A Complete Guide for Understanding How Provident Fund Works
What is a Provident Fund?
The scheme of the provident fund was introduced under the Employees' Provident Fund and Miscellaneous Provisions Act of 1952 by the Government of India and is under the administrative control of the Ministry of Labour and Employment.
Employees' Provident Fund Organisation or EPFO, along with the central board, intends to provide a fund for a pension scheme, a provident fund scheme, as well as an insurance scheme. These are made available for all employees within organized sectors in India by deducting a small portion of their salaries every month.
The contribution is compulsory for all employees working in companies recognized by the Indian Government. The scheme not only covers Indian employees but also international workers who are employed in one of the nineteen countries, which come under the bilateral agreements.
It is the largest social security organization in India, as well as one of the largest in the world in terms of the number of beneficiaries that it covers. However, interns and apprentices are not covered under this scheme.
Components of PF
There are three main components of the provident fund, which include the employer provident fund, employee deposit linked insurance (EDLI), employer pension scheme (EPS).
What is UAN?
The Universal Account Number for Employees was launched on the 1st of October in 2014. It is covered by EPFO to enable the portability of the provident fund number.
The UAN is a 12-digit number allotted to each employee contributing to their provident fund account (for example, 12345678901) and it is generated by the EPFO. Since there is more than one membership ID handed to an individual by different organizations, the universal account number acts as an umbrella, which provides information about an individual’s membership IDs.
This remains the same throughout the lifetime of an employee and does not change even if the holder changes jobs or companies. This is done by linking multiple member IDs, which is allotted to an employee under a single Universal Account Number. This allows members to check the information on the Member IDs attached to their UAN.
The advantage of having a Universal Account Number is that multiple employee provident fund IDs will be recorded under a single account number, thus eliminating confusion. The UAN will also enable the holder to carry out easier transfers and withdrawals from the fund and add additional provisions such as SMS services, online pass-book and online KYC updates to track each deposit.
How to Check PF Balance
The PF scheme provides pension and insurance funds, therefore, staying up to date with the provident fund amount will help the employees with their financial planning.
Today, in the era of digitalization, checking your PF balance is as easy as it gets; you can check it via SMS, missed calls and online (via the EPFO portal or from the Umang app).
1. Balance Check via SMS
If employees have their universal account number or UAN registered with EPFO, they can check their PF balance by simply sending an SMS.
All they need to do is type in a text message “EPFOHO <UAN> <First Three Letters of The Language of Their Choice>" and send it to 7738299899.
For example, if a member with UAN 122333444455 wants to know their PF balance in English, they need to type “EPFOHO 122333444455 ENG” and send it to the number mentioned above. They will receive a response within minutes showing their PF balance.
This SMS service is also available in other Indian languages like Bengali, Hindi, Kannada, Tamil, Malayalam, Telugu, Punjabi and Gujarati.
2. Online Balance Check and via App
The PF passbook can also be viewed via the EPFO portal by visiting the www.epfindia.gov.in site.
After the site opens, the members need to go to ‘Our services’ option and then select ‘For employees’. After that, they need to click on the 'Services' and select the ‘Member passbook’ option. The PF account holder will have to type their UAN and password to view their balance.
They can also take a print of the passbook for further references. The government has also launched the Umang app for the same purpose. Employees can now view their PF passbook, raise claims, and track the status of the claims via the app.
3. Balance Check via Missed Call
Another method of checking the PF passbook is by dialling the number 011-22901406 from the mobile number that has been registered with the employee’s UAN.
The call is automatically disconnected after two rings and a text message is received with the details of the provident fund account and the last entry that was made.
This process is free of charge.
How to Withdraw PF
PF, which is also called the EPF (Employee Provident Fund) is a scheme under the central government of India where the employees working in the organised sectors of the country contribute a portion of their salary, which is 12% of their base pay, every month to their PF account.
The employer also contributes the same amount to the PF account. These contributions together form a corpus. From there, the money is utilized for employees’ pension plans and insurance purposes.
Employees at any point in their employment period can also withdraw amounts from the provident funds. In this section, we will discuss in detail what those circumstances are, under which such a withdrawal can be made.
Employees can withdraw EPF partially or completely.
The amount in the provident fund can be completely withdrawn only if any of the following circumstances arise:
- The PF account holder retires from the company
- The individual with the PF account remains unemployed for two months or more. In this case, a gazetted officer must certify the same before they can withdraw the amount
Complete withdrawal of EPF without being unemployed for 2 months or more is not allowed.
Partial withdrawal from the PF is also allowed under the following scenarios:
- For the marriage of self, siblings or children, the account holder can withdraw up to 50% of his or her share of contribution if the person has been employed for 7 years or more
- For the education of oneself or children (after matriculation), the employee can withdraw up to 50% of his or her share of contribution if the person has been employed for at least 7 years.
- For repayment of the home loan, the account holder can withdraw up to 90% from both employee’s contribution and employer contribution, if he or she has been employed for more than 10 years.
- For purchasing land or construction of a house, provided the employee has worked for 5 years or more.
Other circumstances under which partial withdrawal from PF is allowed include renovation of a house or if the employee is very close to retirement.
If an employee is applying for withdrawal from the PF via the offline method, they are required to fill out the Composite Claim Form. Earlier, the process involved filling up of three forms, Form 10C (for withdrawal of pension), Form 19 (for final PF settlement) and Form 31 (for partial withdrawal from PF). It has now been simplified and reduced to one form, making the process easy and to avoid confusion.
How to Withdraw PF Online with UAN
Even though some still prefer the offline process, most people are comfortable withdrawing their PF via the online method as it is quick, easy and hassle-free.
Employees who wish to withdraw their PF amount simply need to follow the steps below.
However, the members must make sure that their UAN is activated, the mobile number registered with the UAN is active and the UAN is linked to KYC (Aadhaar, PAN and bank details of the individual).
- Visit the UAN portal at https://unifiedportal-mem.epfindia.gov.in/memberinterface/
- Login by using the unique universal account number that has been allotted to you and your password.
- Click on the ‘Manage’ tab and then select KYC to verify whether your KYC details like PAN, Aadhar number and bank details are correct
- After verifying the KYC details, click on the ‘Online Services’ option and from the drop-down menu choose the option ‘Claim (Form-31, 19 & 10C)’
- In the ‘Claim’ screen where the member details are showcased like the KYC details etc., enter the last four digits of the bank account and click on verify
- Click on 'Yes' button to agree to the terms of the undertaking
- Click on proceed to ‘Proceed for Online Claim’
- After that, in the claim form under the ‘I Want to Apply For’ tab, select the claim that you want to make, i. e. partial or complete withdrawal. If you are not eligible for a complete withdrawal, the option will not appear
- Select “PF Advance (Form 31)” to withdraw from PF while providing the amount required and your address
- Click on certificate and apply for a partial or complete withdrawal of PF
You might be asked to upload some scanned documents showing your employer’s consent to the withdrawal. Arrange the necessary papers beforehand to avoid hassle during filling up of the application.
Historical Return on PF and Where to Invest It
The Employees’ Provident Fund Board has recommended a return of 8.65% for the financial session of 2018-19 in February, 2019, and the ministry of finance has approved the same.
Your PF money will be a major financial support after your retirement and in situations of emergencies. Therefore, it is important that you know where you should invest your PF and when it is time to withdraw your hard-earned savings.
You can choose to keep the money in your PF up to 3 years after your retirement, after which it stops earning interest. It is recommended that you assess the risk-benefit relations well before investing any large amount from your PF.
A fixed deposit can be considered a safe investment with approximately 6-8% return per annum. Fixed deposits are also liquid and you can access your money in times of need.
How to Transfer PF
In today’s professional world, which offers a lot of career options and various avenues, switching jobs is becoming more common, be it in the same field or different fields.
However, if a holder of a PF account is changing jobs, they have to make sure that the amount from the old PF account is transferred to the new account. This process can be done both offline and online.
The PF account holder, after changing their job, must fill up Form No. 13 and submit it to the new employer if they want to pursue the offline mode.
The current employer then applies to the EPF office. The attestation of both the previous and the current employer is mandatory for an offline transfer of PF and the entire process can take some time to be completed.
How to Transfer PF Online
If the PF account holder chooses the online method then he or she will have to follow the steps below:
- Fill and submit the Composite Declaration Form to the current employer
- The new employer will then provide the details of the old PF account on the employer’s portal at EPFO. If the UAN has already been linked with the Aadhaar details and the previous employer has verified it, then the EPFO portal will activate auto-transfer
- An SMS is sent to the employee informing the start of auto-transfer procedure. The employee will also receive a final message for completion of the transfer to the new PF account
However, if your Aadhaar number is not linked to the PF account or UAN and the verification is not completed by the previous employer, then the PF transfer has to be done offline.
Merging PF Account
With the introduction of UAN in 2014, the process of merging multiple PF accounts into one has been simplified considerably. To merge two or more existing PF accounts, the holder should follow the steps below:
- Visit the Employees' Provident Fund Organisation website
- Click the “One employee - One EPF account” button situated below the “Services” tab. A form will open for joining multiple EPF accounts
- Enter mobile number registered on the UAN portal, and after submitting the UAN, you will receive an OTP. Enter it on the portal and the PF account details for the merger will be displayed
- After that, the request for a merger of the accounts will be sent to EPFO
How to Get UAN
To get UAN, visit the Unified Member Portal of Employees' Provident Fund Organisation and click on the ‘Know your UAN status’ found below the ‘important links’ section.
Enter the required details including phone number and email address. On submitting the details, an authorisation PIN is sent to the registered mobile number.
After entering the PIN, the UAN will be sent to the registered mobile number and email.
How to Close PF Account
To close your PF account you need to file an EPF Form 19 and withdraw all your money from that account.
The process has been discussed in detail in the “How to Withdraw PF” section.