The Employee Provident Fund (EPF) Scheme was introduced by the Indian government on November 15, 1951, to support the growing labor and industrial sector. To modernize this scheme, the government launched an online portal for easy transactions and access to the benefits of the fund. This article explains the benefits of the EPF Scheme, how employees can practically use the EPFO Portal and UAN database, withdraw from their PF accounts, and lodge complaints using the EPFO portal. It also compares Indian pension schemes with those of other countries and discusses the shortcomings of the scheme in India.
The EPF needs to evolve to be more active in financial markets and include all working classes in the pension and provident fund program. A 1994 World Bank study found that pension funds made up just 5% of India's GDP. An OECD report from 1998 noted that India had one-eighth of the world's elderly population, most of whom lacked pension coverage. By 2000, 89% of the Indian population was not covered by official pension schemes. The United Nations projected in 2012 that life expectancy in India would rise from 65 to 80 years by 2025. This situation requires sufficient savings to prevent poverty among the elderly, who will face high medical costs.
India is experiencing significant demographic and economic changes. Birth rates are falling while life expectancy is rising. A social security system is needed, especially for the sizable unorganized sector. Therefore, a comprehensive and long-lasting pension and provident fund system must cover all economic sectors, ensuring equity and efficiency. The article provides legal recommendations to address the shortcomings of the EPF Scheme in India and offers solutions for employees struggling with the EPFO portal.
This study uses empirical and doctrinal methods, focusing on practical aspects of the EPF Scheme and the government's role. This approach is designed to help modern employees navigate the EPF Scheme.
The main objective is to discuss the benefits of the EPF Scheme and how employees can fully utilize these benefits using the EPFO Portal and UAN database. The article also highlights tax benefits, the procedure for withdrawing from PF accounts, and compares EPF with EPS (Employee Pension Scheme). It includes comparisons with pension schemes in other countries and suggests solutions to improve India's EPF system.
The EPF is a social security retirement benefit program for salaried workers in India, managed by the Employees Provident Fund Organization (EPFO). Companies with more than 20 workers must register with the EPFO to offer EPF services. The EPF pool is invested to yield an annual interest rate, currently 8.15% for the 2023–24 fiscal year. Contributions are required from employees earning more than Rs. 15,000, with voluntary contributions allowed above this threshold.
Each month, 12% of an employee's salary is withheld for EPF, matched by a 12% contribution from the employer. Of the employer's contribution, 8.33% goes to the Employees' Pension Scheme (EPS).
Under Section 80C of the Income Tax Act, EPF contributions up to Rs 1.5 Lakhs annually are eligible for tax deductions. Interest earned in the EPF is also tax-free unless the employee loses their job. After five years, the lump sum can be withdrawn without income tax.
EPF is only available to employees of registered businesses with 20 or more employees, excluding self-employed or retired individuals. The contribution rate is rigid, and early withdrawals before five years are taxable. Changing jobs can complicate contributions, and the EPF account may stop earning interest if the employee leaves an EPF-registered employer.
EPS is a sub-scheme under the Employees' Provident Fund and Miscellaneous Provisions Act. EPF provides a lump sum at retirement, while EPS offers monthly payments to retirees and their families. Contributions to EPS are not direct; 8.33% of the employer's 12% contribution goes to EPS.
The EPFO is a government organization managing provident fund and pension accounts for the organized sector in India. It operates under the Ministry of Labour and Employment and is one of the world's largest social security organizations. EPFO administers the EPF Scheme, Pension Scheme, and Insurance Scheme.
The UAN is a unique 12-digit number assigned to each employee contributing to the EPF. It remains the same throughout an employee's career and facilitates easy access and management of PF accounts. UAN allows employees to transfer and withdraw funds, track monthly deposits, and access various benefits without employer involvement.
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