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It is hard to find a salaried person who would not be aware about the monthly deductions being made from their payslips towards the Provident Fund (PF) contributions. Though being made every month and month on month, not all people are aware of what are the benefits of PF and the associated regulations. The purpose of this article is to appraise th

em of these minor but important aspects of PF and how to make the best out of this investment instrument.

Provident Fund is a long term or rather the one of the best and safest retirement solutions available for a salaried employee in India. Generally an employer having more than 20 employees is required by law to operate Provident Fund scheme.  The employer pays 12% of the monthly emoluments of an employee as an employer contribution into a provident fund account opened with Employees Provident Fund (EPF) India. Similarly, the employee is also required to pay an equal 12% of their monthly pay into the EPF account

 

. This amount is deducted from the salary before crediting it into the employee’s bank account. You can consider it operationally similar to the monthly TDS deducted by the employer. Employees also have an option to get additional funds deducted from their salary and invested into their PF account by providing their employer a written request.

 

Where is the fund invested ?

When we wrote the word ‘Safest’ in the start of the blog, then we really meant that PF is one THE SAFEST investment channels available for a salaried employee. Provident fund accounts are provided a fixed interest at a rate fixed by the government on an annual basis. Due to the political sensitivity, this rate is generally fixed higher than the prevailing market interest rate. Interest is credited to the account on a monthly basis. You may feel surprised, but the interest rate in 1999 used to be as high as 12%. In early 2000 this rate was around 10.5% and it got reduced gradually to around 8.5% by 2009. Currently since 2011 this rate is fixed at 9.5%. A tax free 9.5% rate equates to around 13.5% taxable interest income.

 

How much PF deducted ?

Broadly, an employer has to pay 12% of an employee’s (Basic plus Dearness Allowance) on a monthly basis as PF contribution. Further an employee also has to contribute the same amount on a monthly basis. For example, if an employees monthly salary is Basic Rs. 15,000 and Dearness allowance Rs. 5000 totalling to Rs. 20,000 per month (Gross salary). The employer shall pay 12% of Basic+DA or 12% of Rs. 20,000 (Rs. 2400) as their monthly contribution to the PF account of the respective employee. Similarly, the employee shall also contribute an equal amount, i.e. Rs. 2,400 towards their PF contribution. Employee’s PF contribution is deducted from the gross salary before providing the net cash salary to the employee. You invest Rs. 2,400 and your employer would be investing Rs. 2,400 as well or in other words, your Rs. 2,400 investment toward PF becomes Rs. 4,800 on day 0. Doesn’t it sound too good to be true ? Doesn’t it sound a bit harsh towards the employee – possibly not..

 

Cost to Company or CTC

Most private sector companies have introduced a term ‘CTC’ or Cost to Company. In other words, the companies while hiring an employee declare the total package as CTC instead of gross package. Employer’s contribution towards PF is added to the gross salary and reflected as CTC. For example, if your gross yearly basic salary is Rs. 500,000, the employer shall contribute Rs. 60,000 per year towards your PF. The company shall publish you total yearly emoluments as Rs. 5,60,000 as CTC as it is the total cost which the company is bearing towards the employment.

 

Tax liability

There is not one but multiple tax aspects associated with PF. Some of these are mentioned below :

1. The most important tax benefit of PF is that both the employer contribution, your PF contribution and associated interest on PF balances is tax free at the time of withdrawing of PF. However this would be tax free only if the withdrawal from PF is on the following grounds :

  • On the death of employee.
  • On permanent disability of employee.
  • In case the business of the employer is disrupted.
  • On the completion of 5 years service of continuous service of the employee. As this condition is most common, it requires a bit elaboration. 5 years of continuous service does not mean that it should be from one employer only. For example, if you have worked for 3 years in Company A and left the employment to join Company B and worked there for another 2 years. Both of these services would be clubbed together to identify if you have been in service for 5 years. If you left Company A & didn’t work for some time and then joined Company B, then your service in Company A would not be clubbed for the purpose of computing 5 years of continuous service.

2. Even if you are eligible to be taxed (as you did not meet the conditions specified in point 1 above, only Employer’s contribution to your PF and interest accrued on your PF balances (both Employer and Employee contribution) shall be taxed. In other words, Employee’s contribution shall not be taxed.

3. As per the current laws, your (employee) contribution towards PF is eligible for tax rebate under section 80C of Income tax act upto Rs. 100,000 per year. However, this may change in the coming new Direct Tax Code (Income Tax Act).

 

Voluntary Contribution

Owing to the above benefits, many employees often go ahead with contributing more than the minimum statutory requirement of 12% of the Basic+DA amount. The maximum amount which an employee can contribute is upto 100% of the Basic part of the salary. The extra contribution, generally called as Voluntary contribution is also eligible for the same interest rate earned by the PF account and is also tax free. You need to contact the HR department of your company to request for increasing your minimum contribution towards PF by filling up a form. Some companies put in restrictions that an employees can increase or reduce their voluntary contributions only during specific times in year such as yearly, half yearly or quarterly. You must be aware that while this extra voluntary contribution is one of the best investment options, it would result in reducing your take home net cash salary.

 

Dormant PF account

This is the most common ways by which even after contributing to your PF account you can loose upon a material amount of interest. If you do not contribute to your PF account for more than 3 years, your PF account becomes inactive and will not be provided interest.This rule has been implemented from 1 April 2011. You may be wondering that if you are working as an employee in India, then it is mandatory for you to contribute to your PF. Hence till you are working, you would be contributing to your PF and hence your PF account should not become dormant. However, this is valid only for your current PF account – the one into which your current employer & you are contributing into. If you have other PF account from previous employers, you will not be contributing to those PF accounts. Unless you transfer those PF accounts into your current PF account, all except your current PF account will become dormant after 36 months from the date of last contribution. Hence it is VERY IMPORTANT THAT YOU TRANSFER YOUR PREVIOUS PF BALANCES TO YOUR CURRENT PF ACCOUNT. This would prevent your previous PF accounts from becoming inactive as well make them administratively efficient to be managed.

 

Transfer of PF Balances

Not every person is in the same job upto his / her retirement. It may still be true for public / goverment sector jobs, but in other cases people keep on changing jobs in private sector after every few years. When you join a new employer, they open a new PF account and deposit your contributions to the new account. However, you may be surprised that not many people think about consolidating their PF balances and their PF balances may be scattered across multiple PF accounts. I even know a couple of people who have over 20 PF accounts and they have even lost track of their exact PF details. So what is the best solution out here ? Once you leave your job, you should transfer the PF balances from your previous employer to your new employer’s PF account. This would ensure that your PF balances are consolidated in one account. Also as mentioned in the earlier paragraph, it would prevent your previous PF account from getting into an inactive state. It is simply like transferring funds from your one bank account to another and closing previous bank accounts. This kind of transfer generally takes around 30 days and can be initiated after 2 months of leaving your previous employer. Form 13 is generally used to transfer PF balances (Form 13 – PF Transfer).

 

Should You Encash Your PF Balances ?

This is a very tempting question which may end up releasing your past PF contributions to your bank account ! In many cases this amount can be in several lakhs and hence it becomes even more tempting to milk your PF account to fund your current liabilities / investment decisions. How often I have come across people who have encashed their entire PF balances to fund their car purchase, paying the deposit for their property, children education, foreign holidays or furnishing their houses. But have you thought about how much danger you are putting your future into by encashing your PF balances. Some points which are worth a consideration are:

  • PF balances grow based upon the power of compounding. We have explained the principle of compounding on a seperate blog  Fixed Deposits – How to Benefit the Most Out of them. If you encash your PF balances in earlier stages, you will not be able to take advantage of compounding and hence would loose upon the opportunity to allow your money to grow.
  • You might end up buying a house to live in using your PF balances – but did you ever realise that the house which you live in is a biggest dead asset. Sorry if it sounds harsh – but though that house would provide you shelter, but it won’t provide you a monthly income – something which you would really need post retirement.
  • One of the comparisons which may assist you in deciding if you should really encash your PF is the Gold  / Jewellery asset which you may have for wife. Would you sell your family gold / jewellery to acquire the investment or expend the funds for which you are currently thinking about encashing your PF balance. Fortunately / unfortunately Indian families consider wife’s jewellery as a central bank which is lender of the last resort. A family’s jewellery is tapped only if there is nothing remaining in the family’s finances to cater to the emergency spending requirement. If you still think that the requirement of the situation is so grave that you must tap your PF balances, then go ahead.
  • Encashing your PF balance can have immense ramifications on your financial situations, both from taxation and investment portfolio perspective. Hence you must consult your financial advisor before taking this decision. If you don’t have one, please feel free to contact us. Our contact details are mentioned on our Contact Us page on www.banyanfa.com.

 

How to Encash

If you want to withdrawn your PF balance, then you need to fill Form 19 and submit with EPF authorities. Updated form can be downloaded from http://www.epfindia.com/downloads_forms.htm . Encashment request is taken after 2 months from the date of leaving the service. The form has specific section where the applicant has to mention the bank account where the funds are to be credited. Once the form is processed by EPF, the proceeds are directly credited into the bank account of the appliant.

 

Employee’s Pension Scheme (EPS)

Another component of PF is EPS or Employee’s Pension Scheme, governed by Employee’s Pension Scheme -1995. The benefits of EPS are as follows:

  1. Provide pension for life to the scheme member after retirement.
  2. If the member dies, pension is provided to the following family members:
    • If the member was married, pension is provided to the widow / widower for life or till remarriage;
    • Additional pension provided for upto two children/orphan upto 25 years of age along with pension provided to widow/widower;
    • Children/orphan with total and permanent disability shall be entitled to payment of children pension or orphan pension as the case may be irrespective of age and number of children in the family;
    • In case the member is not married, pension is paid to the nominee; and
    • If there is no nominee and the member does not have any family, pension is paid to dependent father/mother.

 

Eligibility of Pension under EPS

A member is eligible for pension upon completion of 10 years of service and attaining 58 years of age. If the member choses to retire between 50 to 58 years of age, the pension shall be provided by deducting 3% for each year less than 58 years. This condition does not apply if the member dies before 58 years of age.

 

Do I have to pay anything to get Pension under EPS ?

Good news is that you don’t need to contribute any more than what is being deducted for PF i.e. 12% of your salary. EPS amount is deducted from Employer’s share of PF at the rate of 8.33% of the Salary. For the purpose of computing the EPS contribution, maximum salary is maintained at actual salary or Rs. 6,500 per month which ever is lower. For example, if your salary is Rs. 10,000 per month – the PF being paid by the employer shall be 12% of Rs. 10,000 = Rs. 1200 per month. Out of Rs. 1200, EPS amount shall be diverted from Employer’s contribution towards EPS. To calculate the EPS amount, the monthly salary shall be considered at Rs. 6,500 (as Rs. 10,000 is greater than Rs. 6500). EPS amount in this case shall be Rs. 541 (8.33% of Rs. 6500). This amount shall be deducted from your Employer’s contribution of Rs. 1200 and sent to EPS. To clarify, nothing is diverted from Employee’s share towards EPS.

 

If you are looking out for information on PPF, you can read our article Public Provident Fund

The article is written by Banyan Financial Advisors. You can contact us on www.banyanfa.com. An alternative page on PF can be referred to at www.banyanfa.com/banyanfa/saving_investment/pension_schemes/emp_fund.html

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131 Responses to Provident Fund (PF) – Best Investment Option Available for Salaried Employee !

  1. Mahesh says:

    Good Article!!!

  2. Banyan Financial Advisors says:

    Thanks Mahesh.

  3. KK Babu says:

    Very good article. I have a doubt regarding transfer of EPF from one to another.

    One of my colleague recently shifted his job from ‘X’ organisation to ‘Y’ organisation in the same city. Both orgnaisations are big companies and are paying PF to employees. He worked for about 9 years in the first company and got his PF regularly.

    Now, the ‘Y’ has opened a new PF account on his name. He wanted to transfer PF funds from first company to the second one. But, the problem here is very much different from regular users:

    The first company did not relieve him from the job even after completion of mandatory 60 day notice period and kept him on the Rolls of the company and paid him salary, PF, HRA etc. even after he left the company.

    Meanwhile, he has joined the second company and this company promptly paid him salary, PF, HRA etc from the date of joining itself.

    So, this gentleman benefited salary, PF, HRA etc from both the companies for about 7 days of time. The overlapping period is about 7 days.

    Now, when he wanted transfer the PF amount from First Company to Second Company (both are in same city), he is facing problem in Date of Relieving from First one and Date of Joining in second one.

    My Doubt and questions are:

    (1) As per Law, Is it possible for any person work as full time employees in 2 different organisations at the same time?
    (2) As per Law, can any person get PF from 2 different companies for the same period?
    (3) Can this gentleman get his PF transferred from first organisation to second, without any problem (pl. remember his employment was overlapping with both companies for a period of 7 days)?
    (4) If his PF transferred, is it considered as continuous PF contribution?

    Kindly try to answer to the questions and clarify our doubts.

    Thanks in advance for answering.

  4. Banyan Financial Advisors says:

    Hi Mr. Babu,
    Thank you for your comments.
    I would respond to your queries as follows :

    1. It is perfectly legal to work in multiple organisations at one time. PF laws don’t have any problem with that. The second organisation (Y) may have a problem, but since he has already quit Organisation X, it should be okay.
    2. You can get PF from 2 different companies at one time. As I mentioned, PF laws don’t have any clause to the contrary.
    3. Your friend can transfer his PF from X’s account to Y’s account without any problems. He should wait for 2-3 months from the last PF credit into X’s account before raising a request to transfer it into Y’s PF account.
    4. Yes it should be considered as a continous PF contribution.

    Regards
    BFA

  5. Aditya says:

    Excellent Article..Can you put some light on the Employee Pension Fund as well as a part of the contribution is also under the pension part.

    Looking for a prompt reply.
    Thanks in advance.

    Regards,
    Aditya

  6. Banyan Financial Advisors says:

    Hi Aditya
    Thanks for your comment. Could you please elaborate a little more upon what needs to be added. I couldn’t understand the gap from your comment.

    Thanks
    BFA

  7. Aditya says:

    Sure..There are 2 components under PF.One is EPF and one is EPS(Employee pension scheme).Some part of the contribution comes under the EPS division.I dont know the exact %.Can you help me understand it properly…

    Regards,
    Aditya.

  8. Banyan Financial Advisors says:

    Got you. I have added a section on EPS in the same article. Hopefully it will make things clearer.

    Regards
    BFA

  9. Aditya says:

    Thanks.

  10. Sudhir says:

    Dear sir

    It is a good article. We are interested to know the Pension amount to be received after retirement at 58 years. Any formula for no. of years of work / service and years of contribution.

    Regards
    Sudhir

  11. Banyan Financial Advisors says:

    Hi,
    I shall try to give you a rough idea of how it is calculated.The exact calculation is not straight forward.

    The basic formula is :

    (Average Salary X Number of years of Service) / 70

    Average Salary is arrived at by dividing the salary derived in past 12 months by 12. This salary is pegged at a max of Rs. 6500.

    There is also minor bonuses which are added to your pension amount based upon some criterias. For details, check out http://www.epfkerala.in/pen.html

    Regards
    BFA

  12. KK Babu says:

    Dear sir
    Thank you for your valuable suggestions. We will come back to you for any further assistance.
    Regards, KK Babu

  13. Anuag says:

    Dear Sir – An excellent article. However I have an issue related to my PF transfer. The story goes like this:
    In march last year i shifted from Noida to Pune. My new employer in Pune submitted application to EPFO Pune in July 2011 to transfer my PF amount in Noida PF a/c to my new Pune PF a/c. My problem is that till date this transfer from Noida EPFO to Pune EPFO has not happened and I am very much worried about my hard earned money. By taking contact numbers from EPFO website, I am calling Pune and Noida PF offices enquiring about this transfer but as usual these good for nothing government employees are not providing anything concrete. Pune guys say check with Noida office and Noida guys says we haven’t received complete forms…Huh…I am really fed up. What do you suggest I should do? I had raised grievance on EPF website but nothing happened. Now I feel I should have better withdrew my amount from Noida a/c ( though after paying usual bribe ).
    Sir what do you suggest? Thanks and Regards, Anurag

  14. Banyan Financial Advisors says:

    Hi Anurag,
    Thanks for your comments.

    You should start with first contacting your new PF account via your employer’s agent. Avoid contacting them directly as you already know the result!

    Your next best bet is to use RTI (Right To Information) against the previous PF department. You can refer to the following link http://www.epfindia.com/RTI/RTI_1.pdf
    The RTI Officers are mentioned on http://www.epfindia.com/rti_officers.html.

    RTI is a simple application which is sent to the respective RTI officer in the respective EPF office. Make sure that your application is very clear on what information you are after. Include points such as : Date of transfer from the PF to another PF, Reference number associated with the PF transfer to allow tracking it with destination PF, Account number where the PF has been transferred, Reason for Delay, etc.

    You must receive response within 15-20 days from the date of RTI application.

    Regards
    BFA

  15. Anuag says:

    Thanks BFA.

  16. Anuag says:

    Dear BFA – My employer says we have shared the acknowledgement letter with you from EPFO Pune regarding request for transfer of your ( and 70 other colleagues ) PF from Noida to Pune, thats all we can do, now you will need to get in touch with EPF office for any further queries.
    Regarding your suggestion for raising RTI, I am not sure how to write, where to submit and how to follow up on same, but I will go through the process on internet. However, yesterday I have raised another grievance on EPF website for Noida EPFO. Let’s see what they come back with.
    One more thing, I want to post this issue on jagoinvestor forum as well for other expert opinions, I hope you won’t mind. Many thanks again for your time and suggestions.

    Regards,
    Anurag

  17. Banyan Financial Advisors says:

    Hi Anurag,
    Thats perfectly fine – go ahead and raise it to the other forum. I would also be interested to know what other experts have to say.

    RTI would be the easiest way. You just have to write a plain application clearly mentioning what information you want. Send it to the RTI officer mentioned on the EPFO’s website with a RTI fees. Generally it is Rs. 10 payable via DD or postal order.

    Regards
    BFA

  18. Aamir says:

    This is an exhaustive article on PF. Thank you. I wanted to calculate interest accrued on my PF. Do you have any formula to calculate interest money added to my PF account, say in last 5 years.

    Regards,
    Aamir.

  19. Hi Aamir,
    Thanks for your appreciation.

    If I understand you properly, your ultimate objective is to know your PF balance. As you would have read in the article, there are broad two components of PF i.e. Your contribution and Employer’s contribution. 100% of your employer contribution does not get invested into your PF. A specific percentage goes into Pension Fund, Admin cost and remaining into PF. Hence it would not be an exact formula which would arrive at your PF balance.Interest on your PF would be provided on your contribution + Employer’s share at the prevailing rate (currently at 9.5%).

    Regards
    BFA

  20. Ashwani says:

    How about investing PF money into PPF since the interest rate are slashed from this year and since transfering of PF account also takes enormous time.

  21. Hi Ashwani,
    I do appreciate your view. PF interest rates have been slashed to 8.25% and PPF is still at 8.6%. However, PPF rates are annually reviewed and may have the same fate. If that happens would you shift the funds back to PF ? I would suggest you to keep your PF & PPF seperate and avoid the temptation to either encash or transfer the funds from PF to PPF as long as your working in a job and your employer is paying into your PF.
    Transferring funds from PF takes enormous time, but why do we have to care. Let the fund remain in PF and allow it to grow.

    Regards
    BFA

  22. […] to switch your PF balance to any other securities / PPF account. Have a read of our article Provident Fund (PF) – Best Investment Option Available for Salaried Employee ! Share this:Related Posts:Are you a Responsive Parent ? Plan for your Child’s Future. […]

  23. Sundar says:

    Hello, first of all this is a great informative article. My background is as follows:
    1. I have left my former employer as of May 2011 and was contemplating several organizations but not a right fit as I am in the senior level.
    2. My former private employer has sent me the Forms 10c and 19 so that my PF can be transferred to any instrument I choose.
    My question is:
    1 Should I just leave it with the former company? If so, will it accrue interest till I retire or pull it out?
    If not, is it sitting dormant at my previous employers’financial institution?
    2. If I pull it out, assuming no interest is currently being paid, what should I do? I am not employed now and rigorously looking into starting a private business. (no earnings yet).

    Please advise which route and its pros/cons. I appreciate your help. I have the same situation with my Super Annuity also to which I have also contributed. Thanks.

  24. Hi Sundar,
    Your PF account doesn’t become inactive till 3 years from the date of last contribution into your PF. Till it is in active status, you continue to enjoy the interest being credited in your account.
    Hence if you left your former employer on May 2011, your PF account should get interest till May 2014. It is totally up to you to leave your PF untouched till date and if you don’t end up in a job by that time, you may want to withdraw those funds and invest them in another suitable option. Hence you may want to ignore the forms which you have received from your employer.

    If you end up being in another job, you can transfer your PF from previous employer to the PF account of your new employer. If you don’t, then I would suggest you to withdraw the PF just before May 2014. Till that time, you should avoid touching PF.

    Regards
    BFA

  25. Prasad says:

    Thanks BFA for this detailed article on PF.
    I have a query.

    I worked at A organisation in Hyderabad for 9 years & at B organisation in Bangalore for 5 years.
    I joined B organisation immediately after leaving A organisation.
    When I left A organisation, neither did I transfer my PF account to B organisation nor did I withdraw the PF amount.
    I left B organisation in Feb’2012. I have now (in May) applied for withdrawal from B organisation PF Account.

    Q.1) Can I also withdraw from A organisation PF Account now? I have written to HR Dept of A organisation for the same.
    Q.2) B organisation asked me to give an affidavit of unemployment for at least 2 months post my departure from the organisation. Since I am unemployed, I have submitted the same.
    Will A organisation ask me for the same?
    If it asks me to provide so, I cannot as I had immediately joined B organisation post departure from A organisation.
    Q.3) Are there any other documents to be submitted to A organisation.

    Please help.
    Regards,
    Prasad

  26. Hi Prasad,
    You can withdraw your PF from A organisation. There is no restriction. You don’t even need to approach A. You can directly approach the PF authority which is holding your PF and submit the appropriate PF withdrawal form.

    I won’t be very fussy about he documents required by A. If they are within your reach, better submit them, rather than to be delayed. When I requested to withdraw my PF, my ex-employer didn’t ask me for any such affidavit.

    Regards
    BFA

  27. Prasad says:

    Thanks BFA for the prompt reply.
    If I am to directly approach the PF authority at Hyderabad,can I courier the attested documents or do I need to personally visit Chennai for submission. I am based in Mumbai currently.

    Regards,
    Prasad

  28. Prasad,
    Best approach would be to send the filled form to your Ex-employer who would have an established process to communicate with EPF authority. Once they have submitted the form with EPF, then they shall not have any more responsibility. You can then use RTI mechanism to understand the status of your claim in case the funds have not been credited into your bank account within 3 months.

    Regards
    BFA

  29. Prasad says:

    Thanks for your help. Appreciate it greatly.
    Prasad

  30. Welcome. You may want to subscribe to our blog via email as well to get regular updates.

    Regards BFA

  31. Mahesh Phadke says:

    What is VPF?

    “from contributing the normal 12% of his basic pay, employee may choose to put in contribute more than this, voluntarily he can do so at any rate he desires upto 100% of basic and D.A.”

    Is the above permissible under PF Act? Can you pl. guide with the section and how to proceed with the above w.r.t. Gujarat State. The same is required since I am interested in VPF.

  32. Hi Mahesh,

    As per my understanding, there is no seperate rule for the state of Gujrat. The place where you would find the details on Voluntary PF is Section 6 of the Employee Provident Fund Act. The verbatim of the Section is :

    6. Contributions and matters which may be provided for in Schemes. – The contribution which shall be paid by the employer to the Fund shall be ten percent. Of the basic wages, dearness allowance and retaining allowance, if any, for the time being payable to each of the employees whether employed by him directly or by or through a contractor, and the employee’s contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten percent of his basic wages, dearness allowance and retaining allowance if any, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section:

    Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words “ten percent”, at both the places where they occur, the words “12 percent” shall be substituted

    Does it answer your query ?

  33. Raj says:

    Hi, the article is very informative. Thank you. My query is recently i bought a house and now short of funds to furnish the house. I am thinking about en-cashing the PF. i’m working with the same organization for 7 years now. Please let me know if this is a good decision instead of going for a personal loan. Thank U

  34. Hi Raj,
    Thanks for your comment.

    Did you explore the option of taking short term secured loan on your PF instead of withdrawing your PF ? A secured loan on PF may be cheaper than a personal loan which is an unsecured loan.

    You may want to read my article http://insight.banyanfa.com/?p=250 where I have detailed upon disadvantages of having a house as your only / sole investment.
    Withdrawing your PF is an always available option, but do you want to really break your retirement pot ? What would you have to fund your retirement expenses if you would do so ?

  35. Aarti says:

    The article is really informative.. especially for a naivette like me! 😛 I have also heard of PPF. Would like to know how is this different from EPF. And the benifits of investing in a voluntary PF contribution as against investing in a PPF.

  36. Thanks Arti,
    I shall write a detailed article on PPF where you may get more insight upon how it works and now to get more juice out of PPF.

    PPF is a long term saving scheme which every resident individual in India can open by visiting a branch of SBI (now even ICICI). Max amount which you can invest is 1 lac per year per person with an initial lockin of 15 years. Hence it is a good tax free saving option for people who don’t have PF.

    Essentially, PF & PPF may not have much of a difference as both of them are tax free long term saving scheme with fixed returns (over 8%). The ease with Voluntary PF is that it goes out of your Salary monthly. PPF bridges this gap by offering standing instructions for monthly investment.

    The only diff from investor’s perspective is that PPF requires a yearly investment of Rs. 500. You can invest as much as you like (and when ever you like) upto Rs. 1 lac per year. On the contrary, Voluntary PF would be a fixed monthly amount which is not very flexible to change on your month to month desires. Generally the employers offer a window of 1-2 times a year when you get a chance to change your Vol PF contributions.

  37. Sudha says:

    Thanks for a very useful and informative article about EPF.
    I have a query. Please answer it. I started my career working for company X in 2005. Later in 2009 I joined a different company Y. This company Y maintains the PF account by a trust and not by govt. The previous PF account balance (X) too was transferred and Pf account from Y was active till August 2011. I left Y and moved out of India and this account maintained by the trust is inactive from Aug 2011. My questions are,
    1. Should I leave it like this till Aug 2014 and still get the interest for 3 years from 2011-2014.
    2. Does the private trust maintaining pf also gives interest for 3 years till 2014 or only government ppf account pays interest for inactive 3 years?
    3. In case if I withdraw now, do I need to pay tax to the government?

    What would be good option for me to do here? Kindly advise.

    Thanks,
    Sudha

  38. sunil says:

    A wonderful article.
    landed here from Jagoinvestor while searching information about EPF and PPF.

    Can i request you to provide a link where in (in case there is one) you have the same informative article on PPF.

    Thanks for educating.

  39. Thanks Sunil. An article on PPF is on my To-Do list and shall be released shortly. I shall intimate you once thats done.

  40. Sudha,
    You have raised very good question. I would suggest you to do the following :
    1. Private PF trust are given exemption only if they follow the minimum provisions in the PF act. Hence they should be giving you interest upto 3 years after last transaction. Considering it is a Pvt trust, you would get prompt response to your query – send them an email asking about the 3 year provision. I am hopeful that they would say ‘yes’.
    2. If you get ‘Yes’ response, I would suggest you to wait for 3 years to get over.
    3. You can withdraw your PF amount after 3 months of leaving the employer. In order to maintain tax exemption in India – you need to be in 5 years of continuous employment. From the sound of your query, it appears you have been working for 5 years. Hence when you withdraw, the funds would be tax free in India.
    4. However, any interest credited to your PF account after the date you became a resident of the respective foreign country may not be tax free in your respective foreign country. If you declare that interest income, you may have to pay tax in the foreign country.

    I hope it answers your query.

  41. Ankur says:

    Thanks for the tips useful info.

    I have a special case so thought of asking about–
    I worked for a company which had a private PF account. I left the company to persue study abroad and am still out of the country. However I do have a valid and active PPF account with a government bank.

    1. Now since my company have stopped giving me interest on its PF account, can i transfer everything to my PPF account and earn interest?
    2. I hope I dont have to pay any taxes since money is still with PFO?

    Thanks

  42. Ankur,
    If you have a PPF, you can continue to contribute to it till the initial duration of the PPF (15 years). How long did you work in the company ? Essentially, withdrawing PF is tax free if you have worked for 5 continuous years.
    You should withdraw your PF and deposit upto Rs. 1 lac into PPF (max annual limit in PPF). Remaining amount you can invest in other instruments based upon your investment time horizon and risk appetite.

    Regards
    BFA

  43. Sunil,
    My article on PPF is now live and you can have a read at http://insight.banyanfa.com/public-provident-fund-ppf/

  44. Aman Singh says:

    I have a doubt regarding transfer of EPF from one to another.

    I recently shifted job from ‘X’ psu to ‘Y’ psu in the different city. I worked for about 1 years in the first company and got his PF regularly.

    Now, the ‘Y’ has opened a new PF account on my name. I want to transfer PF funds from first company to the second one. But, the problem here is very much different from regular users:

    The first company did not relieve me from the job even after I left the company.

    Meanwhile, I joined the second company and this company promptly paid me salary, PF, HRA etc from the date of joining itself.

    Now, I want to transfer the PF amount from First Company to Second Company but dont want to tell the second company about this.

    Is it possible to transfer the pf amount without letting know the second company??

    Thanks in advance for answering.

  45. Hi Aman,
    I don’t think that there is any problem which you should worry about. You can use Form 13 and give it to your existing employer. I can appreciate that you may not want to consult your earlier employer and hence take help from your current employer. They would guide you with the details.

    You can download the form from http://www.epfindia.nic.in/forms/13revised.PDF.

    If after the submission of the form, the transfer doesn’t happen in next couple of months, I would suggest you to file a RTI against the respective PF office to give you the details behind the delay.

    Regards
    BanyanFA

  46. Aman Singh says:

    Sir
    Actually the problem is that I cant tell my current employer that i earlier had a job because I have joined as a fresher and they had asked me a hundred times if i was working somewhere else but I said no.

    People who said yes were asked to submit relieving letter before joining.

  47. Mandeep says:

    Hi,
    I had worked in a MNC company for approximate one year in 1999 ,the company thereafter shut the Indian Operations and left India for good,are there any chances of recovering this amount.
    Reg

  48. Hi Mandeep,
    Definitely it should be possible. PF amount is not maintained within the bank accounts of the Company. It is invested with PF authorities. I am not sure if you have your PF account number handy. You could then file a claim for redemption of PF amount with your respective PF office.

  49. V.P.Singh says:

    Dear

    My query is

    1. Can an employer split its employees PF contribution & deposit it in PF trust & in PF code got by employer
    2. Is it mandatory for an employer to take consent from employees for depositing their PF contribution in PF account opened by employer
    3. What violation exist if employer did not collect PF form 2 from employees for more than 2 years. What penalty is applicable

  50. Generally an employer would either have a PF trust account with EPF or maintain PF by itself. I haven’t come across a situation where an employer maintained both.

    I am not aware of situations mentioned in 2&3 below.

    Perhaps any of our knowledgeable readers may help ?

  51. Ashish says:

    What a great article.. I have a detailed query regarding PPF of my father. He was working in a cooperative spinning mills in U.P., though his part of EPF contribution was deducted every month but neither this nor the employers contribution was deposited with EPF office. This countinued for many years as the mill was financialy in a very bad state for long. My father took voluntary retirement in 2007 but neither PF nor pension from PF was paid. The mill had secured a stay from court to not to deposit PF owing to ill financial health. On top of it the correct form for initiating the pension i.r.o. my father was not sent by the employer owing to professional differences. Now the mill has locked out and the District Megistrate has been made custodian. With this long story I seek your expert advice on how to proceed to get PF and pension.Your inputs will immensely help us. Thanks

  52. Ashish,
    This is a very unfortunately situation and would require legal battles. The act of the employer would be classified as illegal and the EPF dues would be classified as ‘Employee dues’. When a corporation is bankcrupt and funds remaining with the corporation shall be first paid towards employee dues.

    As a learning – you should reconcile your PF account statement with your payslips atleast on an annual basis to capture the employer’s act before it becomes a big problem.

  53. Saket says:

    Hi,

    What can you suggest for a case when the employee is planning to move out of the country for more than 3 years? What opens are available for him to continue the pf account and earn the interest. Are employee only contributions allowed.

    Thank

  54. Hi Saket,
    Unfortunately PF will be funded till the time you are in employment. Once you leave employment, it can not be funded by you. If you want, you can open a PPF account and self fund it upto Rs. 1 lac a year. There are some restrictions for NRIs (you can’t open a PPF account if you become a NRI, but if you already have one, you can continue to maintain it till maturity). Please refer to my other article http://insight.banyanfa.com/public-provident-fund-ppf/

  55. Rakesh says:

    Thanks for providing such an excellent article with elaboration, could be easily understood by any one.

    I have a problem and would like to ask you for a solution if any:

    I worked for a company(TCS) for 1 year and then quit the job, I am having a PF account with the company. TCS is having a trust for Employee provident fund.

    Now I am working for another company for last 9 months and being a small company right now they are not opening any PF account here, I spoke to the concerned person in my last organization and they are happy to help me to withdraw my last PF amount.

    But I don’t want to withdraw amount rather I would like to invest in PF on my own,
    (1) Is it possible to open a PF account without involving Employer ?
    (2) and is it possible to use the last PF account for further investments?

    Thanks,
    Rakesh

  56. Rakesh
    You cannot invest in PF if your current employer does not have a PF scheme. For such cases you have another option of investing into PPF – check out my article on PPF by searching on this site.

    I would suggest you to withdraw funds from your PF account as it should now be inactive and hence will not be earning any interest. You can invest this amount into a PPF account. Other options are investing into Mutual Funds via SIP.

  57. a.s.reddy says:

    Hi Team,
    I have worked in a company in Mumbai for 6 years, PF registration Mh/KADMAL. Now i am moving to blore where PF reg wil be some thing like KA/BNG. My dount is if i transfer the PF account, from MUM to Blore, will the balance only gets transffered or, my account continuity will also be there. Lets say suppose i stay in this for 5 years, and transfer PF account, will i be eligible for pension scheme

  58. Hi,
    As I understand, you can transfer your PF from MUM to Blore without any negative impact. Your account continuity will still be maintained.

  59. Ram says:

    Hi,

    When the rule of inactive accounts of 3 years came into force, after some months, if one withdrew the PF amt/ closed the account as there was no certainty that in the near future, one would take up a full time job, how can it be reinvested/redirected into PF if it happens to be that they take up a job after few months(i.e they get the amount and after sometime, take up a job). Will the PF rules accept this case if they are given the closed account details and the amount. While there is a case that one can increase their monthly PF contribution, why to take such a route if the Individual can show the amount saved as PF in previous company.

    Please clarify.

    Thanks.

  60. Ram,
    I am not aware of an option where one can invest a lumpsum into PF. It can be via monthly increased PF contribution. Why don’t you invest your lumpsum into PPF account ? It also has similar characteristics of a PF.

  61. Bindu says:

    Hi,

    I left my job after completing 5yrs, now i may get my PF amount by next week. Due to my health condition i will be not working for a year. Is their any scheme wherein i can investment certain amount to PF company as saving and later on i may get returns on the same.
    Please suggest.

  62. Bindu,
    You could have avoided encashing PF as it will continue to earn interest for 3 years since last credit. Unfortunately you can not invest lumpsum into PF after you withdraw. It can only be invested on a regular basis via an employer.

    The only other option which I can recommend in case you have already encashed your PF, deposit the funds into PPF. The deposit limit is Rs. 1 lac only, however, you can split 1 lac in this year upto March 2013 and remaining 1 lac in Apr 2013. If you still have extra funds left, you can buy a 10 year NSC which is currently giving 8.9% return (higher than PF & PPF). I am assuming that you want to invest the entire funds into secure debt instruments only.

  63. Bindu says:

    Thank you for the reply. Yes I want to invest the entire funds into secure debt. So that later on i can make use of it.

    regards,
    Bndu

  64. Hemanth says:

    Good Article

  65. Alka Datt says:

    if EPF account is not transferred even intrest will continue

  66. Yes, but only upto 3 years from last date of credit in your PF. After 3 years, interest shall stop accruing.

  67. Sabaresh says:

    Hello Sir,

    I have worked in X company for 3 years 2 months. Now I have moved to Y Company and working for it for the past 24 months. But I have not transferred my PF account from X to Y.

    1) At total, I am in employment for 5 years and 2 months. Is it considered as continuous PF contribution?
    2) Is it taxable If I withdraw my X company PF account now?

    Thanks in advance.

  68. Preet says:

    HI . I have a query on VPF. Is the extra contribution to VPF from the employee salary added to his salary for taxation ? If not , is there any other benefit except that the maturity proceeds will tax free .

  69. Hareesha says:

    I have a query. I worked in industry for 8 years until Mar 2011. Until then EPF was contributed monthly. Since Mar 2011 I am self employed and hence no contribution. I understand that EPF amount does not fetch any interest after 3 years of no transactions. My question is, is there any harm leaving the amount in EPF account as it even after 3 years? Is it very difficult to reactive the a/c after 3 years? are there any chances where the monet gets forfieted if it is left untouched / becomes dormant a/c?

  70. Hareesha,
    If you are happy to leave your money earning no interest after 3 years, then there is no harm. Generally a person will want his money to earn more money. You never know what tax laws will be there in future and what regulatory changes may affect your withdrawal rights. Hence, a better withdraw them from now till March 2014 and invest that money productively. One option is PPF which is quite equivalent to PF. If you withdraw your funds in March 2014, then you can invest 1 lac in March 2014 and another 1 lac in April 2014. In case you are married and have any more PF fund remaining, you can invest further 2 lacs in the name of your spouse.

  71. Srikanth Goud says:

    Excellent Article…Very Usefull..Thank u So much…

  72. nagaraj says:

    SirJi, Very Usefull Article…
    Today I came to know about Rajiv Gandhi Equity Savings while declaring my investments for 2013-14, really I dont know about this! could you please explain.

    Thanks…

  73. Ricky2201 says:

    Hi,

    I have some queries on the PF transfer.
    I am giving my job details as below.

    Company X1: 01 Aug 2007 – 28 April 2008
    Company X2: 15 Sept 2008 – 04 June 2010
    Company Y: 28 June 2010 – 21 Aug 2012
    Company Z: 22 Aug 2012 – 03 May 2013
    Company A : To join in mid may

    Case 1 :
    My first 2 companies are the same (X1 & X2 is same… HONEYWELL). Due to some personal reasons, I went to my hometown and was unemployed for those 4 months (May-Aug 2008). Then I rejoined the same company (HONEYWELL) which I left earlier.

    Query 1:
    For PF withdrawl / accumulation to be tax exempted, as you said in the article, 5 years of CONTINUOUS service is required. Will my 1 employment be counted keeping the mind the fact that I was unemployed for 4 months…???

    Case 2 :
    In Company Z, I worked for close to 9 months. But I dint get my PF transferred from Y to Z. Now I am joining Company A next week.

    Query 2:
    Can I transfer my 2 PF accounts ( Company Y and Company Z ) to my next employer’s PF (Company A)… If i do so, the years of service will get added individually.
    OR
    Do i need to transfer Y -> Z and then Z -> A… so that the years of service is maintained as Continuous… (Latter may take a long long time… considering my earlier PF transfers.. X1 -> X2… then X2 -> Y… took almost 8-10 months each… Now.. PF account of Z is in Delhi… and my all other accounts are of Karnataka… which would add to the turn-around-time )

    Please give your suggestions on my 2 queries.

    Thanks in Advance….!!!

  74. sanyam jain says:

    I had worked with my old employer for 3 years which ended on 7th May 2010, and after a break of almost one year, i have joined a new company in June 2011. I have never bothered to close my old PF account and got a new PF account with my current employer. I would like to get my old PF account to merge in my new PF account. Now my queries are:

    1. Since i had worked only for 3 years with my old employer, whether my transferred balance from old PF to new PF attracts tax.

    2. To avoid tax liability will the years I worked for old employer be clubbed with the years I worked for current year for tax exemption because I am planning to leave my current employer within few months (most likely by July this year).

  75. Ricky
    In your first case the gap of 4 months may result in tax issues.

    I believe the best solution for you is to transfer PF held in respective companies into your current company. Be rest assured that the transfers from all of your earlier companies will be counted towards 5 year calculation. I am also conscious that since the PF of your earlier company has not received any contributions for over 3 years, they would have been classified as inactive and hence no longer receiving interests. Hence you should act quick to transfer them into your new company in May.

  76. Sanyam
    As per my understanding, the transfer from one PF to another PF will not attract tax.

    Further, since you had a gap of 1 year, you probably will face tax issues as your service was not for a continued period of 5 years.

    To summarise, you should old PF into the current PF so that your earlier PF balance continues to attract interest.

  77. V HARIHARAN says:

    We worked in a private limited company and due to some clash, we five members have resigned our job together. Can we claim our Provident funds amount. If the company does not support us, how we can claim the PF amount.

  78. Hari
    You don’t need the Company to support you as the PF amount should be deposited with PF authorities.

  79. senthil kumar says:

    I worked in a X college for 10.5 yeras.I left the college in may 2010.I didnot closed my PF account there.Now i want to close my account so what the forms i have to submit.

    since i am having more than 10 years contribution in pension scheme.What will happened to that fund.

    I came to know we can opt for a certificate of pension scheme.

    which option is good.

  80. Ramya says:

    Useful article. It has complete information about PF.

    Looks like there is a small typo. “For the purpose of computing the EPS contribution, maximum salary is maintained at actual salary or Rs. 6,500 per month which ever is higher.” – Shouldn’t this be : “actual salary or Rs. 6,500 per month which ever is LOWER.”

  81. Hi Ramya,
    You are correct. I have made the amendment in the article. Thanks.

  82. pushpa says:

    Hi,

    Very informative article. I worked from 1993 to 2001 in 3 different companies in Bombay and Bangalore and was under the impression that the PF accounts are automatically transferred. But I believe I have 3 dormant accounts. I left India in 2001 and have been in the US since then. I would like to withdraw and close my PF accounts. Please provide some guidance on how I should go about doing these. Thank you for your help

  83. Raghav says:

    Hello BFA, I worked for Honeywell from 2007 to 2010 and I moved to Hewlett Packard in 2010 and worked till June 2013. I didn’t transfer my Honeywell pf account to HP. I resigned HP to go for higher studies. What is the process to merge both the pf accounts, so that I can use that after a couple of years down the line? As I am not moving to any new company, I can’t use form 13..

  84. Raghav,
    Your PF balance of Honeywell will stop earning interest from 2013 onwards. The HP one will continue to earn interest till 2016. You have two options :
    1. Withdraw entire PF amount – it won’t attract tax as you have completed 5 years of continuous employment.
    2. If you intend to join a job in next 1-2 years, you could transfer the PF of both Honeywell and HP in the new company.

  85. sandeep says:

    hi
    i have applied for pf and its been 3 months not getting any response , can you please assist.

  86. Generally it takes around 3 months. You can track the status online. Last option is to file RTI to know the status and reason for delay.

  87. Arun Kumar M says:

    Hi BFA
    This is Very Informative, I worked in company A from 2003 to 2007 and Company B from 2007 till 2013, now i am working in Company C. My Query is – There was PF deduction in my Company A but Company A was liquidated/Closed after 6 months of me leaving the company, I had not applied for withdrawal nor for transfer, It’s the same case with most of my friends, Could you please suggest the best way to get our PF amount

    1. Can i apply for transfer of Company A PF to Company C? though Company A does not exist anymore? if so what is the procedure?
    2. Can i apply for withdraw of PF whish was deposited by Company A? if so what is the procedure

    Thanks in advance for your advice
    Arun

  88. Arun,
    Thanks for your appreciation.

    1. The best suggestion for you would be to contact your HR / Finance dept in your Company C and ask for the transfer of PF from Company A & B into your existing company. Your Company A’s PF would have become inactive and won’t be accruing interest any more. While Company A is no more there, the PF should have been deposited with EPF authorities.
    2. Yes you can withdraw, but I won’t suggest that. You can obtain the PF withdrawal form from you Company C and submit it with EPF authorities.

  89. rajesh M says:

    nice article very useful for salaried people

  90. Prem says:

    Hi,

    I had a PF account with an employer ‘A’ with whom I worked for more than 5 years. I left and joined another employer ‘B’ with whom I worked for close to 4 years and left some months back. There was no employment gap between both jobs. I haven’t transferred my PF account balance with employer ‘A’ to employer ‘B’. Neither have I withdrawn the corpus. I am in self-employed status now. Here is my dilemma. If I withdraw my PF account from employer ‘B’ the same will be subject to tax since 5 years employment have not been completed in that company. I want to know if it is possible at this stage to transfer the pf balance from employer ‘A’ to employer ‘B’ which will technically make it 5 years of continuous service and hence tax exempt and then make the withdrawal of entire corpus some months down the line.

  91. sumeet says:

    Hi,

    Would even 3 days of gap lead to discontinuous service (for tax consideration)?

    Detailed case:
    I worked in organization A for 1 yr 5 months and left it on 26 Feb 2009. I joined organization B on 2 Mar 2009 ( so there is a gap of 3 days). I am now going to leave organization B after working for 4 yrs 5 months. I have transferred my PF from organization A to B, and the total service (A+B) is above 5 yrs. But since there is a gap of 3 days would my PF be taxable on withdrawl?

    Thanks,
    Sumeet

  92. Sumeet,
    Your withdrawal won’t be subject to tax as a couple of days gap is justifiable. However, I couldn’t come up with any specific Tax guidance on this.

  93. Prem,
    This is really a difficult one. Since you have left your previous employer, you probably can’t transfer your ‘A’ PF balance to ‘B’. While withdrawal of A won’t attract tax, withdrawal of B would. You can try submitting PF transfer form with EPF authorities and update us on the blog if that goes through.

  94. Barney says:

    Hi,

    I have 7 years of continuous service. Now I am not working under any establishments for past 9 months so my PF account is not being credited. Now, if I join another company for work, is it possible to transfer the balance from PF account created by the old company into the new company? Also, would you advise if it is wise to withdraw the money from the PF account and start a fresh one with the new company?

    Thank you.

  95. Barney,
    We would suggest you to transfer your PF balance from your earlier employer to your current employer. It is very much possible to do so. Just contact your HR department and they shall tell you about the process. PF is best way to have a long term tax free debt investment for your retirement.

  96. robot says:

    Hi,

    I have worked with organization A from 2002 – 2004. Organization has its own PF fund. Tax Slab – Not is tax slab for most part.

    Then moved to organization B from 2005 to 2006. This organization had no PF component. Strange as my CTC was over 3 Lakhs. Tax Slab 10%.

    2007 -I took an education break

    Worked with Organization C from April 2008 – June 2008 and continued education break. Tax Slab – 4 months salary Only. So not taxable.

    Worked with Organization D from Feb 2009 to August 2011. Tax Slab – 20%

    Working with Organization E from September onwards.

    I have not transferred PF from any of the previou employer. Please share if I do now transfer from all employers A,C,D to E, will that be treated as 10 Years Employment.

  97. Sri says:

    HI,
    Thanks for your Exullent article. One thing I want to clear..
    Im not working in an organisation “X”, due to some reasons I want to do another job in another company “Y”. I can neither tell company “X” ant my job in company “Y” nor tel company “Y” about my job in company “X”. Can I have 2 PF accounts active in both the companies? Will I face any issues either in company “X” or company “Y”???

  98. Sri says:

    (edited)
    HI,
    Thanks for your Exellent article. One thing I want to clear..
    Im working in an organisation “X”, due to some reasons I want to do another job in another company “Y”. I can neither tell company “X” about my job in company “Y” nor tel company “Y” about my job in company “X”. Can I have 2 PF accounts active in both the companies? Will I face any issues either in company “X” or company “Y”??? or will I face any issues in future?

  99. Robot,
    Firstly, irrespective of taxation issues, you must combine all your PFs as they are now inactive and earning no interest. Your PF with A, C are already inactive.

    Tax exemption for PF is based upon 5 years of continuous employment. You could combine your previous company’s tenure if there was no break. In your case, you will be able consider continuous employment from Feb 2009 only.

  100. Deepak says:

    Hi, I have PF account from my previous employer. I am working abroad since last year, but I would like to keep contributing in my existing PF account in India. Can I do so, even if I am not working in India ? At least, I would be able to contribute employee component of my salary ?

  101. Santhosh says:

    The is one of the simplest and best piece of article I have ever come across. I used to face difficulty to understand the financial related articles. This is something brilliantly put. Thanks you very much. Expect more

  102. robot says:

    Will an inactive PF account be given interest for the inactive period in case it is transferred to an active account. Say an account is inactive for 3 years. Now I want to move that to new active PF account. Would that inactive account get interest for 3 years.

  103. Deepak,
    As long as your employer is paying you salary in your India bank account, they would be contributing to PF. However, if you have left India and are no longer an employee where the salary in paid in India, you would not be able to contribute to PF. Alternatively, you could look into PPF. You can check out http://insight.banyanfa.com/public-provident-fund-ppf/ for more details on PPF.

  104. Robot,
    You will not be able to recover interest on any PF account once it becomes inactive for the inactive duration. Eg. if your existing PF becomes inactive in 2010 and you transfer it to your active PF in 2013, then the interest on your earlier PF account will not be recoverable for the period 2010 to 2013.

  105. Gunjan says:

    Hi,

    A very well written article. Though I still have few queries and it will be great if you could answer them.

    I am moving to abroad with the same company where I have completed 4 years now. I will not be on the India payroll so my account will eventually become inactive. Now i want to understand what is exactly meant by “Continuous 5 years of service”

    In this case where I m not on the Indian payroll, will the next 3 years (for which interest is paid out) count as part of continuous service? Or does it stop after the last payment is deposited into this account?

    If i come back to the same company after few years, will that time start from 5th year onwards? Or I will have to start fresh?

  106. Gunjan,
    As per Rule 8 of Part A of the Forth Schedule of Income Tax Act, continued period of 5 years include :
    “Where the accumulated balance due and becoming payable to an employee participating in a recognised provident fund maintained by his employer includes any amount transferred from his individual account in any other recognised provident fund or funds maintained by his former employer or employers, then, in computing the period of continuous service for the purposes of clause (i) or clause (ii) the period or periods for which such employee rendered continuous service under his former employer or employers aforesaid shall be included.”

    Hence to answer your query, if you rejoin service after a few years, your previous history of 4 years will be counted. However, your period of being employed in the same company abroad may not be counted as it does not attribute to any additional funds deposted in your PF account.

  107. Kanaja says:

    Hi,

    Working in Company A: 2008-2014
    Company A has a private EPF Trust

    Now I am leaving the company and going abroad.

    Company A is asking me to sign a letter which states, that I accept to submit the PF transfer form from the new company within 60 days.

    In case this does not happen, they will send the cheque for the PF amount so that I should withdraw the entire corpus.

    Isn’t a dormant EPF account supposed to earn interest for 3 years ?

  108. Kanaja
    A dormant EPF account should earn interest for 3 years. Not sure if this is for private EPF trusts as well. You can ask them not to redeem it currently and let it be on hold.

  109. Ravi Shankar says:

    HI BFA,

    I have a query, regarding PF: My PF history is:
    1. i have contributed to PF from 21st July 2008 to 19th June 2010 with company A
    2. I went for higher education from June 21st June 2010 to 10th Apr 2012 (no contribution to PF)
    3. Again started PF contribution in a new account from 11th Apr 2012 to 15th Nov 2013 with company B
    4. Got my PF a/c from company A transferred to company B on 20th Jun 2013
    5. Started PF contribution in a new a/c from 18th Nov 2013 with company C till date
    6. PF a/c transfer is already initiated from company B to company C
    7. Will leave India on 1st Oct 2014 and hence, PF contribution will stop post this date

    QUERY: Should i withdraw my PF? what are tax implications on my PF withdrawal? If i withdraw PF after 2 years, will i be given interest for these 2 years and corresponding tax implications?

    thanks in advance!

  110. Geeta says:

    Most informative, more on Employees Provident Trust Funds is awaited

  111. Ajay says:

    I was working in psu company for 12 years and recently joined central govt job.I am taking back my cpf amount credited to me instead of transferring.What will happen to EPS amount?Will I get pension at my present age of38 years.

  112. Sir ,

    I worked with private BPO company for 37 months . My contribution to my pf account is 550 pm . After two months from my retirement from that company i have applied for my pf withdraw as i need money for my family member hospitalisation .

    Once i have applied i recieved a email from my corporate team that as i didnt complete 5 years service they will deduct TDS from my pf amount . Because of my family suituation i confirm that still i have to withdraw my pf .

    Once i confirm through my email i have recied only 5700 as my PF settlement . As per my knowledge 550*36= 19800 . I dont know how much they deducted as TDS . And also i dont know my employer have contributed for me or not .

    Iam not satisfied with the amount which i recieved and still i didnt take even single paise from my bank account .

    Can you please clarify me regarding TDS deduction .

    Thanks in Advance .
    Muthu Kumaran.J

  113. Alekha says:

    Sir ,
    i have two jobs in two organization in same time, the nature of job is as a filed work and i continuing both any problem both are giving me a good salary but i have a confuse than how can i maintain my EPF account for both organization. how the deposit my EPF in One Account Number please guide me…… if any problem for maintain one EPF Account number for both employers…..kindly guide me…..???

  114. Bommanna Mulla says:

    Sir,
    I shall be retiring soon and i donot want to withdraw PF amount immediately.If i withdraw after three years without any contribution , will the interest earned be taxed?or is it tax free?
    Bommanna

  115. Hi Mr. Mulla,
    If you have been in employment for more than 5 years, then you can redeem your PF after 3 years and it will still be classified as tax free income.

  116. Roselle says:

    Hi,

    Hope you are doing well.

    I would be quitting my current job very soon and will be moving to another country and I want to withdraw my pf amount. So i wanted to know if I can withdraw the amount deposited in pension a/c?

    p.s. I have completed 8 yrs in my current organisation.

    Thanks & Regards,
    Roselle

  117. Hi Roselle,
    Withdrawing your PF may be a good idea in this case if you are not planning to work in India + you have already completed 5 years making your PF tax free.

    I found one good article on pension withdrawal – http://www.bemoneyaware.com/blog/eps/

  118. Jayasree says:

    Sir,
    I have the following employment history :
    Company A : Dec 2007 to Apr 2011(Unexempted)
    Company B : Apr 2011 to Nov 2014 (Unexempted)
    Company C : Jan 2015 – till date (PF trust)

    I have given request for PF transfer while in ‘B’ ,but for some reason it didnt happen and PF accnt with ‘A’ got inoperative.Now I have applied for PF transfer of ‘A’ and ‘B’ to current PF account with ‘C’.
    1) Will it be considered continuous service of 7+ years since I have submitted Form 13 in 2015?
    2) Along with the PF amount transfer whether EPS amount will also be transferred. Or should I submit any other forms for EPS transfer.Please suggest.

    Thanks,
    Jayasree

  119. Hi Jayasree
    Apologies but I am not extremely close to the details asked by you. My suggestion would be to talk to your work’s HR department who would put you in touch with the PF people.

  120. Arvind says:

    Hi,
    I worked for following durations in 2 companies
    1) 2004 to 2013 : Company A for 8.5 years
    2) 2013 to present : Company B for 2.5 years
    I had transferred my PF from A to B in 2014. Now, ill be going to a Company C which doesn’t pay PF (employees < 10). Some queries regarding the same :
    1) Can I continue to keep the PF account with Company B ? Will it continue to earn interest? How long?
    2) The Company A maintains its PF with a trust and after quitting from it, they had communicated to move the PF accout asasp as it would show up in their audits and creates problems. Is this correct? If yes, do I need to enquire the same from Company B?
    3) If after the specified maximum period of elongating the PF account with Company B (after quitting) I'm withdrawing the balance, will I be subjected to any taxation?
    4) Any difference to any of the above answers for EPS ?

    Thanks,
    Aditya

  121. Arvind,
    PF stops paying interest after 3 years of inactivity, i.e. after you stop contributing to it. In your case, since Company C will not be paying PF, your current accumulated PF in Company B will stop accruing interest after 3 years of leaving the company. You should redeem the PF amount and invest it gainfully, e.g. PPF or other such products.

  122. tkl says:

    I have nearly 20 years of continuous service and I have withdrawn Rs 15 lakhs from PF for purchase of flat. Do I have to pay taxes for? The second question is whether I will get tax exemption for my present contribution to PF as a withdrawal has happened in this FY? An early reply will be helpful in my tax planning.

  123. Hi tkl,
    If you withdraw PF after more than 5 years of continous employment, it is not subject to tax.

  124. Madurai Durai D says:

    Hi I am Durai. I am planning to open a PPF account in SBI. Is it possible to link my EPF account of current organisation with my PPF account which I am going to open in SBI?

    so money will automatically deposit to my ppf account..

  125. Hi Durai,
    PPF and EPF are completely different accounts and can not be linked.

  126. Sagarika says:

    Hi,

    Thank you for an informative article. Now my brother has received his 1st offer letter where PF has been calculated at 12% of his CTC INR 50000…Now the company has given him the option to opt for Minimum PF contribution (as per the new rule from Sep.2014) given which his salary structure will change and they will send him the updated offer letter. Please suggest which one should he opt for.

    Thanks,
    Sagarika.

  127. IMRAN says:

    How can we mention in the ITR our properties and assets that are purchased or invested in through PF ?

  128. Imran – ITR has no requirement or field to mention about the properties, unless you are having an income of Rs. 50 lacs and more.

  129. Sagarika,
    Your brother should opt for the minimum PF amount as it will be also matched by his employer. Considering he may be in his early stages of life, he should invest more amount into Equities via Mutual funds rather than a major amount via PF.

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Delhi – Odd Vs Even Formula

January 2, 2016January 2, 2016

The actual success of the Delhi government’s odd-even formula will be known only by January 15, but if the response of most Delhiities on the first day is any indicator, then the risk taken by Arvind Kejriwal’s Aam Aadmi Party seems to have paid off.

The local government will review the effect on pollution after the 15-day trial and consider including two-wheelers in the second phase of the scheme.

For more click here