Do you know that the tax on your EPF corpus as well as employer’s contribution has been rolled back.

Here’s a quick guide to understanding your EPF and what happens from FY 2016-17 onwards.


What is EPF?

Employee Provident Fund is

• a contributory social security scheme
• applicable to companies with 20 or more employees
• threshold on contribution is Basic salary of Rs 15,000

How does it work?

• presently, employee contribution to provident fund is 12% of Basic salary
• matched by employer* [* 3.67% to EPF, 8.33% to EPS (Employee Pension Scheme)]
• employer contribution is usually part of CTC
• total amount earns interest, interest rate notified by Govt each year
• both EPF and EPS amounts paid out separately during withdrawal
• rate of interest is currently 8.8% for FY 2015-16

Before 2016-17

EPF Withdrawal

• after 5 or more years of continuous service
• after attaining the age of retirement (presently 58)
• if unemployed for two months or more after leaving previous job
• for marriage, higher studies, house construction/purchase
• for medical emergencies

Tax on EPF

• tax applicable if withdrawn before completion of 5 years of continuous service
• no tax if withdrawn after 5 years or upon retirement
• tax status is EEE (Exempt at all stages contribution, accrual, withdrawal)

After 2016-17

EPF Withdrawal

• only employee contribution and accrued interest on it can be withdrawn prematurely
• employer contribution stays in your EPF account
• this can be withdrawn only upon retirement, at 58 years of age

Tax on EPF

• proposal to tax 60% EPF corpus on withdrawal has been rolled back
• proposal to tax employer contribution above Rs 1.5 lakhs has been rolled back
• tax status stays EEE (Exempt during contribution, accrual and withdrawal)

More information on EPF and EPS is available on the EPFO website.

Are you clear now, what is EPF with this Infographic? Why? Feel free to leave a comment, if you have any doubts. Have a Nice Day!

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