Planning To Invest In EPF? Check Eligibility, Contribution Structure And Key Rules

Despite having several investment options available, people usually feel more secure investing in government-backed schemes. This sense of security has been reinforced with the Central Board of Trustees (CBT) of the Employees' Provident Fund Organisation (EPFO) deciding to retain the interest rate on Employees' Provident Fund (EPF) deposits at 8.25% for the financial year 2025-26, offering stability to subscribers about their retirement savings.

If you are considering investing in the EPF scheme, let's take a closer look at how it works.

Who Can Become An EPF Member?

If you work for an employer registered as an "establishment" under the EPF and Miscellaneous Provisions (EPF & MP) Act, 1952, typically an organisation employing more than 20 people, and your salary (basic pay plus dearness allowance, or DA) exceeds Rs 15,000 per month, you can be enrolled as a member of the EPF scheme.
If an organisation has fewer than 20 employees, it is not mandatory for it to register under EPF. However, such organisations can still choose to register voluntarily.

How does EPF work?

Let us understand how the EPF contribution system works -

•Suppose you work in an organisation that is registered with EPF. Your employer registers you for the scheme, and you are required to contribute either 12% or 10% of your basic salary to the EPF account every month.

•In addition, your employer contributes another 12% of your basic salary. Out of this, 8.33% goes to the Employee Pension Scheme (EPS), which helps build a pension corpus for retirement. The remaining 3.67% is credited to your EPF account. In total, the combined contribution towards EPF-related schemes amounts to 24% of your basic salary.

•You also get coverage under the Employee Deposit Linked Insurance (EDLI) Scheme, which provides life insurance. Even if you earn a higher salary, the EDLI contribution is calculated based on the maximum salary ceiling of ₹15,000.

•If your organisation has fewer than 20 employees, your EPF contribution requirement may be reduced to 10% of your basic salary. Certain other conditions may also qualify employees for this reduced contribution.

How Long Can You Retain An EPF Account?

A subscriber can retain their EPF account for as long as they do not fully withdraw the PF balance. However, if the account does not receive any contributions for more than three years, interest will not be credited after the end of the third year.

How Is The Period Of Non-Employment Treated Under EPF?

Short periods of unemployment generally do not significantly affect the PF balance. However, they may impact the calculation of service for determining pension benefits under the Employee Pension Scheme (EPS). As mentioned earlier, if there are no contributions to the PF account for more than three years, the account will stop earning interest.

What Happens When You Shift Jobs?

Every EPF subscriber is allotted a Universal Account Number (UAN). When you change jobs, your UAN remains the same, but a new member ID is generated for the new employer. You must provide your UAN to the new employer so that the EPF account can be linked, as an individual can have only one UAN throughout their lifetime.