Employee Provident Fund (EPF) is a fundamental component of nearly every employee’s salary, ensuring a portion of earnings is saved for retirement. Administered by the Employees Provident Fund Organisation (EPFO), EPF is applicable to organizations with over 20 employees, with mandatory contributions for employees earning up to ₹15,000.
EPF contributions entail a minimum monthly contribution of ₹1,800 or 12% of the salary (Basic Salary + Dearness Allowance), whichever is lower, with employers matching this contribution.
Tax implications vary for employee and employer contributions. Employee contributions are deductible up to ₹1,50,000 under section 80C, while employer contributions are exempt from tax, provided the total employer contributions across retirement funds do not exceed ₹7.5 lakhs annually.
Interest earned on EPF contributions is tax-exempt, with exceptions if employee contributions exceed ₹2.5 lakhs annually.
Withdrawals made before 5 years of employment render employer contributions taxable. However, employee contributions remain tax-free, though previously claimed deductions under section 80C may be added to taxable salary. TDS at 10% applies if withdrawals exceed ₹50,000.
Withdrawals post 5 years of employment are entirely tax-exempt. This 5-year period includes employment with previous employers.