EPF (Employees' Provident Fund)
A mandatory retirement savings scheme for employees of covered establishments, with both employer and employee contributing a fixed percentage of basic salary each month.
In short
- Both employer and employee contribute 12% of basic salary plus dearness allowance each month.
- Withdrawal after 5 years of continuous service, including service transferred across employers via UAN, is entirely tax-free.
- Premature withdrawal above ₹50,000 attracts TDS under Section 192A: 10% with a valid PAN, a much steeper rate without one.
- Interest on your own contributions above ₹2.5 lakh a year (₹5 lakh with no employer contribution) is taxed annually, separate from withdrawal taxation.
EPF is a retirement savings scheme, mandatory for establishments above a specified employee count, under which both employee and employer contribute a fixed percentage, currently 12% each, of basic salary plus dearness allowance every month. The employee's full contribution goes into their own EPF account; part of the employer's contribution is routed to the Employees' Pension Scheme (EPS), with the remainder added to the EPF account.
Withdrawals, and the interest credited each year, follow specific tax treatment depending on how long the account has been active and the circumstances of withdrawal, generally tax-free if withdrawn after five years of continuous service, including service transferred across employers through the same UAN. EPF is separate from voluntary schemes like PPF, though both fall under the broader umbrella of retirement-focused, government-backed savings instruments. The full withdrawal and TDS rules, including what happens if you withdraw early, are in our guide to EPF withdrawal and taxation.
Also referred to as: EPF, provident fund, PF.
Frequently asked questions
Is EPF withdrawal always tax-free?
Only after 5 years of continuous service, including service transferred via UAN. Withdrawal before that can attract TDS above ₹50,000, though several involuntary reasons, like ill health or an employer shutting down, stay exempt even earlier.
How much do I and my employer contribute to EPF?
12% of basic salary plus dearness allowance each, though part of the employer's share is redirected to the Employees' Pension Scheme rather than your EPF account.
Is EPF the same as PPF?
No. EPF is an employer-linked scheme tied to your job, funded jointly by you and your employer. PPF is a separate, voluntary scheme anyone can open on their own, with no employer involvement.
Disclaimer
This glossary entry is for general informational purposes only and does not constitute professional tax, legal, or financial advice. Rules and rates change, so consult a qualified Chartered Accountant for advice specific to your situation.