The Employees' Provident Fund

How India's EPF works for salaried workers, how contributions and interest add up, and when members can withdraw.

For millions of salaried workers in India, the Employees’ Provident Fund, or EPF, is the main form of retirement saving. It is managed by the Employees’ Provident Fund Organisation, EPFO, one of the largest social security organisations in the world.

Who is covered

Establishments with 20 or more employees are generally required to register with EPFO. Employees earning up to a wage ceiling of 15,000 rupees a month must be enrolled; others may join voluntarily.

Contributions

Employees contribute 12 percent of basic wages and dearness allowance.
Employers also contribute 12 percent. Of this, 8.33 percent goes to the Employees’ Pension Scheme, subject to a ceiling, and the rest to the EPF account.

Interest

EPFO declares an interest rate each year, which has generally been higher than bank deposit rates, for example 8.25 percent for 2023 to 2024. Interest is tax-free within limits.

Universal Account Number

Each member has a Universal Account Number, or UAN, which stays the same across jobs. Balances can be transferred when changing employers, and members can check balances online.

Withdrawals

Full withdrawal is allowed at retirement or after two months of unemployment. Partial withdrawals are permitted for purposes such as buying a house, medical treatment, education and marriage, subject to conditions.

The value of not withdrawing

A worker changes jobs three times in ten years. Each time, she is tempted to withdraw her EPF balance. Instead, she transfers it using her UAN. Over decades, her balance, with compound interest and continued contributions, grows into a substantial retirement fund. Early withdrawals would have cut this growth short.

Limitations

EPF covers mainly formal sector workers; most Indian workers, in the informal sector, are not covered. Delays in claims and transfers have been common complaints, though digital services have improved.

Thinking EPF is only a retirement account to ignore until 60

EPF is a retirement fund, but members should check balances, update records and transfer accounts when changing jobs. Unclaimed or unlinked accounts can cause problems later.

Key takeaways

EPF is the main retirement savings scheme for India's salaried formal workers.
Employees and employers each contribute 12 percent of basic wages and DA.
EPFO declares annual interest, such as 8.25 percent for 2023 to 2024.
A Universal Account Number keeps the account across jobs; most informal workers are not covered.