Discover the process of opting out of India's EPF scheme. Navigate personal financial goals with our guide on opting out of the Employee Provident Fund.
The Employee Provident Fund (EPF) is a retirement benefits scheme for salaried employees in India. It is a mandatory savings scheme where both the employee and employer contribute a certain percentage of the employee’s salary towards the EPF account. However, some employees may prefer not to participate in the scheme due to various reasons such as personal financial goals or investment preferences.
The good news is that the EPF scheme allows employees to opt-out of the scheme. In this blog, we will discuss the detailed procedure of Opt-Out Option in PF.
Understanding the Opt-Out Option in PF
The opt-out option in EPF allows an employee to withdraw from the EPF scheme and stop contributing to the scheme. However, it is important to note that this option is available only to employees who earn less than ₹ 15,000 per month. Employees who earn more than ₹ 15,000 per month cannot opt-out of the scheme and are required to contribute to the EPF scheme as per the rules.
Steps to Opt-Out Option in PF
The procedure for opting-out of PF is relatively simple and can be completed online. Here are the steps to follow:
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Step 1: Visit the EPF Member Portal
To opt-out of the EPF scheme, the first step is to visit the EPF member portal at https://unifiedportal-mem.epfindia.gov.in/memberinterface/. If you do not have an account on the portal, you will need to create one by providing your UAN (Universal Account Number) and other personal details.
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Step 2: Login to the Portal
Once you have created an account on the portal, you can log in using your UAN and password.
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Step 3: Go to the ‘Online Services’ Section
After logging in, you need to go to the ‘Online Services’ section and select the ‘Claim (Form-31, 19 & 10C)’ option.
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Step 4: Select the Reason for Withdrawal
Next, you need to select the reason for withdrawal as ‘Illness’, ‘Marriage’, ‘Higher Education’, ‘Purchase of land or house’, ‘Repair or modification of the house’, or ‘Any other reason’.
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Step 5: Enter the Amount to be Withdrawn
You will then need to enter the amount to be withdrawn. The amount that can be withdrawn depends on the reason selected for withdrawal. For example, if the reason for withdrawal is illness, you can withdraw up to six months’ basic wages and DA or the total employee share with interest, whichever is lower.
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Step 6: Upload the Necessary Documents
You will then need to upload the necessary documents, such as medical certificates, wedding invitations, or land purchase documents, depending on the reason selected for withdrawal.
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Step 7: Submit the Claim
After completing the above steps, you can submit the claim for withdrawal. The claim will be verified by the EPFO and the amount will be credited to your bank account.
Use our PF calculator to estimate your savings. Our EPF calculator ensures accurate results with current interest rates. Try our PF calculator online now!
Important Points to Note
- Only employees earning less than ₹ 15,000 per month can opt-out of the EPF scheme.
- Once you opt-out of the PF scheme, you will not be eligible for the employer’s contribution to the EPF account.
- The opt-out option is available only after completing two months of continuous service with the employer.
- If you have withdrawn from the EPF scheme earlier, you will not be eligible for the opt-out option.
- The amount withdrawn from the EPF account before the completion of five years of continuous service is taxable.
Can I Opt Out of PF?
Now that we have discussed the eligibility and consequences of opting out of EPF, let us look at the procedure to opt-out of PF.
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Step 1: Write a Request Letter
The first step is to write a request letter to the employer stating your intention to opt-out of PF. The letter should mention the reason for opting out and should be addressed to the HR department or the person in charge of EPF in the organisation.
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Step 2: Submit the Request Letter
The request letter should be submitted to the HR department or the person in charge of EPF in the organisation. Along with the request letter, you may need to submit a few documents such as ID proof, address proof, and bank account details.
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Step 3: Wait for Confirmation
After submitting the request letter, you need to wait for the confirmation from the EPF office. The confirmation will be sent to the employer, who will then inform the employee.
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Step 4: Update the KYC Details
Once the confirmation is received, the employee needs to update the KYC details on the EPFO portal. The KYC details include the bank account number, IFSC code, Aadhaar number, PAN number, and mobile number.
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Step 5: Open a New NPS Account
As mentioned earlier, opting out of EPF means that the employee will not have any retirement benefits from the organisation. To ensure financial security after retirement, the employee can open a new National Pension Scheme (NPS) account.
Conclusion
Opt-Out Option in PF is a personal choice that should be taken after careful consideration of the consequences. While opting out of PF means higher take-home pay in the short term, it also means foregoing retirement benefits provided by the organisation. If an employee decides to opt-out of PF, they should ensure that they have an alternative retirement plan in place, such as opening a new NPS account or investing in other retirement schemes.
If you are an employer, it is important to inform your employees about the Opt-Out Option in PF and ensure that they understand the consequences of opting out. You should also ensure that the PF return filing is done accurately and on time to avoid penalties and legal action.
Certainly, Opt-Out Option in PF is a crucial decision that can have significant financial implications. It is always recommended to consult a financial advisor or tax expert before taking such a step. Additionally, Vakilsearch can assist you with the necessary paperwork and ensure that you follow the correct procedure to Opt-Out Option in PF and safeguard your financial interests.
FAQs – Opt-Out Option in PF
Can an Employee Opt Out of PF?
Opting out means forgoing Provident Fund benefits. You won't contribute or receive employer contributions; it may impact retirement savings.
How can I opt for a minimum PF contribution?
Discuss with your employer to contribute the minimum eligible percentage, usually 12% of your basic salary, to the Provident Fund.
How do I opt out of the EPS scheme?
Consult your employer or EPFO for details on opting out of the Employee Pension Scheme (EPS) if eligible.
Is it good to opt for PF?
Opting for PF is advisable; it builds a corpus for retirement and provides financial security.
Is it compulsory to opt for PF?
It's usually mandatory for eligible employees, but some may be exempt based on income or industry norms.
Can I opt out of PF in my new job?
Generally, no. PF is often mandatory, and opting out may not be an option in many organisations.
Is it possible for employees earning more than ₹15,000 to voluntarily contribute to the Provident Fund?
The PF wage limit is ₹15,000 for mandatory coverage, but employees with a higher salary can still contribute voluntarily.
Is PF Compulsory or Optional?
Provident Fund (PF) is compulsory for employees working in establishments covered under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, in India. It is mandatory for employees earning up to ₹15,000 per month, while those earning above this threshold may opt out if they had no PF account earlier.
Can I Stop Employee Contributions to PF?
Once enrolled, employees cannot unilaterally stop their contributions to the Provident Fund if they are part of an establishment covered under the PF Act. Both employee and employer contributions are mandatory as per the law, ensuring social security benefits for employees.
Can I Stop My PF Account?
Employees cannot stop or close their PF account while employed with an organization covered under the PF Act. The account remains active until the employee retires, resigns, or is terminated. However, employees can transfer their PF account when changing jobs.
Can an Employee Request an Employer Not to Deduct PF?
An employee cannot request the employer to stop PF deductions if the establishment is covered under the PF Act and the employee is eligible. PF deductions are legally mandated, and both employees and employers must comply with the statutory requirements to ensure employees' social security.
Is It Okay to Not Opt for PF?
Not opting for PF is generally not permissible for eligible employees working in covered establishments. PF ensures long-term financial security and benefits like pension and insurance. Employees and employers are legally required to contribute, making opting out against the law and potentially detrimental to employees' future financial health.
Can an Employee Choose to Not Pay EPF?
An employee can choose not to pay Employee Provident Fund (EPF) only if they are earning above ₹15,000 per month and have no prior EPF account. Such employees must submit Form 11 upon joining a new company to declare their exemption status. Otherwise, EPF contributions are mandatory.
Can We Stop Voluntary PF Contribution?
Yes, employees can stop their voluntary Provident Fund (PF) contributions by informing their employer. Voluntary contributions are over and above the mandatory 12% of the basic salary and dearness allowance. To stop these contributions, employees must follow their company’s procedures for modifying payroll deductions.
What Is Form 11 to Opt Out of PF?
Form 11 is a self-declaration form submitted by employees upon joining a new company. It includes details about their previous employment and EPF membership. Employees earning above ₹15,000 per month and not having an existing EPF account can use Form 11 to opt out of EPF contributions.
Can I Exit From My PF Account?
Employees cannot exit their Provident Fund (PF) account while still employed with a covered establishment. However, upon retirement, resignation, or termination, employees can withdraw their PF balance. They can also transfer their PF account when changing jobs to continue their contributions and benefits.
Can We Remove PF From Salary?
Employers cannot remove Provident Fund (PF) contributions from the salary of eligible employees working in establishments covered under the PF Act. Both employer and employee contributions are legally required. Any attempt to exclude PF from the salary structure would be against the law and subject to penalties.
Can an Employee Opt Out of EPS?
Employees earning above ₹15,000 per month and joining a new company without an existing EPS account can opt out of the Employee Pension Scheme (EPS) by submitting Form 11. However, once an employee is enrolled in EPS, they cannot opt out while remaining employed with a covered establishment.
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