What is EPF? Complete Guide to Employee Provident Fund in India
If you're a salaried employee in India, chances are you have an EPF account. The Employee Provident Fund is a mandatory retirement savings scheme that helps you build a substantial corpus over your working years. Let's understand how EPF works and how to make the most of it.
What is EPF?
EPF (Employee Provident Fund) is a retirement benefit scheme managed by the Employees' Provident Fund Organisation (EPFO). It's mandatory for organizations with 20 or more employees, though smaller companies can also opt in.
EPF Interest Rate 2025-26
The EPF interest rate for FY 2025-26 is 8.25% per annum. This is an increase from the previous year's rate of 8.15% and represents one of the highest risk-free returns available in India.
How interest is calculated:
- Interest is calculated monthly on the closing balance
- Credited annually to your account
- Monthly rate = 8.25% ÷ 12 = 0.688%
EPF Contribution Structure
| Contributor | Contribution | Where It Goes |
|---|---|---|
| Employee | 12% of Basic + DA | 100% to EPF |
| Employer | 12% of Basic + DA | 3.67% to EPF, 8.33% to EPS |
Note: EPS (Employee Pension Scheme) contribution from employer is capped at Rs 1,250/month (8.33% of Rs 15,000).
New EPFO Rules (October 2025)
The EPFO introduced transformative changes in October 2025 affecting over 7 crore subscribers:
- Simplified categories - Previous 13 complex rules consolidated into 3 categories: Essential Needs, Housing Needs, and Special Circumstances
- Reduced service period - Minimum service period for partial withdrawals uniformly reduced to 12 months
- Full balance withdrawal - Members can now withdraw entire EPF balance (both employee and employer contributions)
EPF Withdrawal Rules (2026)
Full Withdrawal
You can withdraw your entire EPF balance when:
- You reach 58 years of age (retirement)
- Unemployed for more than 2 months
- Permanent disability or incapacity
- Leaving India permanently
- Retrenchment or voluntary retirement
Partial Withdrawal During Employment
| Purpose | Service Required | Maximum Amount |
|---|---|---|
| Medical Emergency | No minimum | 6 months' basic salary |
| Marriage (self/children/siblings) | 7 years | 50% of employee contribution |
| Education (self/children) | 7 years | 50% of employee contribution |
| Home Purchase/Construction | 5 years | 36 months' salary or total cost |
| Home Loan Repayment | 3 years | 36 months' salary |
| Home Renovation | 5 years | 12 months' salary |
| Pre-retirement (54+ years) | 54 years age | 90% of balance |
Unemployment Withdrawal
- After 1 month unemployment - Withdraw up to 75% of balance
- After 2 months unemployment - Withdraw remaining 25% (or full 100%)
EPF Tax Benefits
Section 80C Deduction
Employee's contribution to EPF qualifies for deduction up to Rs 1.5 lakh under Section 80C (old tax regime only).
Tax on Interest
Interest earned on EPF is generally tax-free. However, for employee contributions exceeding Rs 2.5 lakh in a financial year (Rs 5 lakh for government employees), the interest on the excess amount is taxable.
Tax on Withdrawal
- After 5 years of continuous service - Completely tax-free
- Before 5 years - TDS deducted; amount added to taxable income
UAN: Your Universal Account Number
Every EPF member gets a 12-digit Universal Account Number (UAN) that remains constant throughout their career, even when changing jobs. Benefits include:
- Single number across all employers
- Easy transfer of EPF when changing jobs
- Online access to passbook and claims
- Aadhaar and bank account linking
How to Check EPF Balance
Multiple ways to check your EPF balance:
- EPFO Portal - Login at epfindia.gov.in with UAN
- UMANG App - Download and check using UAN
- SMS - Send "EPFOHO UAN ENG" to 7738299899
- Missed Call - Give missed call to 011-22901406
EPF vs PPF: Key Differences
| Feature | EPF | PPF |
|---|---|---|
| Who can invest | Salaried employees | Any Indian resident |
| Interest Rate (2025-26) | 8.25% | 7.1% |
| Employer Contribution | Yes (12%) | No |
| Lock-in Period | Till retirement/unemployment | 15 years |
| Maximum Investment | No cap | Rs 1.5 lakh/year |
Tips to Maximize EPF Benefits
- Don't withdraw when changing jobs - Transfer your EPF instead to maintain continuity and compounding
- Contribute to VPF - Voluntary Provident Fund lets you contribute more than 12% at the same interest rate
- Keep UAN updated - Link Aadhaar, PAN, and bank account for seamless transactions
- Nominate beneficiaries - Ensure your nominee details are updated
- Check passbook regularly - Verify employer contributions are being deposited
EPF for Retirement Planning
Example: Starting salary of Rs 50,000 (Basic + DA of Rs 25,000), with 5% annual increment, EPF at 8.25% over 30 years:
- Your contribution: ~Rs 32 lakh
- Employer's contribution: ~Rs 32 lakh
- Interest earned: ~Rs 1.2 crore
- Total corpus: ~Rs 1.8 crore
Plus, you'll receive a monthly pension from EPS after retirement.
Need Liquidity Without Touching EPF?
EPF withdrawal before 5 years attracts TDS and affects your retirement corpus. If you have mutual fund investments, there's a smarter way to access funds.
DhanLAP offers Loan Against Mutual Funds (LAMF):
- Keep EPF intact - Let your EPF compound undisturbed
- Quick access - Often same-day disbursement
- Lower interest rates - Compared to personal loans
- Flexible repayment - No rigid EMI structure
Final Thoughts
EPF is one of the most powerful wealth-building tools for salaried Indians. The combination of employer matching, high interest rates (8.25%), and tax benefits creates a compounding machine that can build substantial retirement wealth over your career.
The key is to avoid unnecessary withdrawals, transfer your EPF when changing jobs instead of withdrawing, and let the power of compounding work for decades. Your future self will thank you.
