Does EPF come under 80C?

What is EPF?


There are various things that an employee working in a corporate setting would like to know about the Employees Provident Fund (EPF). The EPF and Miscellaneous Provisions Act, 1952, governs the primary plan. The Employees’ Provident Fund Organization is in charge of the program (EPFO). An employee must contribute a specified amount to the EPF plan, and the employer must also contribute an equivalent amount. On retirement – the employee gets a lump sum payment that includes both the employee’s and the employer’s contributions and interest.

EPF Interest Rate

These are the main elements to remember about the EPF Interest Rate:

  • Only EPF deposits made between April 2021 and March 2022 will be eligible for the present interest rate of 8.10%.
  • Even though interest is calculated monthly, it is only deposited once a year, on March 31st of the applicable fiscal year.
  • The interest is added to the balance for the next month, April, and then used to calculate interest again.
  • An EPF account becomes dormant or inactive after 36 months of no contributions.
  • Employees who are not yet eligible for retirement can earn interest on their dormant accounts.
  • Money placed in the inactive accounts of retiring employees does not earn interest.
  • Interest earned on dormant accounts is taxed at the member’s slab rate.
  • For payments made by the firm to the Employees’ Pension Scheme, the employee will not get any interest. However, beyond 58, a pension is paid out of this sum.

Does EPF come under 80C?

Employee contributions to the Employee Provident Fund (EPF) account are eligible for a tax deduction of Rs 1.5 lakh under Section 80C. This equals 12% of a worker’s pay deducted by the employer and placed in the EPF or other recognized provident fund. The current EPF interest rate is 8.5% per annum.

Benefits of EPF

Investing in this Employees’ Provident Fund has numerous advantages. Some of them are:

  • According to the EPF system, there is a fixed rate of interest. Further, the EPF receives interest even when it is dormant.
  • The EPF can operate as an emergency corpus because of particular premature withdrawal rules.
  • People invest in the EPF primarily to build a retirement fund. The corpus provides comfort to investors.
  • Section 80C applies to Employees’ Provident Funds. As a result, even the earnings from this EPF scheme are tax-free.

Workers can check the status of their EPF account, the balance of their EPF account, and so on using their Employees’ pf account numbers. The number is required for EPF withdrawals. Employees who have not kept track of the monthly contribution to the program may be unaware of their EPFO number or EPF balance check number. The boss would not tell the employees about their PF numbers (unless you ask). But, since you can’t always keep asking – you must be aware of this.

Who is eligible for EPF?

The following are the eligibility requirements for EPF:

  • The Employees’ Provident Fund Organization of India requires all businesses with more than 20 employees to register.
  • Employees’ Provident Fund membership is voluntary for companies with less than 20 employees.
  • All salaried employees are eligible for EPF benefits.
  • Additionally, any employees earning less than Rs. 15,000 must contribute to the EPF.
  • Employees who are earning more than Rs. 15,000, on the other hand, can opt-out of the EPF plan.

Withdrawals from EPF account

There are two circumstances to withdraw the funds in EPF, and they are as follows:

  • Complete Withdrawal: The funds in an EPF account can be withdrawn entirely in incomplete settlements when the employee reaches the age of 58 when the employee retires, if the employee is unemployed for two months or more, or if the employee dies while in service before reaching the age of retirement. In this case, the nominees or legal heirs will get to withdraw the accumulated fund.
  • Partial Withdrawal: Partially withdrawing funds from the EPF is possible for educational purposes, medical treatment, home loan repayment, marriage, land/house/flat purchase, if the establishment/factory closes, natural calamity, a year before retirement, and unemployment for more than one month.

In a nutshell

Contributions to the EPF provide many advantages for paid workers:

  1. Safe returns: This is one of the most secure debt instruments. It is backed by the government and ensures that the principle and interests earned are safe. It can help you build up a sizable retirement fund because contributions are made every month throughout your working life. This qualifies it for very long-term financial objectives.
  2. Friendly tax treatment: It is an E-E-E instrument, which means your contributions are tax-deductible under Section 80C, the interest generated is tax-free, and maturity earnings are tax-free, providing you have contributed to the fund for at least five years.
  3. Interest earned on EPF is the equivalent of a high pre-tax rate: the EPF is paying 8.75% this year, equivalent to a 12.50% rate of interest (for somebody in the 30% tax bracket). This interest rate is risk-free and guaranteed.

Apart from the primary functions, it also allows withdrawals, as mentioned in a previous question, and you can borrow money against your EPF.


But, you will also have to keep in mind that this is a long-term investment. If you have short-term financial goals, don’t try to meet them through EPF withdrawals. Suppose your goals are primarily short-term, as they are for young couples or parents funding their children’s education in the coming years. You may want to consider investing only the bare minimum in your EPF and channeling the rest of your funds into a more liquid instrument, keeping your risk appetite and goal time horizon in mind.

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