Opt out of EPF - employees in my organisation drawing a BASIC SALARY of More than 21000

Dear All,

After the new Supreme Court ruling regarding EPF, some employees in my organization drawing a BASIC SALARY of more than Rs. 21,000 (considering the statutory limit of Rs. 15,000) have requested to withdraw from the EPF scheme completely while continuing their service with the company.

I understand that there is no fixed format required to be presented to the RPFO for initiating such opt-out by existing employees. Therefore, I request the experts to shed some light on this topic regarding how this process should be carried out.

Some common points about these employees are as follows:

1) All are earning salaries well above the statutory limit of EPFO.
2) All of them are based in the New Delhi area.
3) All have completed an average of 2 years with the company.
4) At the time of joining my company, all of them had opted for EPF, with deductions occurring at 12% of the Basic salary until January 2019.
5) All have been issued a UAN.

In addition to understanding the process of opting out of EPF while in service, I would also like to request the following information:

a) If they leave my company for another company and wish to have EPF deductions in the new company, will they be eligible to do so?
b) Since all these employees are senior individuals with EPF contributions spanning 15-20 years and have transferred their EPF from company to company, can they withdraw the PF contributions when opting out? Will they be eligible for pension considering they have completed more than 10 years of EPF contribution?
c) Lastly, what will happen to their UAN? Will they need to surrender it or leave it as is?
d) What impact will it have on my company if these existing employees request to stop contributions entirely? Will the company have to pay any token amount?

Please provide advice as these employees wish to cease EPF contributions at the earliest.

Dear Friend,

1. If an employee is already a member of PF, then the contribution is subject to a maximum of 15,000/-.
If an employee is not a member of the provident fund earlier, and he is a fresher for the PF while joining, and his Basic is more than 15,000, then exemption is granted by filling form no 11.

2. If an employee has completed 10 years of Pension contribution, he may avail of a pension scheme certificate from EPFO.

3. UAN will be active until his last employment. If he joins another company after 10 years, the same UAN will be activated.

Dear Ravi,

Thank you for your response. However, if you carefully read my query, I have already stated what you mentioned. My query is different altogether as I want to know the DISCONTINUATION OF EPF CONTRIBUTION while in CURRENT EMPLOYMENT. If you are aware of that, please shed light on that aspect.

Regards,
Anuradha

Dear Anuradha,

I would like to know the reason for the discontinuation of EPF contributions while in current employment.

The employee's contribution to EPF is too high and wants to invest in other Sec. 80C tax-saving options.

Dear Anuradha,

EPF regulations do not allow exemptions if an employee's basic salary is high. If the employee's basic salary exceeds 15,000, they must contribute a maximum of 15,000, which is equivalent to 1800. The only way we can exempt employees in such cases is by referring to my point number 1.

Additionally, as you mentioned, if you are looking for other options for tax savings, according to the new guidelines, apart from HRA, any other allowances provided to employees will be considered as basic for PF calculation purposes.

Please let me know if you need further clarification or assistance.

Best regards, [Your Name]

Dear Ravi,

Thanks for your response.

In continuation of your response, I understand that once an employee has voluntarily or, due to stipulation, enrolled in the EPF scheme, he/she cannot opt out of the EPF scheme for the duration of his/her employment but can at best limit his/her contribution to Rs 15,000 of Basic, as upheld by the Supreme Court in the Marathwada Bank case. However, I am still not fully convinced with your view as exemption and opt-out cannot be construed similarly. The latter is based on certain stipulations, whereas opting out is willfully letting go of one's right, provided he/she is not in contravention of any said law.

Thus, hypothetically speaking, if an employee wants to opt out of the EPF scheme, he/she can resign from the company (withdraw all amounts and from the EPF Scheme using the CCF) and work for a brief period as a retainer with the company. At the end of this retainership period, he/she can be reabsorbed into the company as FTE, opting out of EPF!

Please share your opinions on the same.

Warm Regards,
Anuradha