
EPF has issues. Can you say No to it?
Summary
- In 2023-24, the Employees’ Provident Fund Organisation rejected 8.7 million applications from individuals seeking to withdraw money from their EPF accounts.
Savings are meaningless if you cannot access them. When Dhairya Tanna, 33, tried to withdraw ₹3 lakh from his EPF account, the Employees’ Provident Fund Organisation rejected his application. The chartered accountant wanted to withdraw some money from his EPF account to purchase his first house. Despite submitting all the relevant documents, he says his claim was rejected on grounds of improper cheque image.
Last year, the EPFO rejected 24% of part-withdrawal claims—Tanna’s being one among 8.7 million rejected applications. Not just that, it also rejected one in every three EPF final settlement claims in 2023, according to the EPFO annual report. That was the highest in five years.
Following the rejection, Tanna approached his company’s human resources department to reduce his monthly EPF contribution. The HR department declined his request, stating that the company had a standard policy of deducting 12% of the basic pay plus dearness allowance for all its employees.
“I didn’t want to put more money in EPF anymore," said Tanna, who works in internal audit. “I wanted to invest in MFs as EPF rules are complex and withdrawal is an issue."
Many employees, like Tanna, are realising that they have limited options when it comes to not contributing to the EPFO from their monthly salary.

Compulsory contributions
By law, companies with more than 19 employees are required to register with the EPFO. The Union government uses a huge chunk of the money it gets through EPFO inflows to buy government of India securities, which in turn helps finance budget deficits.
Typically, medium to large-size companies pay 12% of an employee’s basic pay (plus dearness and retaining allowances) to the EPFO every month, as required by the EPF Act. Alternatively, companies can pay just ₹1,800, or 12% of a ₹15,000 basic salary, towards an employee’s EPF account every month. The EPF Act allows companies the flexibility to choose either model. To be sure, this flexibility does not extend to employees.
“In reality, almost everyone ends up subscribing to the EPF through their company," said Anurag Jain, co-founder and partner of ByTheBook Consulting LLP.
Once registered with the EPFO, employees have to contribute to it compulsorily. Most companies deduct 12% of an employee’s basic pay plus dearness allowance and retaining allowance as the monthly EPF contribution. Both employer and employee have to chip in equal amounts towards the EPF account.
Corporate policy
When Thanigai Ravindran’s wife joined a new company as a French translator her EPF contribution dropped fromRs 6,000 to ₹1,800 per month. The Tamil Nadu-based employee wondered if his company could do the same with his EPF contribution, which was ₹16,000 per month.
He had opted for the new tax regime under which he could not claim a tax deduction under 80-C of the Income Tax Act for EPF contribution. Even the interest was fully taxed for contributions beyond ₹2.5 lakh in a year. But he was told the company couldn’t lower his EPF contribution.
Also read |EPFO alert! How to avoid, deal with rejections, delays
Some companies allow employees to switch from 12% of actual basic pay to ₹1,800 towards the monthly EPF contribution. But for large companies with thousands of employees, it would be an administrative challenge if many people request this. “That’s why, in practice, many companies follow a uniform policy of EPF contribution," said Bisen Jeswant, partner, employment law practice, at Cyril Amarchand Mangaldas, a law firm.
In a few instances, companies have been allowed to change their EPF policy. In the caseof Marathwada Gramin Bk.Karmch.Sangtn.& ... vs Mangt.Of Marathwada Gramin Bank & Ors on 9 September, 2011, the Supreme Court allowed the company to reduce employees’ contribution to the statutory limit when the bank’s finances were in a crisis.
That said, the court’s decision should be treated as an exception and not the norm, said Adarsh Vir Singh, founder of social-security consulting firm Nidhi Niyojan Inc.
Reducing EPF contributions
Employees have two ways to reduce their EPF contributions when changing jobs.
One is if their new company has a policy of restricting employee EPF contributions to ₹1,800 per month. In this case, even if the previous employer was deducting a higher amount, the employee has to accept the new company’s policy.
The other option is withdrawing all the money in an EPF account linked to a Universal Account Number and creating a new UAN while changing jobs. When opening a new UAN, employees have a one-time option of choosing whether to restrict their EPF contribution to ₹1,800 or pay a higher amount.
Also read |EPF interest delays: How it impacts compounding and tax filing
However, for a fresh UAN, a person should have been unemployed for a minimum of 60 days, which is the time required to withdraw the corpus from an existing EPF account. Singh of Nidhi Niyojan said this was not a recommended path as continuity of provident fund or pension service offers benefits at a later date.
On the other side of the EPF spectrum, employees can opt to increase their monthly contribution to up to 100% of their basic pay by informing the company’s HR department at the start of the financial year. However, companies have no obligation to match an employee’s voluntary provident fund (VPF) contribution, unlike in EPF, which requires an employer to match an employee’s monthly contribution.
Also read |No interest on National Savings Scheme from Oct 1: What it means for you