EPF and UAN explained: contributions, UAN, KYC and withdrawal

The Employees' Provident Fund (EPF) is the backbone of retirement savings for salaried Indians. It is a forced-savings scheme with a generous, government-declared interest rate, run by the Employees' Provident Fund Organisation (EPFO). For an HR or payroll team, it is also a monthly obligation with real penalties for getting it wrong. This guide covers everything you need to run EPF confidently: coverage, the contribution split, the pension share, the UAN, interest, and the tax treatment of withdrawals.

Who is covered by EPF

EPF runs under Chapter III of the Code on Social Security, 2020, in force since 21 November 2025, and applies to establishments employing 20 or more people, and to smaller ones that are notified or opt in. Once an establishment is covered, it stays covered even if the headcount later drops below 20.

Within a covered establishment, any employee earning basic wages up to the wage ceiling at the time of joining must be enrolled. The ceiling is ₹25,000 per month from 17 September 2026 (notification S.O. 5109(E) under the Code on Social Security, 2020); it was ₹15,000 before that, so employees earning between ₹15,001 and ₹25,000 are now covered compulsorily. Employees earning above that threshold are called "excluded employees" and are not compulsorily covered, but the employer can, and usually does, extend membership to them voluntarily. In practice most established employers cover their entire workforce, because a split scheme is harder to administer and worse for the employee.

How the 12% contribution is split

Both the employee and the employer contribute 12% of PF wages. PF wages generally mean Basic salary plus Dearness Allowance (and retaining allowance, where it applies). The employee's entire 12% goes into the provident fund account. The employer's 12%, however, is not all provident fund; part of it funds the pension scheme.

Component	Rate	Applied on
Employee share (EPF)	12%	PF wages
Employer share to pension (EPS)	8.33%	PF wages, capped at ₹25,000 (so up to ₹2,083)
Employer share to EPF	3.67% and any balance	Remainder after EPS

On top of the 12% each, the employer also pays small charges: EDLI (a life insurance component) and administrative charges, together roughly 0.5% of PF wages. Because the EPS portion is capped at 8.33% of the ₹25,000 ceiling, a high earner's pension contribution is capped at ₹2,083 a month, with the rest of the employer share flowing to EPF. EPS and EDLI use the same ₹25,000 ceiling. The Central Government's separate 1.16% pension share stays on ₹15,000 under G.S.R. 890(E) and is not deducted by the employer. September 2026 is a split month: the old ceiling applies to 1 to 16 September and the new one from 17 September, as our monthly payroll checklist explains. EPFO's operational guidance on the split month was awaited at the time of review.

Many employers choose to cap PF wages at the ₹25,000 statutory ceiling even for employees whose basic exceeds it. That makes the contribution for such employees ₹3,000 per side per month. Others contribute on actual basic, which builds a larger retirement corpus. Both are valid; what matters is that the policy is consistent and correctly reflected in payroll.

What is the UAN

The Universal Account Number (UAN) is the 12-digit number EPFO gives each PF member for life. Every employer the person works for opens a new member ID under the same UAN, so the whole PF history sits in one place.

UAN versus member ID

These two are often confused:

	UAN	Member ID (PF account number)
Issued to	The person	The person's employment with one establishment
Changes on job change	No, it stays for life	Yes, each employer creates a new one
Used for	Passbook across employers, KYC, claims, transfers	Posting contributions from one employer

When an employee joins, the employer links a new member ID to the employee's existing UAN. The ECR is filed against the UAN, and contributions post to that employment's member ID.

How a UAN is generated now

The FAT route (the default)

In April 2025, EPFO introduced three services in the UMANG app using Aadhaar-based Face Authentication Technology (FAT): direct UAN allotment and activation, activation of existing UANs, and face authentication for already activated UANs. By a circular dated 30 July 2025, EPFO made FAT the only route for allotting new UANs from 1 August 2025.

What the employee needs:

• a valid Aadhaar number, and access to the Aadhaar-linked mobile number for OTP;
• the UMANG app and the Aadhaar Face RD app on a smartphone.

The steps, per EPFO's user manual:

1. In UMANG, open UAN Allotment and Activation, enter Aadhaar and mobile number, and give consent.
2. Enter the OTP. The system checks whether a UAN already exists for that Aadhaar. If one does, the employee is told, and no new UAN is created.
3. Complete the face scan.
4. The UAN is generated from Aadhaar data and sent by SMS, already activated. The employee can download the e-UAN card to give to the employer.

Because details are pulled straight from Aadhaar, name, date of birth and gender mismatches, a frequent source of trouble in the past, are much less likely.

When the employer still generates the UAN

EPFO kept the employer route for exceptional cases, such as international workers and citizens of Nepal and Bhutan. For everyone else, the employer's job is to collect the UAN, not create it.

Activation

A UAN must be activated before the member can log in to the member portal, see the passbook, update KYC or file claims. A UAN generated through FAT is activated at the same time. For an older UAN that was never activated, the employee uses UAN Activation in UMANG: enter UAN, Aadhaar and mobile, verify the OTP and complete the face scan. The system sends a temporary password by SMS.

EPFO's procedures in this area have changed several times since 2024, so check the current process on the EPFO website before issuing joining instructions.

KYC seeding

KYC links the UAN to the documents EPFO relies on for payments and verification.

KYC item	Why it matters	Current process
Aadhaar	ECR can be filed only for members whose Aadhaar is seeded and verified	Seeded at FAT generation; otherwise via the employer's KYC function or a joint declaration
Bank account	Claims are paid only to a seeded, verified account	Employee seeds it; verified by the bank or NPCI, with no employer approval since 3 April 2025
PAN	Affects TDS on taxable PF withdrawals	Added through KYC and verified against income-tax records

A few specifics from EPFO circulars:

• Aadhaar is a hard gate for ECR. Filing ECR only for Aadhaar-verified members has applied since 1 June 2021, and EPFO ended the last extensions for specified regions and industries after 31 October 2025.
• Where name, gender and date of birth in the UAN match Aadhaar exactly, the employer can seed Aadhaar through the KYC function on the employer portal, with no separate EPFO approval (circular of 13 August 2025).
• Where they do not match, or a wrong Aadhaar is linked, the correction goes through the joint declaration function, which the employer files and the regional office approves.
• Members with Aadhaar-verified UANs can correct many profile fields themselves under the simplified joint declaration process introduced in January 2025.
• Bank details no longer need a cheque leaf or passbook image for claims when the account is validated by the bank or NPCI.

Transfers on job change

With one UAN, a job change no longer means a new account balance to chase. The old balance still has to be transferred to the new member ID, though:

• The employee files a transfer claim (Form 13) online from the member portal, choosing whether the previous or present employer attests, where attestation is needed.
• Since April 2025, a transfer approved at the source office posts the PF balance and pension service to the new account automatically, without separate processing at the destination office. The revamped Form 13 also splits taxable and non-taxable parts of the accumulation.
• The transfer certificate (Annexure K) is available to members in the member portal.

Exits matter here. If the previous employer never marked a date of exit, the old member ID looks active and transfers and new contributions run into trouble. Mark exits on the employer portal as soon as the employee leaves.

Employer responsibilities

For HR and payroll, the UAN checklist is:

1. At offer or joining, ask whether the joiner has a UAN. Most people with any prior formal employment do.
2. If not, send them the FAT steps before day one so the UAN exists before the first payroll.
3. Register the employee on the employer portal against the UAN, with the correct date of joining.
4. Verify Aadhaar seeding before the first ECR; otherwise the member cannot be included.
5. Collect nomination. Under the EPF Scheme 2026, nominations are electronic.
6. Mark the date of exit promptly when someone leaves.
7. Protect the data. UAN, Aadhaar, PAN and bank details are personal data under the DPDP Act, 2023. Limit who can see them.

Common issues and fixes

Issue	Likely cause	What to do
Employee has two UANs	A previous employer generated a new one instead of reusing the old	The member raises a request through the member portal or EPFO grievance channel to merge; do not add a third
Wrong member ID linked to a UAN	Error at registration	EPFO has a process for de-linking erroneously linked member IDs through the regional office
ECR rejects a new joiner	Aadhaar not verified, or date of joining missing	Complete KYC seeding and check the joining date before re-uploading
Transfer stuck	Previous exit not marked, or profile mismatch	Ask the previous employer to mark exit; fix profile through a joint declaration
Face authentication fails	Lighting, app version, or Aadhaar data issue	Retry; EPFO lists UMANG and EPFO support as next steps

Interest and how the corpus grows

EPF earns interest at a rate declared each year by the EPFO, credited annually. The interest is calculated on the running monthly balance. Because both sides contribute and the money compounds tax-free while it stays in the fund, EPF is one of the most effective long-term savings tools available to salaried employees.

The pension portion (EPS) works differently. It does not earn a declared interest rate in the same way; instead it funds a monthly pension after retirement, based on pensionable service and pensionable salary.

How withdrawals are taxed

EPF is meant for retirement, and the tax rules encourage keeping it invested.

• If an employee has completed five years of continuous service (across employers counts, as long as the balance was transferred), withdrawal is tax-free.
• If withdrawal happens before five years of continuous service, the amount can be taxable, and TDS may apply, especially where the taxable amount exceeds a threshold and PAN is not linked.

Partial advances are allowed without closing the account, for specific reasons such as buying or building a house, medical treatment, marriage, or education. These have their own eligibility rules based on years of membership.

The monthly compliance cycle

Running EPF in payroll is a rhythm:

1. Compute the employee and employer contributions for every member.
2. Generate the Electronic Challan cum Return (ECR) with the wage and contribution details.
3. Deposit the challan by the 15th of the following month.

The ECR is the single filing that reconciles wages and contributions, so it must match what payroll actually deducted and what the bank actually paid.

Common mistakes to avoid

• Applying PF on gross instead of on Basic + DA.
• Still applying the old ₹15,000 ceiling after 17 September 2026, or not capping the EPS share at 8.33% of ₹25,000 for high earners.
• Missing the UAN for a new joiner, which delays transfers later.
• Filing the ECR late, which triggers interest and damages.
• Inconsistent policy on capping versus contributing on actual basic across employee groups.

Frequently asked questions

Is EPF compulsory above ₹25,000 basic? Not strictly. Employees above the ceiling when they join are excluded, but most employers cover them voluntarily. Up to ₹25,000, coverage is compulsory from 17 September 2026.

Can an employee opt out of EPF? Only an employee who has never been an EPF member and joins above the wage threshold can be treated as excluded. An existing member generally cannot opt out.

Does a UAN change when the employee changes jobs? No. The UAN stays the same; the new employer creates a new member ID under it.

Can an employer still generate a UAN? Only in exceptional cases such as international workers and citizens of Nepal and Bhutan. Other new UANs are generated by the employee through face authentication in UMANG.

What is VPF? Voluntary Provident Fund is the employee choosing to contribute more than 12% of their own share. It goes into the same account and earns the same interest, but the employer share does not increase.

Key takeaways

• EPF is mandatory for establishments with 20 or more employees, and for members earning up to ₹25,000 basic (₹15,000 before 17 September 2026).
• Both sides contribute 12%; the employer's share splits into EPS (pension, capped) and EPF.
• The UAN unifies an employee's PF across jobs.
• Withdrawals after five years of continuous service are tax-free.

A payroll system that computes PF at source with the correct EPS and EPF split, and generates the ECR each month, removes almost all of this risk. In NeevHR, PF is computed for every employee with the right pension split, the ECR is ready to file, and the UAN travels with the employee record.

This article provides general information for educational purposes. Statutory rules, thresholds, rates and filing requirements may change; verify with the relevant authority or a qualified professional. Last reviewed: 03 Nov 2026.