EPF Rules: Big update for EPFO members.When starting a new job, the focus is typically on salary, offer letters, and new responsibilities. Yet, one important financial task that often gets neglected is the proper updating and transfer of your EPF account. This minor oversight can result in considerable losses over time.

Why did EPFO issue a warning?

The Employees’ Provident Fund Organization (EPFO) has recently urged employees to verify the dates of joining and exit in their PF records. Even a tiny mistake in these dates can affect their PF balance, pension, and the processing of claims.

What are the consequences of incorrect dates?

As Kunal Kabra, founder of Kustodian.life, points out, an incorrect EPF exit date can skew your entire service history. This misrepresentation can alter the length of your employment, which subsequently affects PF calculations and claims.

If your recorded total service period is less than 5 years, withdrawing your PF may result in taxation, and TDS could also be deducted.

Pension is also directly affected

To qualify for a pension under the Employees’ Pension Scheme (EPS), a minimum of 10 years of service is necessary. If your service is underreported due to a date error, you may not receive a monthly pension and might only be eligible for a lump sum payment.

Additionally, such mistakes can lead to issues like claim rejections, failed PF transfers, and discrepancies in service history, causing delays in receiving your funds.

How is the pension calculated?

The pension under EPS is determined using a specific formula:

Monthly pension = (Pensionable salary × Pensionable service) / 70

In this formula, the pensionable salary is the average salary over the last 60 months, subject to a certain cap. Moreover, pensionable service is based on the total years of service.

If there is an error in the joining or exit date, the service period may seem shorter. This can also lead to a reduction in the pension amount. If the service is below 10 years, you may lose your pension entitlement.

Why do errors occur in EPF?

There are several common reasons for discrepancies in EPF records, such as delays in updating the exit date by the old company, date overlap due to UAN linking to the new job, failure to merge the old PF account with the new one, leaving the job without formal exit, or data entry errors.

How to identify and fix a mistake?

It’s important to identify these errors and correct them quickly. To do this, check your passbook and service history on the EPFO ​​portal. Compare the joining and exit dates for all companies and see if there are any gaps or overlaps.

If you notice any errors, apply for corrections through your employer or on the EPFO ​​Unified Portal. If you have multiple PF accounts, be sure to merge them. It’s also important to inform both companies before changing jobs to avoid any confusion.

What are the options if a mistake occurs?

If there is a mistake in the records, the employee can also make some corrections himself by logging into the EPFO ​​portal, especially when there has been no contribution in that period.

According to Munab Ali Back, Head of Compliance Advisory at Core Integra, if the mistake was made by both the employee and the company, a joint declaration must be submitted. The company is responsible for the information provided.

If the error is in data entry, the company has to give a correction letter, on the basis of which EPFO ​​makes corrections in its system.