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In India, most employees rely on the Employees' Provident Fund Organisation (EPFO) for their retirement savings. It is a system built to provide security and long-term growth. However, the

financial overview is evolving—with mutual funds offering potentially higher returns, and employees getting knowledgeable about various investment avenues that can give higher returns than

provident funds. This raises a critical question: is it possible to exit the EPFO and go with market-linked investments?

The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act), applies to notified establishments employing 20 or more individuals. Under the EPF Act, employers are required

to contribute to the Employees’ Provident Fund (EPF) on behalf of all employees, unless an employee qualifies as an excluded employee, or the employer has obtained a formal exemption.

Contributions to the provident fund are to be made by both the employer and the employee.

An excluded employee is one whose monthly wages exceed ₹15,000 and who has either never been a member of the Employees’ Provident Fund Scheme, 1952 (EPF Scheme), or has withdrawn their

entire accumulated balance, thereby terminating their membership.

EPF contributions are mandatory under certain conditions. If the employer is covered under the EPF Act and the employee earns less than ₹15,000 per month, participation in the EPF is

compulsory. However, for employees earning more than ₹15,000 per month, contributions to the EPF are optional—provided the individual has not been a member of the EPF Scheme. Moreover, if

they are a member of the scheme contributing a higher amount, they need to continue contributing on a salary of at least ₹15,000 in the scheme by opting for a one-time option of reducing

contribution. The amount over and above can be invested in any investment avenue.

Aarti Raote, Partner, Deloitte India, said, “An employee who has enrolled in PF needs to continue with the PF contributions till they leave the company. However, an employee earning PF wages

of more than ₹15,000 is not mandated to enrol in the PF scheme. So, such employees can exercise a one-time option to restrict PF contributions to the minimum threshold of ₹15,000 and the

balance could be invested in other investment options of his choice.”

PF provides a risk-free avenue with an assured rate of interest to receive sums post-retirement. However, the clarity around Provident Fund contributions provides employees with higher

salaries the flexibility to diversify their investments in other areas like the National Pension Scheme or the stock market while remaining compliant with statutory obligations.