Can you say no to EPF? If so, how?

However, the decision to opt out could impact retirement savings, tax-free benefits, insurance coverage and your employer's matching contribution

- Aprajita Sharma

The moment Mr. A landed his first job at a tech company, he started thinking about his salary structure. With an annual package of ₹12 lakh and a basic salary of ₹40,000 per month, he wondered if he really needed to contribute to Employees' Provident Fund. Across town, Mr. B, who just got a job with an MSME with a ₹5 lakh annual salary and ₹14,000 basic salary per month, had heard about the challenges of withdrawing funds from EPF and wanted to know if he could skip it entirely. The answer isn't straightforward. While A has a choice to opt out, B doesn't—thanks to rules governing EPF eligibility.

Fine print for opting out
Most new employees can opt out of EPF if basic salary, as defined by EPF Act, exceeds ₹15,000 a month. However, those earning less than ₹15,000 are automatically enrolled and must contribute. Besides, once an employee becomes a member of the EPF, she can't opt out—even if salary increases beyond ₹15,000. This means B is locked in, regardless of future salary hikes.

The Employees' Provident Fund Organization (EPFO) says employees earning more than ₹15,000 in basic salary are not required to join the scheme—provided they are not already members. But, if employer and employee agree, she can voluntarily opt in by submitting a request (Para-26 (6) of PF Scheme).

In practice, employers enroll new hires by default and rarely inform them about opting out. Those who wish to avoid EPF contributions should act at the time of joining by filling out Form 11 and selecting 'no' in the seventh and eighth sections—confirming they have never contributed to EPF or Employee Pension Scheme (EPS). Miss this window, and there is no turning back. There is, however, one way out.