- Date : 27/01/2021
- Read: 6 mins
How private sector employees can avail of life insurance under EDLI
n 1976, the Government of India extended the benefit of insurance to private sector employees at no extra charge from the employee through the Employee Deposit Linked Insurance (EDLI) scheme. Insurance support was given by the government since the EPF (Employees’ Provident Fund) and EPS (Employees’ Pension Scheme) were both savings schemes under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and couldn’t address the family support factor in the event of the employee’s demise.
Hence the EDLI scheme was implemented.
What is the EDLI scheme?
All members of EPS and EPF are automatically eligible for the EDLI scheme. The employer provides 0.5% of the basic salary or a maximum of Rs 75 per month for every employee. The employee need not make any provision at all. At the time of the employee’s demise, their nominees can claim 30 x 15,000 (maximum basic salary) + 1,50,000 (EDLI bonus) = Rs 6,00,000 (6 lakh) as maximum payout.
The EPF and EPS savings schemes are linked to EDLI since any person who is not covered by EPF or EPS is not eligible for EDLI. The employer provides every month to EDLI, and if the employee moves to a different organisation, their EDLI is also transferred along with EPF and EPS.
The contribution of the employee is calculated as follows:
- For EPF – 12%
- For EPS – Nil
- For EDLI – Nil
The contribution of the employer is calculated as follows:
- For EPF – 3.67%
- For EPS – 8.33% or Rs 1250
- For EDLI – 0.50% or maximum of Rs 75
The main objective of the EDLI scheme was to offer the benefit of insurance to the family of the deceased employee. Family members include spouse, unmarried daughter, or male children up to the age of 25. The employee cannot choose the scheme; it is up to the employer to provide it to the employee. It is mandatory for all private firms having more than 20 employees to become a member of the EPFO.
Related: Insurance cover for COVID-19 in India
Benefits of EDLI available to employees
- Rs 6 lakh is the maximum amount that is given under EDLI, and the maximum salary is Rs 15,000 per month.
- Employees need not make a provision for EPS or EDLI; all they need to do is provide for EPF.
- As per the EDLI scheme, the bonus allocated is Rs 1,50,000.
- Any organisation that has a staff strength of more than 20 is mandated to apply for EPF. Once an EPF account exists, the employee can opt for an EDLI scheme.
- Coverage provided by EDLI is uniform for all. The employee is insured 24x7x365, anywhere in the world.
- An employer can opt for either EDLI or an insurance scheme that offers more than EDLI, but insurance is mandatory.
- The employer needs to pay 0.5% of the basic salary of the employee or up to Rs 75 for every person, once every month. In the absence of a group insurance scheme, the maximum payout is Rs 15,000 per month.
- It is mandated that dearness allowance is to be added to basic salary as per EDLI scheme calculations.
Related: How to decide the nominee for your life insurance
Documents required for claiming EDLI
- Form 5 IF
- Death certificate of the insured person
- Succession certificate in case the legal heir files the claim.
- Guardianship certificate if the claim is filed on behalf of a minor by a person other than the natural guardian
- Copy of cancelled cheque for the account in which the payment is to be received
How to claim benefits under EDLI
- The benefits under EDLI can be claimed by the nominee. In the absence of a nominee, the legal heir or family members can put in a claim.
- At the time of death the deceased employee should be an active contributor to EPF.
- EDLI Form 5 IF has to be filled and submitted by the claimant, and signed by the employer.
- In the absence of an employer or if the signature of the employer cannot be obtained, the form must be attested by any one of the following:
- Bank manager (in whose branch the account was maintained)
- Local MP or MLA
- Gazetted officer
- Magistrate
- Municipality Chairman, or a Member, or the Municipal Secretary
- Postmaster or Assistant Postmaster
- Regional committee member of EPF or CBT
- Necessary papers along with proofs of identity etc, must be submitted at the office of the regional EPF Commissioner to process the claim.
- To withdraw your EPF, and all benefits from EPF, EPS, and EDLI, Form 20 (EPF withdrawal claim) and Form 10C/D need to be deposited.
- Once all the documents are provided and the claim is accepted, the EPF Commissioner must settle the claim within 30 days of receipt of the claim. Otherwise, the claimant is entitled to interest @12% p.a. up until the date of actual disbursal. The EPF Commissioner is given 30 days after the claim has been received by the Regional EPF Office. Interest at 12% p.a. is provided up to the day of actual disbursement of funds.
Related: Why should you avail of life insurance?
Tax benefits of having life insurance
Under Section 80C and 10D of the Income Tax Act, there are tax benefits on life insurance. Under section 80C, premiums that you pay towards a life insurance policy qualify for a deduction up to Rs 1.5 lakh, while Section 10(10D) makes income on maturity tax-free if the premium is not more than 10% of the sum assured, or if the sum assured is at least 10 times the premium.
So, EDLI can attract the same tax benefits as life insurance. Life insurance provides tax benefits under Section 80C and 10D of the IT Act. A tax deduction of Rs 1.5 lakh is allowed for life insurance premiums as per section 80C, and if the premium is not higher than 10% of the sum assured, or the sum assured is 10 times higher than the premium, Section 10D allows income on maturity to be tax-free.
Last words
As per the Employees Provident Fund and Miscellaneous Provisions Act, 1952, the Indian government has made it mandatory for all organisations that come under EPF to compulsorily extend the EDLI scheme to all employees impartially, so as to give the benefits of life insurance to all its employees. This has hugely benefited the families of workers, especially in the private sector, who did not enjoy the social security benefits available to those employed in the government sector. In a mixed economy, EDLI bridges the gap of social benefits between the private and the government sector.
n 1976, the Government of India extended the benefit of insurance to private sector employees at no extra charge from the employee through the Employee Deposit Linked Insurance (EDLI) scheme. Insurance support was given by the government since the EPF (Employees’ Provident Fund) and EPS (Employees’ Pension Scheme) were both savings schemes under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, and couldn’t address the family support factor in the event of the employee’s demise.
Hence the EDLI scheme was implemented.
What is the EDLI scheme?
All members of EPS and EPF are automatically eligible for the EDLI scheme. The employer provides 0.5% of the basic salary or a maximum of Rs 75 per month for every employee. The employee need not make any provision at all. At the time of the employee’s demise, their nominees can claim 30 x 15,000 (maximum basic salary) + 1,50,000 (EDLI bonus) = Rs 6,00,000 (6 lakh) as maximum payout.
The EPF and EPS savings schemes are linked to EDLI since any person who is not covered by EPF or EPS is not eligible for EDLI. The employer provides every month to EDLI, and if the employee moves to a different organisation, their EDLI is also transferred along with EPF and EPS.
The contribution of the employee is calculated as follows:
- For EPF – 12%
- For EPS – Nil
- For EDLI – Nil
The contribution of the employer is calculated as follows:
- For EPF – 3.67%
- For EPS – 8.33% or Rs 1250
- For EDLI – 0.50% or maximum of Rs 75
The main objective of the EDLI scheme was to offer the benefit of insurance to the family of the deceased employee. Family members include spouse, unmarried daughter, or male children up to the age of 25. The employee cannot choose the scheme; it is up to the employer to provide it to the employee. It is mandatory for all private firms having more than 20 employees to become a member of the EPFO.
Related: Insurance cover for COVID-19 in India
Benefits of EDLI available to employees
- Rs 6 lakh is the maximum amount that is given under EDLI, and the maximum salary is Rs 15,000 per month.
- Employees need not make a provision for EPS or EDLI; all they need to do is provide for EPF.
- As per the EDLI scheme, the bonus allocated is Rs 1,50,000.
- Any organisation that has a staff strength of more than 20 is mandated to apply for EPF. Once an EPF account exists, the employee can opt for an EDLI scheme.
- Coverage provided by EDLI is uniform for all. The employee is insured 24x7x365, anywhere in the world.
- An employer can opt for either EDLI or an insurance scheme that offers more than EDLI, but insurance is mandatory.
- The employer needs to pay 0.5% of the basic salary of the employee or up to Rs 75 for every person, once every month. In the absence of a group insurance scheme, the maximum payout is Rs 15,000 per month.
- It is mandated that dearness allowance is to be added to basic salary as per EDLI scheme calculations.
Related: How to decide the nominee for your life insurance
Documents required for claiming EDLI
- Form 5 IF
- Death certificate of the insured person
- Succession certificate in case the legal heir files the claim.
- Guardianship certificate if the claim is filed on behalf of a minor by a person other than the natural guardian
- Copy of cancelled cheque for the account in which the payment is to be received
How to claim benefits under EDLI
- The benefits under EDLI can be claimed by the nominee. In the absence of a nominee, the legal heir or family members can put in a claim.
- At the time of death the deceased employee should be an active contributor to EPF.
- EDLI Form 5 IF has to be filled and submitted by the claimant, and signed by the employer.
- In the absence of an employer or if the signature of the employer cannot be obtained, the form must be attested by any one of the following:
- Bank manager (in whose branch the account was maintained)
- Local MP or MLA
- Gazetted officer
- Magistrate
- Municipality Chairman, or a Member, or the Municipal Secretary
- Postmaster or Assistant Postmaster
- Regional committee member of EPF or CBT
- Necessary papers along with proofs of identity etc, must be submitted at the office of the regional EPF Commissioner to process the claim.
- To withdraw your EPF, and all benefits from EPF, EPS, and EDLI, Form 20 (EPF withdrawal claim) and Form 10C/D need to be deposited.
- Once all the documents are provided and the claim is accepted, the EPF Commissioner must settle the claim within 30 days of receipt of the claim. Otherwise, the claimant is entitled to interest @12% p.a. up until the date of actual disbursal. The EPF Commissioner is given 30 days after the claim has been received by the Regional EPF Office. Interest at 12% p.a. is provided up to the day of actual disbursement of funds.
Related: Why should you avail of life insurance?
Tax benefits of having life insurance
Under Section 80C and 10D of the Income Tax Act, there are tax benefits on life insurance. Under section 80C, premiums that you pay towards a life insurance policy qualify for a deduction up to Rs 1.5 lakh, while Section 10(10D) makes income on maturity tax-free if the premium is not more than 10% of the sum assured, or if the sum assured is at least 10 times the premium.
So, EDLI can attract the same tax benefits as life insurance. Life insurance provides tax benefits under Section 80C and 10D of the IT Act. A tax deduction of Rs 1.5 lakh is allowed for life insurance premiums as per section 80C, and if the premium is not higher than 10% of the sum assured, or the sum assured is 10 times higher than the premium, Section 10D allows income on maturity to be tax-free.
Last words
As per the Employees Provident Fund and Miscellaneous Provisions Act, 1952, the Indian government has made it mandatory for all organisations that come under EPF to compulsorily extend the EDLI scheme to all employees impartially, so as to give the benefits of life insurance to all its employees. This has hugely benefited the families of workers, especially in the private sector, who did not enjoy the social security benefits available to those employed in the government sector. In a mixed economy, EDLI bridges the gap of social benefits between the private and the government sector.
