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Employee Provident Fund (EPF) is a scheme regulated under the purview of Employees’ Provident Fund Organization (EPFO). This scheme has been evolved under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. EPF is a social security scheme that helps employees save a portion of their salary which is returned back to them as a retirement benefit in lumpsum. Such lumpsum amount helps employees to take care their financial needs post retirement.
EPF is applicable in the following cases:
But before notifying any class of establishments with less than 20 employees, the government needs to give a notice of 2 months in official gazette.
Such eligible organizations are required to contribute a fixed amount towards EPF as a part of employees’ salary & wages. Due dates of deposit PF contribution is 15th of every month.
Besides minimum contribution, employees can voluntarily make higher contribution to EPF to earn interest which is generally higher as compared to bank interest.
EPF helps in accumulating a good deal of money for employees which they can use in certain unanticipated occasions and family occasions such as marriages, illness, mishaps, accidents, education etc.
Contribution made by employees to EPF upto Rs. 1, 50,000 is eligible for deduction u/s 80C of the Income Tax Act.
Besides the contribution of the employee to EPF, the employer adds his contribution which is inclusive of Employee Pension Scheme (EPS). Thus, EPF helps employees get pension.
There is an insurance scheme linked to EPF contribution known as “Employees Deposit Linked Insurance” (EDLI). Under this scheme, 0.5% of the salary goes as a contribution by employer towards life insurance premium.
PF account can be transferred while changing the employer. It is a unified account under which a universal number is allotted to employee which he can carry forward to the new employer instead of opening a new one.
Business documents required
Employee details required
As per the EPF rules, employee whose ‘pay’ is more than Rs. 15,000 per month, is not eligible and is called ‘Excluded Employee’. Employee who is drawing a salary less than Rs. 15,000 per month has to compulsorily become member of EPF scheme. However, an excluded employee i.e. one who is drawing a salary above Rs. 15,000 can also become a member with permission of Assistant PF Commissioner, if he and his employer agrees.
The following are not covered as employee for the purpose of EPF:-
Rate of contribution for establishment having 20 or more employees:
Rate of contribution for establishment having less than 20 employees:
The following establishments have to contribute @10% of basic salary + dearness allowance:
Yes, the employee can voluntarily make higher contribution above 12% of salary. This is called contribution towards Voluntary Provident Fund (VPF) which is accounted for separately. This VPF also earns tax free interest. However, the employer does not have to match such voluntary contribution.
For F.Y. 2019-20, the interest rate is 8.50% However, this rate is still lucrative as compared to interest rate on fixed deposits and debt instruments. Further, a PF account comes within the Exempt, Exempt, Exempt (EEE) status. You need not pay tax on the amount saved in your PF account at any point of time.
Once you are registered with EPF, the compliances laid down under the law are to be made irrespective of the fact that the number of employees has fallen below 20.
Registration under EPF cannot be cancelled until and unless the entity wounded up and closed down. PF Commissioner may consider special cases where employer undertake that there is no employee left and in future, no employee will be hired. After the presentation of all documents to the satisfaction of the commissioner, cancellation may be granted.
UAN stands for a 12 digit Universal Account Number, which is allotted to each employee at the time of registering on the EPFO Portal. It is unique for every employee and remains the same throughout his tenure of employment, whether he changes his job or establishment.
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