Employee's Provident Fund (EPF)

We all know how infuriating it is to find obscure portions of monthly salary deducted and we are unable to spend it to the fullest. This deduction is for your EPF otherwise known as Employees Provident Fund. In this article, we look at the basics of Employee Provident Fund in India.

Employee's Provident Fund (EPF)

Employees Provident Fund (EPF) is a scheme controlled by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. It is regulated under the umbrella of Employees' Provident Fund Organisation (EPFO). PF registration is applicable for all establishment which employs 20 or more persons, subject to certain circumstances and exemptions even if they engage less than 20 employees. Under EPF scheme, an employee has to pay a certain contribution towards the scheme and an equal contribution is paid by the employer. The employee gets a total amount including self and employer’s contribution with interest, on retirement or resignation.

Who is Eligible for PF?

It is obligatory that employees’ drawing less than Rs 15,000 per month, to become members of the EPF. As per the guidelines in EPF, employee, whose ‘basic pay’ is more than Rs. 15,000 per month, at the time of joining, is not requried to make PF contributions. Nevertheless, an employee who is drawing a pay of more than Rs 15,000 can still become a member and make PF contributions, with the consent of the Employer and Assistant PF Commissioner.

Amount of PF Contribution

The PF contribution paid by the employer is 12% of (basic salary + dearness allowance + retaining allowance). An equal contribution is payable by the employee. In case of establishments which engage less than 20 employees or meet certain other conditions, as per the EPFO rules, the contribution rate for both employee and the employer is restricted to 10%. For most employees working in the private sector, it’s the basic salary on which the contribution is calculated.

Employees Pension Scheme

Out of employers’ contribution, 8.33% will be routed to Employees’ Pension Scheme, which is calculated at Rs 15,000. The amount routed to EPS would be Rs. 1250 for employees whose basic pay amounts to Rs 15,000 or more. However, if the basic pay is less than Rs 15000, then 8.33% of such amount would be routed to EPS, the balance will be retained in the EPF scheme. On superannuation, the employee would receive the full share plus the balance of employer’s share reserved for his credit in EPF account.

Breakup of PF Contribution

We arrive at the rate of 12% based on the following sub-division: 3.67% of contribution towards Employees’ Provident Fund 1.1% of contribution towards EPF Administration Charges 0.5% of contribution towards Employees’ Deposit Linked Insurance 0.01% of contribution towards EDLI Administration Charges 8.33% of contribution towards Employees’ Pension Scheme

EPF Charges

Contribution is rounded to the nearest rupee for each employee, for the employee share, pension contribution and EDLI contribution.
The Employer Share is the difference between employee Share (payable as per statute) and Pension Contribution.
Monthly payable amount liable to EPF Administrative charges is rounded to the nearest rupee and a minimum of Rs. 500/- is payable.
If the establishment has no member in the month, the minimum administrative charge will be Rs. 75/-
Monthly payable amount under EDLI Administrative charges is rounded to the nearest rupee and a minimum Rs 200/-is payable.
If the establishment has no member in the month, the minimum administrative charge will be Rs. 25/-
In case, establishment is exempted from PF Scheme, Inspection charges @0.18%, minimum Rs. 5/- is payable in place of Admin charges.
In case the Establishment is exempted under EDLI Scheme, Inspection charges @ 0.005%, minimum Re 1/- is payable in place of Admin charges.

Due Date for PF filing with EPFO

The employer before paying the employees salary must deduct the employee’s contribution from his wages. Then the employee portion and employer portion are payable to the EPFO, within 15 days of the close of every month.

In case you require ESI or PF registration for your business, get in touch with an IndiaFilings Advisor.