The Employees’ Provident Fund (EPF) is a savings scheme in India managed by the Employees’ Provident Fund Organization (EPFO), designed to provide financial security for employees post-retirement. Both employees and employers contribute a percentage of the employee’s salary to the EPF. The contributions earn interest, which is compounded annually. Employees can withdraw their EPF balance upon retirement or under specific conditions, such as medical emergencies. The scheme also offers tax benefits, making it a key component of financial planning for employees.
What is Employees Provident Fund (EPF)
The Employees’ Provident Fund (EPF) is a key savings platform for the working class in India. It is mandatory for businesses with 20 or more employees to obtain an Employer Identification Number (EIN). This count includes all types of employees, such as contractors and temporary staff. Companies with fewer than 20 employees can also choose to register for EPF. The Provident Fund Registration Certificate must be obtained within 30 days of reaching the employee threshold.
What is the Rate of PF Contribution?
- Employee Contribution: 12% of the Basic Salary is deposited directly into the Employees’ Provident Fund (EPF).
- Employer Contribution: This is divided into:
- 8.33% towards the Employees’ Pension Scheme (EPS).
- 3.67% towards the Employees’ Provident Fund (EPF).
- EPF Administration Charges: 1.1% of the total contribution (reduced to 0.65% after April 1, 2017).
- Employees’ Deposit Linked Insurance (EDLI): 0.5% of the total contribution, with a minimum contribution of Rs. 500/-.
- EDLI Administration Charges: 0.01% of the total contribution (reduced to Rs. 0/- after April 1, 2017).
What are the different Provident Fund forms?
- 1. EPF Form 11
- 2. EPF Form 19, 10C, 31(New)
- 3. EPF Form 19
- 4. EPF Form 13 Transfer Form
- 5. EPF Form 31 Advance From the Fund
- 6. EPF Form 20,10-0,5IF(NEW)
- 7. EPF Form-10C
What Are the benefits of PF Registration.
Benefits for Employees:
- Retirement Savings:
- A PF account helps employees accumulate savings over time, ensuring financial security post-retirement. Both employer and employee contribute to the fund, which grows with interest over the years.
- Pension Benefits:
- Part of the employer’s contribution goes to the Employees’ Pension Scheme (EPS), which provides employees with pension benefits after they retire.
- Tax Benefits:
- Contributions made by the employee are eligible for tax deductions under Section 80C of the Income Tax Act. Additionally, the interest earned and the final amount received at retirement or withdrawal are also tax-free (if withdrawn after 5 years of continuous service).
- Insurance Coverage (EDLI):
- Under the Employees’ Deposit Linked Insurance (EDLI) scheme, in the event of an employee’s death during their service, the family receives a lump sum amount as life insurance coverage, up to ₹7 lakh.
- Loan/Withdrawal Options:
- Employees can withdraw partial amounts from their PF for specific needs like buying a home, marriage, medical emergencies, or education. These withdrawals usually do not attract any penalties.
- In times of financial need, such as unemployment, employees can take an advance or a loan from their PF balance.
- Portability:
- The Universal Account Number (UAN) enables easy portability of the PF account across different jobs. Employees can link their UAN to new employers and continue contributing to the same PF account.
- Interest Earnings:
- The employee’s PF balance earns interest at rates declared by the EPFO, which are generally higher than most savings accounts. For FY 2022-23, the interest rate was around 8.15%.
- Financial Stability for the Family:
- In case of the employee’s untimely demise, the family receives the accumulated PF balance, providing financial support during tough times.
Documents Required For EPF Registration
- PAN Card copy of firm/company/society/trust
- Partnership deed (In case of partnership)
- Cancelled cheque (bearing pre-printed company/firm name & Current Account No)
- Certificate of Registration (In case of Proprietorship/Partnership/Company/ LLP)
- Certificate of incorporation (In case of company/ society, trust/ NGO)
- • Copy of PAN Card of Directors / Partner
- • Copy of Aadhaar Card/ Voter identity card of Director