Employee Provident Fund
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What is An Employee's Provident Fund?
Employee’s Provident Fund (EPF) is a retirement benefit scheme for the employee which is governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. It is one of the most important investment schemes for the salaried class of our country. An establishment has to compulsorily register under PF, if it employs more than 20 employees. PF is mandatory for all employees whose monthly salary is less than Rs 15,000. For such employees earning more than Rs 15,000, they can either voluntarily opt out of making contribution to the provident fund or make contribution to the provident fund only after taking permission from the employer & assistant commissioner of PF.
EPF contribution consists of 2 parts – Employee’s Contribution & Employer’s Contribution. Employers have to make a contribution equal to the employee’s contribution. At the time of retirement or during the course of his employment, the employee can withdraw the amount from his accumulated corpus in the Provident Fund account.
Table Of Contents
An Overview
Employee has to contribute an amount equal to 12% of the employee’s basic salary + dearness allowance in his EPF account. An amount equal to employee’s contribution is made by the employer.
Out of the total employer’s contribution,
8.33% is paid towards EPS (Employee’s Pension Scheme)
3.67% is paid towards the EPF account of the employee
However, the contribution rate is restricted to 10% for both employee & employer, in case there are less than 20 employees in the establishment.
It is the employer’s duty to deduct PF contribution from the employee’s salary and make payment to the EPF before the due date.
Benefits
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Financial Security
Provident fund is a great way to inculcate the habit of savings among the low income group and thereby gain financial security -
No Risk Of Default At The Time Of Payment
Since the amount is deposited with the government of India. There is zero risk of default at the time of withdrawal -
High Returns
The amount deposited in your PF accounts compounds at a handsome rate of interest from the government -
Tax Savings
Employee’s get a tax exemption on the contribution made to EPF account u/s 80C. Also, the interest earned on the contributions are tax exempt -
Lifelong Pension
8.33% of the employer’s share is deposited into pension accounts with the Employee’s pension scheme authority.This will generate cash flow for the employee at the time of retirement. -
Premature Withdrawal Option
EPFO allows it members to withdraw from the accounts to meet needs such as unemployment, medical treatment, repayment of loan etc -
Single PF account
At the time of registering for PF, every employee gets a Universal Account number (UAM) which is linked to your Aadhar and can be carried forward to the new employer
Due Dates
The employer has to pay the sum total of his contribution and the employees’ contribution to the EPF within 15 days from the end of the month for which salary is paid.
For example, for the month of August, if the employer is paying a basic salary of Rs 10,000 to his employee, then employee contribution to PF is Rs 1,200 (12% of 10,000) & Employer’s contribution to PF is Rs 367 (3.67% of Rs 10,000). So, a total contribution of Rs 1,567 has to be made by the employer to the EPF by 15th of September.
Employees will receive Rs 8,800 in his bank account & remaining Rs 1,200 will be deposited in his provident fund account which he can withdraw at the time of retirement or earlier dependent on certain conditions.
Documents Required
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For Proprietorships
- Pan Card
- ID Proof – Aadhar Card/Driving license/ Election Card/ Passport
- Address proof of the premises
Related read: What’s The Difference Between Sole Proprietorship And OPC?
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For Private Limited company, Partnership firm & LLP
- Certificate of Incorporation for LLP & Private Limited company
- Partnership deed in case of partnership firm and MOA/AOA of in case of Private Limited company
- Identity proof of partners/ directors - Aadhar Card/Driving license/ Election Card/ Passport
- Address proof of the premises
Related read: How To Choose Between A Private Ltd. Company And LLP?
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For Society/Trust/NGO
- Certificate of Incorporation
- Identity proof of President & members
- Pan Card of Society/Trust/NGO
- MOA & Bye laws
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Common documents required
- Email ID & Mobile number of authorised person
- Digital Signature of the authorized person
- GST registration certificate & MSME registration certificate, if registered
- Name, address, branch, IFSC code of the bank in which the organization has a bank account
- Number of employees in the organization along with personal details such as name, father’s name, address, date of joining, birth date
- Salary & wage register
- Cancelled cheque
- In case of factory, factory license number, date of license & place of issue
Process Flow
- Register your organization with EPFO by filing an application with the relevant documents
- Register DSC of the employer with the EPFO
- Get PF registration certificate
- File PF returns
How will we help you?
- We have a team of experts who can help you with:
- Obtaining PF registration
- Filing of PF returns monthly
- Calculation of PF liability
- Preparation of workings
- Solving tax queries
- In case of litigation, preparing documents for representation in front of the officer
FAQs
The EPF interest rate FY2019-20 is set at 8.50%, a cut of 0.15% from 2018-19
Employers have to bear additional administrative charges at a rate of 0.50% w.e.f. 1st of June 2018.
Minimum admin charges are ₹ 500 & in case there is no contribution for a month, then an admin charge of ₹ 75 is payable by the employer.
Employers must obtain PF registration within 1 month from the date on which it exceeds 20 employees. Even if the strength of employees fall below 20 employees after taking registration the registered employees continue to be under the purview of this act.
On average, it takes 10-15 days to get your PF registration certificate.
Speak to our experts who shall solve all your doubts.
Call us at +91 7738 066 334 or Mail us at info@indiacompanyincorporation.com
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