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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.
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.
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.
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.