What Is Employees’ Provident Fund?
A Provident Fund is essentially a retirement scheme. The Employee Provident Fund (EPF) is closely monitored by the Employee Provident Fund Organisation of India. The Government plays a supervisory role through the Ministry of Labour and Employment. Commonly known as the Employee Provident Fund scheme, this savings scheme was introduced in 1952 under the Employee’s Provident Fund and Miscellaneous Act. The scheme operates through this act and the Employees’ Deposit Linked Insurance Scheme Act (1976), along with the Employees’ Pension Scheme Act (1995).
This scheme builds a retirement corpus for employees. A particular amount is deducted from their account that goes into their provident fund. A fixed level of interest is also given. Consequently, the amount in the fund is made available to the Individual after he/she retired. The employer also contributes to the corpus. The scheme also provides insurance and tax benefits to the employees.
An important point to note here is that any organization that has a minimum of 20 employees is considered liable to give its employees the benefits of the EPF scheme. This scheme is available to both public sector and private sector employees. It’s an important social security initiative that goes a long way in improving an individual’s financial prospects.
In This Blog:
- Benefits Of The Provident Fund
- Who Can Benefit From The Scheme?
- Steps To Register For The Provident Fund By Employers
- Important Documents And Details Required For Registration
- How To Calculate Contribution Of PF For Employers And Employees?
- Types of Provident Fund
- Steps To Check Your Balance If PF
- Steps To Withdraw PF
You can navigate to the topics directly from here.
Benefits Of The Provident Fund
The Employee Provident Fund scheme offers a multitude of benefits to those who avail it. These provisions work towards ensuring a financially stable life post-retirement. The major benefits of this scheme are –
- The most primary benefit that this scheme extends to people is a substantial corpus for The employer and employee both contribute to creating this fund during the years of employment.
- Capital appreciation is another advantage of this scheme. The scheme offers its members a pre-fixed interest rate on the amount held in the fund, which considerably appreciates the capital. Also, rewards are extended at the time of the maturity of the scheme that further increases the amount in the
- The EPF fund also acts as an emergency fund if need be.
- Tax benefits are accrued to those who sign up for this scheme under Section 80C of the Income Tax Act, wherein, an employee’s contribution towards his/her provident fund is eligible for exemption. Also, the earnings that are procured through the EPF are also exempted. Tax exemption is applicable to a limit of ₹1.5
- The EPF scheme also has the advantage of an easy process of premature/partial withdrawal.
Who Can Benefit From The Scheme?
- The EPF scheme can be availed by employees of both the public and private
- Any organization that has a minimum of 20 employees is liable to mandatory register for the EPF scheme. Organizations with lesser employees have the choice of registering for the scheme. Note: Organizations that have 20 or more employees are expected to register within a month of obtaining the stipulated employee number else it would be liable to penalties.
- Co-operative societies have to necessarily register if their employee strength reaches a minimum of 50 or
- A salaried employee whose salary (including dearness allowance) is less than ₹15,000 per month has to be mandatory given the benefits of the scheme by his/her employer.
- If your salary is more than (including D.A.) ₹15,000, it is up to you to register for the scheme or not, and it would require the consent of your employer and assistant PF.
Steps To Register For Provident Fund By Employers
Let us go through the steps that are to be taken by an employer in order to register for the EPF scheme.
- Visit the E-Sewa portal – gov. In
- Select the option of ‘Establishment Registration’
- Once you click on that, you will be led to https://registration.shramsuvidha.gov.in/user/register wherein the user manual will be available to Read the manual carefully.
- Click on the ‘Sign Up’ button on the Shram Suvidha Portal.
- Fill in the details and the verification code that you will get to create your account.
- Click on the option ‘Registration for EPFO-ESIC’
- The page will then display the option of ‘Apply for New Registration’. Once you click on that, you will get two options of ‘Employees’ State Insurance Act, (1948) and ‘Employees’ Provident Fund and Miscellaneous Provision Act (1952). Click on ‘Submit’ after going through them.
- The page will now ask for mandatory details such as Establishment Details, eContacts, Contact Persons, Identifiers, Employment Details, Particulars of workers, Branch/Division, Activities, and Fill in each of them carefully.
- View the preview of the form on the dashboard.
- Now, you may click on ‘Submit’ to submit your registration form.
- Once you have submitted, you will be required to register for a Digital Signature After completion of FSC registration, you will get an email from the portal informing you of your successful registration.
Important Documents And Details Required For Registration
- Name and address of the company
- Head office and branch details
- Date of incorporation/registration of the company
- Total employee strength
- The type of business undertaken by the organization
- Legal details
- Bank details
- PAN details
- Basic details of their employees (name, date of joining, salary)
- A form by the name “Proforma for Coverage” and Form 5A with Annexure 1 needs to be
- Copy of partnership deed (registered partnership firm)
- Copy of Certificate of incorporation
- Societies need to submit a copy of their registration certificate
- Societies need to submit a copy of the rules and objects of the society
- All legal documents required under the Income Tax Act
- PAN details
- Public and Private Limited Companies need to submit memorandum and Articles of Association
- Partition Deed
- Proof of incorporation (first sales invoice/ license that has been issued by competent authorities)
- Salary details of employees
- Balance sheet details
How To Calculate Contribution Of PF For Employers & Employees?
The contribution to a provident fund is essentially divided into two parts – by the employee and by the employer.
The employee has to contribute 10% or 12% of his basic salary. If the employee happens to be a female, then she has to contribute only 8% for the first three years of her employment, thereafter, she will contribute either 10% or 12% of her basic salary.
The employer contributes an amount that is either 10% or 12% of the employee’s basic salary towards the provident fund.
In fact, the basic rate of PF is further divided into:
- Employee’s Provident Fund (EPF) – 67%
- Employee’s Pension Scheme (EPS)- 33%
- Employee’s Deposit Link Insurance Scheme (EDLIS) – 50%
- EPF Administration charges – 10%
- EDLIS Administration charges -0.01%
The contribution is calculated per month in the following way-
- The employee’s contribution will amount to 12% of his/her basic salary.
- The employer’s contribution to the EPF will amount to 67% of your basic salary.
- The Employer’s contribution towards Employee Pension Scheme (EPS) will amount to 33% of the basic salary of the employee.
- To understand the calculation of contributions in a better manner, assume your basic salary is ₹25,000 per month. In this case, the employee’s contribution will amount to 12% of 25,000, which will be equal to ₹3000 per month.
- Similarly, if your basic salary is ₹25,000, then your Employer’s contribution to the EPF will be 3.67% of 25,000, which will be ₹917.50 per month. Employer’s contribution to the EPS will be equal to 8.33% of 25,000 which is ₹2,082.50 per month. Now, due to the threshold limit of ₹15,000 (8.33%) towards EPS, the employer can only contribute ₹1,249.50. Now, the difference between the maximum amount and what the employer can transfer will be transferred to the Employer’s EPF contribution, which will be ₹833(₹2,082.50 -₹1,249.50). Thus, total EPF contribution becomes ₹2,915.50.
- Thus, the EPF total Contribution by the employee and employer, if basic salary is assumed to be ₹25,000 will be equal to ₹5,915 (₹3,000 + ₹2,915).
Types Of Provident Fund
Apart from the Employee Provident Fund, there are two more types of provident funds- GPF and PPF.
GPF is the General Provident Fund which is mainly for government employees.
PPF is the Public Provident Fund, which is a savings scheme for anyone.
Steps To Check Your Balance Of PF
An individual can check his/her EPF balance through the Umang App, EPFO Member e-Sewa portal, SMS, or a missed call.
Through the Umang app, you can view your passbook and other transaction details. Through the EPFO portal, you will have to log in to the portal using your UAN (Universal Account Number), and then download or print your passbook from the portal. You can access your passbook on the portal by following these steps-
- Go to epfindia.gov.in
- Select the ‘For employees’ option under the ‘Our services’ tab.
- Select the option of ‘Member Passbook’
- This will lead you to this page
- Fill in the login credentials and sign in to access your passbook.
Steps To Withdraw PF
An EPF scheme member has the option of withdrawing from the scheme by submitting a withdrawal application. This can be done through both online and offline modes.
For offline submission of application, the member needs to fill the ‘new composite claim form’ or a ‘composite claim form’ and submit it to the concerned EPFO office. This form must be attested by the employer.
For online submission of the withdrawal application, follow these steps-
- You must have an active UAN that is tagged to your EPF The mobile number that is attached to the UAN must be active too. The UAN is also required to be linked with your Aadhaar.
- PAN details and Bank details are also required.
- Login into the https://groww.in/p/savings-schemes/uan-member-portal/, which is the UAN online portal.
- Verification of KYC details is to be done
- Confirm the terms and conditions stated
- Select the option of ‘Proceed for online claim’.
- You will have to select the reason for withdrawal from the drop-down The reasons displayed will be those for which you are eligible.
- After this, you will have to enter your complete address, and also the amount of it is an advance claim.
- Click on the ‘Get Aadhaar OTP’ option.
- Once you enter the OTP received on your number, and it is verified, you have successfully submitted your application.
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