Unlocking the Mysteries of EPF: Your Comprehensive Guide

Welcome to our comprehensive guide on the Employee Provident Fund (EPF). In this detailed exploration, we delve into the intricacies of EPF, shedding light on its importance, functionality, and frequently asked questions. As a vital aspect of financial planning and employee benefits, understanding EPF is crucial for both employers and employees alike.

What is EPF?

EPF, short for Employee Provident Fund, is a government-mandated savings scheme in the United Kingdom. It serves as a retirement savings option for employees, ensuring financial stability during their post-employment years. Both employers and employees contribute a percentage of the employee's salary to the EPF account, accumulating wealth over time.

Why is EPF Important?

EPF plays a pivotal role in securing a stable financial future for employees. Here's why it's crucial:

Retirement Planning:

EPF provides a reliable avenue for retirement planning, allowing employees to build a substantial corpus over their working years.

Financial Security:

By contributing to EPF, employees ensure financial security post-retirement, mitigating the risk of financial instability.

Employer Contribution:

Employers matching employee contributions demonstrate a commitment to their workforce's well-being, fostering loyalty and trust.

How Does EPF Work?

Understanding the mechanics of EPF is essential for maximising its benefits. Here's a breakdown of how EPF operates:

Contribution:

Both employers and employees contribute a fixed percentage of the employee's salary to the EPF account. These contributions accumulate over time, forming the retirement corpus.

Interest Accrual:

EPF contributions earn a competitive interest rate, compounded annually. This interest accrual boosts the retirement corpus, enhancing long-term savings.

Withdrawal:

While primarily intended for retirement, EPF allows partial withdrawals under certain circumstances, such as housing, medical emergencies, or education expenses.

Frequently Asked Questions (FAQs) About EPF

1. How is EPF Calculated?

• EPF contributions are calculated as a percentage of the employee's basic salary plus dearness allowance (if any). The current statutory rate is 12% of the employee's basic salary.

2. Can I Increase My EPF Contribution?

• Yes, employees have the option to voluntarily increase their EPF contribution beyond the statutory rate. This can be done through the Voluntary Provident Fund (VPF) scheme.

3. What Happens to EPF Upon Resignation?

• Upon resignation, employees have the option to withdraw their EPF balance or transfer it to a new employer, preserving the continuity of their retirement savings.

4. Is EPF Taxable?

• EPF enjoys tax benefits under Section 80C of the Income Tax Act, allowing for tax deduction on contributions. However, withdrawals made before completing five years of continuous service are subject to taxation.

5. How Can I Check My EPF Balance?

• Employees can conveniently check their EPF balance online through the EPFO portal or mobile app. By providing essential details such as UAN (Universal Account Number) and PAN (Permanent Account Number), individuals can access real-time updates on their EPF balance.

Who is eligible to get EPF registration?

For Employer

PF Registration is mandatory for all the establishments-

• That has engaged 20 or more than 20 people.
• For any other establishment that has less than 20 people then the central government has to specify the same in the notification on the behalf.

For Employee

Employees drawing less than Rs.15000 per month need to mandatorily become members of the EPF. According to the guidelines, employees whose basic pay is more than Rs. 15000 a month at the time of joining are not required to make any PF contributions.

But an employee who is drawing pay of more than Rs.15,000 can still be a member and make contributions with the employer and the Assistant PF commissioner.

The amount for the contribution of PF

The employer has to obtain the PF registration within 1 month of attaining the strength, in case of failure to abide by applicable penalties. A registered establishment continues under the purview of the Act even in case the No of employees falls below the required limit.

The employer has to contribute 12% of the (Basic Salary + Dearness Allowance + Retaining Allowance). An equal amount of contribution is to be made by the employee. If the establishment has engaged less than 20 employees the EPFO rules state that the contribution rate for both the employees and the employer is limited to 10 %. In most cases the employees who are employed in the private sector it is on the basic salary on which the whole contribution is calculated.

The breakup of the PF contribution

• The 12 % contribution is divided into the following subdivision:
• 3.67% of the contribution towards the Employees Provident Fund
• 1.1% of the contribution towards the EPF administration Charges
• 0.5% of the contribution towards the employee's deposit linked insurance
• 0.01% contribution towards the EDLI administration charges
• 8.33% towards the Employees Pension Scheme.

What is the Employees Pension Scheme?

8.33% of the employer’s contribution is routed towards the Employees Pension Scheme that is calculated at Rs.15,000. The amount routed to the Employee Pension Scheme would be Rs.1250 in case the basic pay of the person is Rs.15,000. If the Basic Pay is less than Rs.15,000 then 8.33% of the amount will be routed and the balance will be retained in the EPF scheme. On superannuation, the employee would receive the full share with the employer's share reserved for credit in the EPF account.

Documents Required for Registration

The employer has to attach the following documents with the registration form:

• PAN of the Partner, Proprietor, or the Director
• Address proof (can be any utility bill but should not be older than 2 months)
• Aadhar card of Proprietor, Partner, or Director.
• Canceled Cheque Or Bank Statement
• Digital Signature of the Proprietor/ Partner or Director.
• Hired/ Rented or Leased Agreement If there is any.

EPF charges

• The contribution is rounded to the nearest rupee for each of the employees for the employee share, the contribution towards pension, and the EDLI contribution.
• The employer share is the difference between the employee Share and the pension contribution.
• The monthly payment amount towards the EPF administrative charges is rounded to the nearest rupee and a minimum of Rs.500 is payable.
• In case the establishment has no member in the month the minimum administrative charges applicable will be Rs.75.
• The monthly payment amount under the EDLI administrative charges is rounded to the nearest rupee and a minimum of Rs.200 is payable.
• In case the establishment has no member in the month, the payable minimum administrative charge is Rs.25
• Suppose the establishment is exempted from the PF scheme inspection charges of 0.18% ( Minimum Rs 5 ) is payable in place of the admin charges
• In case the establishment is exempted under the EDLI scheme. The inspection charges of minimum Rs.1 @0.005% are payable in place of the administrative charges.

Due date

Before paying the Salary to the employees the employer must deduct the employee's contribution from his wages. Later, the employee portion and the employer’s share will be payable to the EPFO within 15 days of the close of every month.

The EPF stands tall in terms of returns from a debt instrument. The money is sovereign backed and the interest earned is tax-free. The PF enjoys EEE ( exempt, exempt, exempt) status as contributions are deductible from the income. Hardly any debt instruments provide such high returns with safety and assurance. Hence, it is better to transfer the PF account at the time of switching jobs and also avoid the temptation to withdraw the money.

PF Registration FAQ's

Where I can register a PF account?

PF registration has to be done with EPFO. The PF registration can be done online on the website.

Who is eligible to get PF Registration?

For a salaried employee if the Basic and Dearness allowance is less than Rs.15,000 per month then it is mandatory to get the EPF registration by the employer.

What is the basic limit for PF registration?

Employees that draw less than Rs.15,000 per month need to get EPF registration mandatorily, and the employee drawing the Pay above the prescribed limit needs to get permission from the assistant PF commissioner to become a member.

Is PF registration mandatory?

PF registration is mandatory for all establishments with 20 or more persons, if the establishment has fewer than20 employees still a PF registration would be required. The employee can become eligible for PF right from the commencement of the employment and onus of deduction and PF payment is with the employer.

How long does it take to obtain PF registration?

It requires 20-25 days to obtain PF registration in India.

Is PF registration mandatory for a Private Limited Company?

Not every Private Limited Company is required to obtain PF registration.

What if the employee doesn't have PF?

If the employee does not want PF registration he can fill the Form 11 at the time of joining the job. The employee can also submit a letter addressing the employer stating that he wishes to opt out of the Provident Fund Scheme.

Which PAN is to be entered to obtain PF registration?

The PAN issued in the name of the business entity is to be used for PF registration.

Is it necessary to be present physically to obtain PF registration?

No, You can complete the whole procedure online, all you need to do to submit is the documents required.

How is the PF registration process helpful in pension?

The PF is directly related to the employee's pension. Apart from the employees contribution that is 12% towards the EPF, an equal amount is contributed by the employer, 8.33% from this goes towards the Employee Pension Scheme.