Employee Provident Fund or EPF

An overview of the Employee Provident Fund (EPF)

Employee Provident Fund (EPF) is a type of retirement benefit that pays you a lump sum of money when you retire. The Employees’ Provident Fund Organization (EPFO) manages India’s Employees’ Provident Fund (EPF).
Both employers and employees contribute to the EPF account. Each employee has their own EPF account and a unique PF number, which changes if they change employers.
Employees also acquire a Universal Account Number (UAN), which stays the same regardless of job changes.

Calculation and contribution of PF :

PF is calculated on the Basic and DA of your salary.

Both the employer and the employee contribute 12% of Basic and DA.

Employee contribution – 12% → EPF

Employer contribution – 12% – 3.67% → EPF

                                                        – 8.33% → EPS

EPS is an Employee Pension Scheme, and the maximum pension contribution is Rs. 1250.

Note: EPS is not applicable for employees whose date of joining is after September 1, 2014, And whose basic and DA are above 15,000.

Understanding with an example:

  1. Raj joined Sunshine Electronics on April 1, 2014. His Basic and DA total is Rs.20,000.The company’s PF contribution limit is Rs.15,000.

He contributes 12% of 15,000 to his EPF = Rs.1,800.

His employer is contributing → 8.33% of 15,000 towards EPS = Rs.1,250

                                                       → 3.67% of 15,000 towards EPF = Rs.550.

  1. Priya joined Sunshine electronics on April 1, 2015. Her basic and DA total Rs.10,000.PF contribution is restricted to Rs.15,000 in the company.
    She contributes 12% of 10,000 to her EPF = Rs.1,200.

Her employer is contributing → 8.33% of 10,000 towards EPS = Rs.833

                                                       → 3.67% of 10,000 towards EPF = Rs.367.

  1. Jothika joined Sunshine Electronics on April 1, 2015. Her Basic and DA total Rs. 20,000. Her PF contribution is restricted to Rs. 15,000 in the company.

Her is contributing 12% of 20,000 to his EPF = Rs.1,800

Her employer is also contributing 12% of 20,000 towards EPF = Rs.1,800Interest on PF Accumulation

At the end of each year, a fixed amount of interest is paid on the accumulated PF. This interest is calculated based on the monthly increase in PF balance.

The central government fixes the interest rate in consultation with the Central Board of Trustees, Employees’ Provident Fund Organization.

Currently, the interest rate is 8.25%. The interest on PF accumulations is exempt from income tax up to Rs 250000 per year. Above this value, the interest amount is also taxable.

Duties of employer -

Employees who are members of the EPF have certain duties and responsibilities.

  • They must submit KYC and Aadhar card-related documentation.
  • Form 2 includes a nomination form for EPF to the employer.
  • UAN with a declaration of fund membership after joining the organisation to the employer.

Rights of employee under EPF

Employees who are members of the EPFO have the following rights: 

  • Right to receive a UAN from EPFO.
  • The right to transfer their collected funds to a new account.
  • Right to receive pension payments.
  • They have the right to file a grievance and have it resolved within a month.
  • Right to receive a free claim form.
  • Obtain guidelines for filing a form.
  • You have the right to withdraw a portion or all of your pension from your PF account.

Offences and penalties under the Employee Provident Fund (EPF)

  • If the employer fails to pay or contribute to the employee’s wages, it is punishable by one year in prison and a Rs.10,000 fine.
  • Any false statement or representation made to avoid paying EPF is punishable by imprisonment for approximately one year, which may extend for one year with a fine of Rs.5,000 or with both.
  • Contravention of provisions relating to administration costs or payment can result in imprisonment for one year, which can be extended to three years.
  • Any additional offences will result in a 6-month prison sentence or a Rs.5000 fine.

We have reached the end of our discussion of the employment provident fund. Please mention your other questions and opinions below in the comment box.

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