Employee Provident Fund

The Provident Funds and Miscellaneous Provisions Act of 1952 governs the Employees Provident Fund, a program for Indian employees. Employees Provident Fund Organization, sometimes known as EPFO, is in charge of overseeing the Employee Provident Fund.

Any business in India that has hired 20 people or more is eligible to apply for PF registration. Sometimes establishments with less than 20 employees are still eligible for PF registration, depending on the circumstances and the exemption. On retirement or resignation, the employee receives a sum that comprises both their own and the employer's contributions, plus interest.

Who is eligible to get EPF registration?

For Employer

PF Registration is mandatory for all the establishments-

• That has at least 20 persons involved.
• The central government must state this in the announcement on behalf of any such establishment with fewer than 20 employees.

For Employee

If an employee's pay is less Rs. 15,000 per month, they must be compelled to join the EPF. Employees are not required to make any PF payments if their basic wage at the time of joining the company is greater than Rs. 15000 per month, per the norms.

However, a worker who earns more than Rs. 15,000 per month can still join and pay contributions with the employer and the Assistant PF commissioner.

The amount for the contribution of PF

If the employer doesn't register the PF within a month of reaching the required strength, they risk incurring the necessary fines. Even if there are fewer employees than the requisite number, the registered establishment remains subject to the Act's jurisdiction.

A 12% contribution from the employer is required of the (Basic Salary + Dearness Allowance + Retaining Allowance). The employee must provide an equivalent amount. According to EPFO laws, the contribution rate for both the employer and employees is only allowed to be 10% if the firm has fewer than 20 employees. The basic pay is typically the basis on which the total contribution is computed for employees who work in the private sector.

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?

An estimated Rs. 15,000 from the employer's contribution, or 8.33%, goes into the Employees Pension Scheme. If the person's basic pay is Rs. 15,000, Rs. 1250 would be channeled to the Employee Pension Scheme. 8.33% of the Basic Pay will be routed if it is less than Rs. 15,000, and the remaining amount will be kept in the EPF plan. The company would reserve its portion for credit in the EPF account and give the employee their entire part at superannuation.

Documents Required for Registration

The following paperwork must be included by the employer with the registration form:

1. PAN of the Partner, Proprietor, or the Director
2. Address proof (can be any utility bill but should not be older than 2 months)
3. Aadhar card of Proprietor, Partner, or Director.
4. Canceled Cheque Or Bank Statement
5. Digital Signature of the Proprietor/ Partner or Director.
6. If there is one, the hired, rented, or leased agreement.

EPF charges

• For the employee share, pension contribution, and EDLI contribution, the amount is rounded to the closest rupee for each employee.
• The employee share and the pension contribution are subtracted to get the employer share.
• A minimum of Rs. 500 is required to be paid each month as part of the EPF administrative costs payment amount.
• The minimum administrative fee that would be charged if the institution has no members during the month is Rs. 75.
• A minimum payment of Rs. 200 is required under the EDLI administrative charges, and the monthly payment amount is rounded to the next rupee.
• If the establishment doesn't have a member during the month, a minimum administrative fee of Rs. 25 is due.
• If the establishment is exempt from the PF system, the admin fees would be replaced by inspection fees of 0.18% (minimum Rs 5).
• if the establishment qualifies for the EDLI plan exemption. Administrative fees can be replaced by inspection fees, which must be at least Rs. 1 @ 0.005%.

Due date

Before paying the salaries of the employees, the company must deduct the employee's contribution from his compensation. The employer's share and the employee half will then both be due to the EPFO within 15 days of the end of each month.

In terms of returns from a debt instrument, the EPF stands out. The money is backed by a sovereign, and the interest is tax-free. Since contributions are tax-deductible from income, the PF has EEE (exempt, exempt, exempt) status.It is uncommon to discover debt securities with such high yields that are also dependable and safe. Therefore, it is preferable to move the PF account while changing jobs in order to reduce temptation to withdraw funds.