Employee Provident Funds are governed by the Employees Provident Fund Organization, commonly referred to as EPFO. The Provident Funds and Miscellaneous Provisions Act,1952 governs the Employees Provident Fund, which is a system for Indian employees.

In India, all businesses with 20 or more employees are eligible to apply for PF registration. Establishments with fewer than 20 employees may be eligible for PF registration in specific cases, depending on the circumstances and the exemption. On retirement or resignation, the employee receives an amount that comprises both the employee's and the employer's contributions, plus interest.

Eligibility for EPF Registration

For Employee :

  • Employees whose basic income is more than Rs. 15000 a month at the time of joining are not required to make any PF payments, according to the norms.
  • Employees earning less than Rs.15000 per month are required by law to join the EPF.
  • An employee earning more than Rs.15,000 per month can still be a member and contribute to the PF with the help of the employer and the Assistant PF Commissioner.

For Employer :

For all establishments, PF registration is mandatory:

  • That has enlisted the participation of 20 or more people.
  • The central government must indicate the same in the announcement on behalf of any such establishment with fewer than 20 people.

Distribution of the PF contribution

In the situation that the employer fails to comply with the necessary penalties, the employer must seek PF registration within one month of obtaining the strength. Even if the number of employees falls below the minimum standard, a registered establishment remains subject to the Act.

Employers are required to contribute 12% of (Basic Salary + Dearness Allowance + Retaining Allowance). The employee is expected to provide an equivalent amount. The EPFO guidelines stipulate that if the institution employs fewer than 20 people, the contribution rate for both employees and employers is limited to 10%. In the majority of cases, employees in the private sector compute their whole contribution based on their basic wage.

The 12% contribution of PF is broken down into the following categories:

Contribution goes towards EPF administration charges 1.1%
Employee's deposit-linked insurance contribution 0.5%
Employee contribution to the Employees Provident Fund 3.67%
Contribution to the EDLI administration fees 0.01%
Employees Pension Scheme 8.33%

Documents required for PF registration

The following documents must be attached to the registration form by the employer:

  1. Partner's, Proprietor's, or Director's PAN.
  2. Proprietor, Partner, or Director Aadhar card.
  3. Address Proof (can be any utility bill but should not be older than 2 months).
  4. Cancelled Cheque or Bank Statement.
  5. The Proprietor/Partner or Director's Digital Signature.
  6. If applicable, a Hired/ Rented or Leased Agreement.

EPF Expenses

  • The difference between the employee share and the pension contribution is the employer share.
  • If the establishment does not have any members during the month, the minimum administrative expenses are Rs.75.
  • The monthly payment amount for EPF administration charges is rounded up to the next rupee, with a minimum payment of Rs.500.
  • The EDLI administrative costs monthly payment amount is rounded to the next rupee, with a minimum payment of Rs.200.
  • The employee share, pension contribution, and EDLI contribution are all rounded to the closest rupee for each employee.
  • Assuming the establishment is exempted from the PF programme, inspection charges of 0.18% (minimum Rs 5) are payable in lieu of the administrative charges
  • In the event that the business is exempt from the EDLI system. Inspection fees of at least Rs.1 @0.005 percent must be paid in lieu of administrative fees.
  • There is a minimum administrative charge of Rs.25 if there is no member in the establishment for the month in question

Due Date

The employer must subtract the employee's contribution from his wages before paying the salary to the employees. After that, the EPFO will receive the employee portion and the employer's share within 15 days of the end of each month.

As a debt instrument, the EPF is one of the most profitable ones. The money is backed by the government, and the interest is tax-free. There are few debt instruments that offer such high returns while also ensuring safety and security. As a result, it is preferable to move the PF account while changing jobs in order to avoid the temptation to withdraw money.

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