Employee Provident Fund or PF is a kind of social security benefit wherein the benefits are paid in a lump-sum amount at the time of retirement.
In India, it is referred to as Employees’ Provident Fund or EPF and is administered by the Employees’ Provident Fund Organization (EPFO).
Under the EPF scheme, both employers and employees contribute towards the Provident Fund (PF). This contribution from both the employer and the employee is deposited in the EPF account.
Each employee enrolled under EPF scheme will have an EPF account and a PF number. The PF number of an employee will change when you change the organization.
Universal Account Number (UAN) is another number which is given to the employee and this number does not change when you change the organization.
Calculation and contribution of PF :
PF is calculated on Basic and DA of your salary.
12% of Basic and DA is contributed by both the employer and the employee.
Employee contribution – 12% → EPF
Employer contribution – 12% – 3.67% → EPF
– 8.33% → EPS
EPS is Employee Pension Scheme and the maximum amount that can be contributed towards pension is Rs. 1250.
Note: For employees whose date of joining is after 1st September 2014 And have basic and DA above 15,000, EPS is not applicable.
Understanding with an example:
1. Kumar joined Sunshine electronics on 1st April 2014. His Basic and DA add up to Rs.20,000. PF contribution is restricted to Rs.15,000 in the company.
He is contributing 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.
2. Rahul joined Sunshine electronics on 1st April 2015. His Basic and DA add up to Rs.10, 000. PF contribution is restricted to Rs.15,000 in the company.
He is contributing 12% of 10,000 to his EPF = Rs.1,200
His employer is contributing → 8.33% of 10,000 towards EPS = Rs.833
→ 3.67% of 10,000 towards EPF = Rs.367.
3. Raman joined Sunshine electronics on 1st April 2015. His Basic and DA add up to Rs. 20,000. PF contribution is restricted to Rs.15,000 in the company.
He is contributing 12% of 20,000 to his EPF = Rs.1,800
His employer is also contributing 12% of 20,000 towards EPF = Rs.1,800
Interest on PF Accumulation
A certain interest amount is paid towards the accumulated PF at the end of every year. This interest is calculated on the monthly increasing PF balance.
The Rate of interest is fixed by the Central Government in consultation with the Central Board of Trustees, Employees’ Provident Fund Organization.
Currently, the interest rate is 8.50%. The interest on PF accumulations are exempted from income tax.
Rights of employee under EPF
There are rights of employee who are the member of the EPFO
- Right to obtain the UAN from EPFO.
- Right to transferred their accumulated fund to their new account.
- Right to receive the payment of pension.
- Right to register their grievance and get the redressal within a month.
- Right to obtain claim form free of cost.
- Obtain guidelines in filing a form.
- Right to withdraw the partial or full pension from PF account.
Duties of employee –
- There are some duties and responsibility of employees who are the member of EPF.
- They have to submit the KYC and Aadhar card related documents.
- Nomination form for EPF to employer in form 2.
- UAN with declaration related to membership of the fund after joining the organisation to the employer.
Withdrawal from the fund
Withdrawal of PF is of two types: partial and complete.
We have written another, complete post about partial withdrawal. Here we discuss about complete PF withdrawal.
Complete PF withdrawal is allowed in the following cases:
- On retirement from service.
- On retirement due to permanent and total incapacity for work due to physical or mental disability.
- Immediately before migration from India for permanent settlement abroad or for taking employment abroad.
- On termination of service in the case of mass or individual forced lay-off.
- On termination of service under a voluntary scheme of retirement.
- After two months of resignation, in case of no employment.
Offenses and penalties under the Employee Provident Fund (EPF)
- If there is some default in payment or contribution which has been deducted by the employer from the employee’s wages, then it is punishable with imprisonment of one year with a fine of Rs.10,000.
- In case of any false statement or false representation to avoid the payment of EPF, then it is punishable with imprisonment approximately for one year, which may extend for one year with a fine of Rs.5,000 or with both.
- Contravention of provisions related to the administration charges or payment can be punishable with imprisonment for a year which may extend to three years of imprisonment.
- Any other cases of offense will be punishable with imprisonment of 6 months or more than with the fine of Rs.5000.
With that, we have come to the end of our discussion on employment provident fund. Let’s know your other questions and opinions on this topic. Mention below the comment box.