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Employees' Provident Fund Organization (EPFO)

1. Purpose

The EPFO is established to provide financial security and stability to employees in the organized sector for their retirement. It operates under the Ministry of Labour and Employment, Government of India.

2. Provident Fund (PF)

The EPF is a mandatory, long-term retirement savings scheme. Both employees and employers contribute a percentage of the employee's salary (12% of the basic salary and dearness allowance from both the employee and the employer) to the EPF account. The accumulated amount, along with interest, is payable to the employee upon retirement or resignation.

3. Employees' Pension Scheme (EPS)

In addition to the EPF, the EPFO administers the Employees' Pension Scheme. A portion of the employer's contribution to the EPF is diverted to the EPS to provide a pension to employees after their retirement.

4. Universal Applicability

EPF is applicable to all establishments employing 20 or more employees. Certain industries and classes of establishments can voluntarily opt for EPF coverage even if they have fewer than 20 employees.

5. Contributions

The contributions made by employees and employers are invested and managed by the EPFO. The funds are used to provide a lump sum amount (including both EPF and EPS contributions) to employees upon retirement, as well as a monthly pension through the EPS.

6. Online Services

The EPFO has introduced various online services to simplify processes, including online EPF transfers, withdrawals, and the provision of Universal Account Numbers (UAN) to track EPF accounts.

7. Nomination and Withdrawal

Employees can nominate family members for the benefits in case of the employee's demise. Additionally, EPF can be withdrawn in certain circumstances, such as for buying a house, medical emergencies, or unemployment.

8. Regulatory Compliance

The EPFO ensures that employers comply with the rules and regulations related to EPF and EPS. It conducts regular inspections and takes corrective actions to safeguard the interests of employees.

The EPFO plays a crucial role in securing the financial future of employees in the organized sector by managing their provident fund and pension contributions. It serves as a cornerstone for retirement planning and social security for millions of workers in India.

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.

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


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