Provident Fund (PF) | Payroll | Employers Contribution

Types of Provident Funds

• Statutory Provident Fund (SPF)
• Recognized Provident Fund (RPF)
• Unrecognized Provident Fund (URPF)
• Public Provident Fund (PPF)

Governing Act

The Employees’ Provident Fund & Miscellaneous Provisions Act, 1952 is an Act to provide for the institution of Provident Fund (PF), Pension Fund (PS), and Deposit-Linked Insurance (EDLI) funds for employees.

The fund is maintained & regulated by the Employees’ Provident Fund Organization (EPFO). EPFO is one of the largest social security organizations in India in terms of the number of covered beneficiaries and the volume of financial transactions undertaken.

Do all employers come under the purview of the Act?

The Act applies to:

• every establishment which is a factory engaged in any industry specified in Schedule I to the Act, and in which 20 or more persons are employed ; and
• any other establishment which employs 20 or more persons or class of such establishments which the Central Government may, by notification in Official Gazette specify in the behalf
• any other establishment so notified by the Central Government even if employing less than 20 persons. (after giving not less than 2 months’ notice in this behalf)

Every establishment must register themselves under PF if the number of employees in the establishment at any time during the previous year reaches 20 or more. (5 in the case of seasonal employers).

Do all employees come under the purview of the Act?

Every employee who receives wages (or salary) of Rs.15,000 per month or less, shall be eligible for becoming a fund member.

Here,

Employee includes the one employed through a contractor but excludes:

• an apprentice engaged under the Apprentices Act or the standing orders of the establishment
• casual labourers

Salary means- Basic pay, Dearness Allowance and Retaining Allowance if any. (discussed later)

Contributions

The amount that is contributed to be deposited into the fund by the employee and the employer (on behalf of the employee) is termed as Contribution.

Employee Contribution - 12% of salary

Employer Contribution - The contributions are segregated into:

• 3.67% into Employees’ Provident Fund Scheme (EPF)
• 8.33% into Employees’ Pension Scheme (EPS)
• 0.5% into Employees’ Deposit Linked Insurance Scheme (EDLIS)
• 0.5% for EPF Administrative Charges (w.e.f 01/06/2018)

totalling it to 13%

Here, salary is a sum of:

• Basic pay
• Dearness Allowance (DA) (including the cash value of any food concession allowed to the employee)
• Retaining Allowance (RA) (an allowance payable to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining their services)

Choosing contribution levels

Once the establishment is enrolled under PF, the employer shall look into the below matters for employees whose:

• Salary is Rs.15,000 per month or less- Contribution to EPF & EPS is mandatory
• Salary is above Rs.15,000 per month-

• Has an option to contribute to PF
• If an employee chooses to contribute to PF, then EPS contribution is not mandatory

Calculation of Provident Fund contribution

Example1:

Salary received by the employee, (Basic + DA+RA) is Rs.14000

Both employer and employee contribute upon Rs.14000 salary

Calculation:

Employee Contribution- 14000 x 12% = Rs.1680

Employer Contribution:

-towards Employees’ Pension Scheme- 14000 x 8.33% = Rs.1166

-towards Employees’ Provident Fund- 14000 x 3.67% = Rs.514

-towards Employees’ EDLIS - 14000 x 0.5% = Rs.70

-towards EPF Administrative Charges- 14000 x 0.5% = Rs.70

Total deposit into Employee’s PF Account = Rs.1680+ Rs. 1166 + Rs.514 = Rs.3360

Example2:

Salary received by employee, (Basic + DA+RA) is Rs.20000

Both employer and employee restrict the contribution upon Rs.15000 salary

Calculation:

Employee Contribution- 15000 x 12% = Rs.1800

Employer Contribution:

-towards Employees’ Pension Scheme- 15000 x 8.33% = Rs.1250

-towards Employees’ Provident Fund- 15000 x 3.67% = Rs.550

-towards Employees’ EDLIS - 15000 x 0.5% = Rs.75

-towards EPF Administrative Charges- 15000 x 0.5% = Rs.75

Total deposit into Employee’s PF Account = Rs.1800 + Rs.1250 + Rs.550 = Rs.3600

Example3:

Salary received by employee, (Basic + DA+RA) is Rs.20000

Both employer and employee contribute upon Rs.20000 salary

Calculation:

Employee Contribution- 20000 x 12% = Rs.2400

Employer Contribution:

-towards Employees’ Pension Scheme- 20000 x 8.33% = Rs.1666

-towards Employees’ Provident Fund- Rs.2400 - Rs.1666 = Rs.734

-towards Employees’ EDLIS - 20000 x 0.5% = Rs.100

-towards EPF Administrative Charges- 20000 x 0.5% = Rs.100

Total deposit into Employee’s PF Account = Rs.2400 + Rs. 1666+ Rs.734= Rs.4800

Example4:

Salary received by employee, (Basic + DA+RA) is Rs.20000

Employer contributes on Rs.15000 limit prescribed whereas employee contributes on Rs.20000 salary

Calculation:

Employee Contribution- 20000 x 12% = Rs.2400

Employer Contribution:

-towards Employees’ Pension Scheme- 15000 x 8.33% = Rs.1250

-towards Employees’ Provident Fund- 15000 x 3.67% = Rs.550

-towards Employees’ EDLIS - 15000 x 0.5% = Rs.75

-towards EPF Administrative Charges- 15000 x 0.5% = Rs.75

Total deposit into Employee’s PF Account = Rs.2400 + Rs.1250 + Rs.550 = Rs.4200

Taxation of Provident Fund

Sl no.	Particulars	Taxation	Remarks
1	Statutory Provident Fund
1.1	Employee Contribution	Deduction allowed u/s 80C
1.2	Employer Contribution	Exempt
1.3	Interest	Exempt
1.4	Lumpsum amount received by employee on retirement	Exempt
2	Recognized Provident Fund
2.1	Employee Contribution	Deduction allowed u/s 80C
2.2	Employer Contribution	Exempt up to 12% of Salary	Where, Salary: Basic salary + D.A drawn (if considered for retirement benefits) + Commission based on a percentage of Turnover
2.3	Interest	Exempt upto 9.5% per annum
2.4	Lumpsum amount received by employee on retirement	Exempt	Provided Employee has served for 5 years or more. Less than 5 years permissible only if employee: -retired due to ill health -retired due to shut down of employer's business -retired with the instruction that his balance in RPF should be transferred to new employer.
3	Un-recognized Provident Fund (URPF)
3.1	Employee Contribution	Not available
3.2	Employer Contribution	Exempt
3.3	Interest	Exempt
3.4	Lumpsum amount received by employee on retirement	Employee Contribution: Interest on Employee Contribution is Taxable under the head 'Income From Other Sources'. (Only the Interest) Employer’s Contribution and Interest on Employer Contribution are taxable under the head ‘Salaries’
4	Public Provident Fund (PPF)
4.1	Employee Contribution	Deduction allowed u/s 80C
4.2	Employer Contribution	-
4.3	Interest	Exempt
4.4	Lumpsum amount received by employee on retirement	Exempt

Withdrawal of PF

An Employee can withdraw PF entirely or partially.

Complete withdrawal under the following circumstances:

• When an employee retires
• When an employee continues to be unemployed for more than two months after terminating employment. (The employee must get an attestation from a gazetted office for the same).

Partial withdrawal under the following circumstances:

Allowed for the below needs-

• Medical treatment in case of certain major illnesses
• Construction / Purchase of a House including the acquisition of site or plot for such purpose
• Addition / Repair to the existing house
• Marriage
• Education
• Home loan repayment
• Withdrawal within one year before retirement

How to get updated information about your PF account?

• Post activation, a member receives SMS about credits/debits to their EPF account from the EPFO.
• Members can give a missed call to get details about their PF account.
• Members can download the EPF mobile app to track their EPF account.
• Members may list all existing EPF accounts – EPFO would facilitate the consolidation of all accounts.

Check your PF balance

• Access the government EPF portal.
• Select the location (State, Regional branch office) of your PF office
• Fill the online form- Personal information and EPFO account number (also specified in your payslip)
• Submit the form after verifying the details provided
• You will receive an SMS on your registered mobile number stating the EPF balance.

Check PF balance via SMS or Missed Call

• You will need to have an active UAN number.
• Your mobile number would already be registered with the EPF department.
• A missed call to 011-22901406 will fetch you an SMS that lists down your PF number, age and name as per the EPF records.
• You will also require your UAN along with Aadhaar Number or PAN Number handy.

(KYC details along with UAN are mandatory for knowing your EPF balance. Once your UAN is integrated with your KYC, every time you give a missed call to the Employee’s Provident Fund department, you will receive SMS with your EPF details including the EPF balance)

Check PF balance via the mobile application

• Open the mobile app – Umang (https://web.umang.gov.in/web/) - on your phone and click EPFO.
• Under the Employee Services option, click passbook and then input your 12-digit UAN number.
• The system will send an OTP to the mobile number registered with the EPFO.
• Once verified, you will be shown a screen which displays your updated EPF balance information along with personal details like your name, date of birth, Aadhaar number; PAN for tax deduction, last month EPF contribution etc.

The mobile app helps to check the EPF balance and generate an account statement.

Transfer PF money online .

• When you change your job change, you need not re-create a new account. You can transfer your existing EPF account using the Unified Account Number (UAN)
• Go to the official EPF member portal www.epfindia.gov.in and register.
• Log in once you get the login credentials.
• Visit the Online Transfer Claim Portal and request for EPF transfer using the same login details (as above)
• If you are eligible to make the transfer claim online, you can do it without submitting Form-13.
• Click ‘Request for Transfer of Funds’ and enter your old employment details as directed.
• Get it authenticated by your employer (previous or new)
• After entering the details, you will receive a PIN on your registered mobile number.
• Use the tracking ID generated to track your application.

It takes 30-60 days to complete the claim settlement process. Even your employer can view, verify or correct, and submit your details online through this portal.