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.
For Employee :
For Employer :
For all establishments, PF registration is mandatory:
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%|
The following documents must be attached to the registration form by the employer:
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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