PF rules and obligations for employers

Provident Fund or PF is a type 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 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 or 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 has 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. 1250

                                              → 3.67% of 15,000 towards EPF = Rs. 550

2. Rahul has 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 has 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 Central Government in consultation with the Central Board of Trustees, Employees’ Provident Fund Organization.

Currently, the interest rate is 8.65%. The interest on PF accumulations are exempted from income tax.

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.
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