The Employee Provident Fund (EPF) is a program designed by the Indian Central Government under the EPF and Miscellaneous Provisions Act (1952). Since 1951, PF registration has been available throughout India, except in Jammu and Kashmir. Employee’s Provident Funds have been recognized as one of the best investment mechanisms for salaried professionals. By stipulating certain conditions, the Indian government has made EPF registration mandatory.
A long-term objective of the Government was to encourage workers in public and private sectors to save. In government offices, the same approach is maintained.
The Employees’ Provident Fund’s applicability
There are a number of reasons why EPF registration is required:
- There are at least twenty employees in any factory or manufacturing plant that is commercially operated.
- An establishment that employed 20 or more professionals in the previous year.
- A monthly salary of less than $15,000 applies to every employee.
A substantial portion of every employee’s monthly salary must be contributed to the EPF scheme by any institution entitled to it. Regular contributions are required. Staff contributions are collected in a savings account. In any case, this money is invested in the market. When the person retires, the cumulative principal value and tax surplus are credited to him or her. These funds can also be transferred if an individual switches jobs for a better career opportunity.
EPF contribution required
Employers must contribute 12% of the cumulative amount derived from adding the following elements of the salary structure: Basic pay, retaining allowance, and dearness allowance. Moreover, the employee is required to contribute the same margin in percentage terms. Contribution rates drop to 10% if your business recruits fewer than 20 professionals. Both employers and employees are responsible for this. According to EPFO guidelines, this amendment is applicable only if certain PF registration prerequisites are met.
The Indian Government designed employees’ pension scheme to be funded with 8.33% of their EPF contributions (10% or 12% of their monthly salaries). It is important to note that this calculation is based on a salary of Rs. 15,000 or more. Each month, the EPS account of every professional receiving an in-hand salary of Rs. 15,000 or more gets credited with Rs. 1250. If the basic sum is less than Rs. 15,000, 8.33% of the entire salary gets transferred to the EPS. The remaining balance is deposited into the EPF account. Upon retirement, the employer pays the worker the entire amount saved in his EPF account and his EPS share.
EPF Eligibility Criteria for Employers
PF registration will not be required if an employer employs no more than 20 employees to run his business. When the majority of professionals within the organization approve exemption, the rule becomes effective. Let’s assume that the latter scenario is the case. The government may still require you to undergo various formalities as an employer in that case. Form 1 may be used when an employer requests exemption for PF benefits that are as good as statutory provisions.
Recruiting rates for employers with fewer than 20 employees
EPFO norms require establishments with less than 20 employees to grant EPF at 10% of in-hand wages along with a dearness allowance.
The following are affected:
- Offices with less than ten employees
- An organization that suffered a heavy financial loss at the end of the previous fiscal year
- Brick factories, beedi factories, gum factories, and jute factories are some of the highlighted sectors of manufacturing.
What is the process for redeeming the EPF amount?
Once a staff member reaches 55 years of age or retires, he is entitled to redeem the accumulated money from his EPF account. Employees can withdraw the entire income from their EPF accounts, including their employer’s contributions. Before reaching 55, the employee can redeem the entire amount from his EPF account. For two months, he must not be active in his employment status.
As the entire withdrawal process can be performed online, the withdrawal process has been simplified. To help you redeem your PF balance online without encountering any hassle, we have outlined the sub-processes step-by-step:
- Check out the EPFO’s official website: unified portal-mem.epfindia.gov.in
- Log in with your password and UAN code.
- After logging in successfully, the first step is to check the KYC specifications, which are already provided online.
- Choose ‘Claim (Form 31,10C & 19)’ from the dropdown box under ‘Online Services’.
- Enter your registered bank account’s last four digits by selecting ‘member’s details’ and clicking ‘verify’ to approve all bank-related inputs.
- The undertaking certificate must now be signed.
- Submit the withdrawal application online.
- Currently, the EPFO examines the bank details against the KYC documents. After an EPF request is processed by the administration, the payment is sanctioned within 10-15 days, and the money is deposited into the registered bank account.
- An employee’s provident fund can only be redeemed through this government-supervised online facility if his Aadhar ID is linked to his Universal Account Number.
Public and private firms must register for PF. Occasionally, an employer’s contributions are exempted under certain circumstances, which must be addressed by the businessperson. With the registration process now available online, employees can track their savings by entering the correct login credentials, which has minimized the hassle for them.