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The Employees' Provident Fund Act, 1952, is a legislation in India that aims to provide financial security and stability to employees by encouraging them to save for retirement. The act applies to organizations with 20 or more employees and establishes a mandatory provident fund scheme. Under this scheme, both the employer and the employee contribute a certain percentage of the employee's salary to a provident fund account managed by the Employees' Provident Fund Organization (EPFO). The contributions accumulate with interest and are paid out to the employee upon retirement, resignation, or in certain other specified circumstances such as disability or death. The EPF Act also covers issues related to withdrawal, loans, and transfer of provident fund accounts. It serves as a crucial social security measure for employees in India.
In India, under the Employees' Provident Fund (EPF) scheme governed by the Employees' Provident Fund Organization (EPFO), both the employer and the employee make contributions towards the provident fund and pension scheme.
Provident Fund Contribution: Both the employer and the employee contribute 12% of the employee's basic salary plus dearness allowance (DA) towards the provident fund. This contribution is made every month and goes into the employee's provident fund account.
Pension Contribution: Out of the 12% contribution made by the employer, 8.33% (subject to a maximum limit) goes towards the Employee Pension Scheme (EPS). The employer's contribution towards EPS is capped at a certain salary limit, currently set at ?15,000 per month. However, if the basic salary plus DA of an employee exceeds this limit, the excess amount is only directed towards the EPF, not EPS.
Here's a breakdown of the contributions:
Employee's contribution: 12% of basic salary plus DA
Employer's contribution:
3.67% of the employee's basic salary plus DA towards EPF
8.33% of the employee's basic salary plus DA towards EPS (capped at ?15,000 per month)
The total contributions are managed by the EPFO, which invests them in various instruments to generate returns. The accumulated funds are then available to the employee upon retirement, resignation, or other eligible circumstances, providing financial security post-employment.
Organizational Size: The Act typically applies to organizations with 20 or more employees. Establishments falling under this category are required to register under the Act and provide provident fund benefits to their employees.Employee Coverage: The Act covers all employees, including temporary, contract, and part-time workers, who meet the eligibility criteria specified by the Act. This includes employees engaged in industries specified in Schedule I of the Act.
Both the employer and employee contribute 12% each of the employee’s pay towards EPF. However, the employee’s entire share is contributed towards EPF, 8.33% of the employer’s share goes towards the Employees’ Pension Scheme (EPS) and 3.67% goes towards EPF contribution every month.
PF compliance refers to adhering to the regulations and requirements outlined in the Provident Fund Act, which mandates various aspects related to the management, contribution, and administration of provident funds for employees. Ensuring PF compliance is crucial for both employers and employees to maintain legal and financial integrity. Here are some key aspects of PF compliance: Employer Registration, Employee Eligibility, Contributions, Deposit and Remittance, Record Keeping, Annual Returns and Reporting, Compliance Audits, Employee CommunicationNon-compliance with PF regulations can lead to penalties, fines, legal liabilities, and reputational damage for employers. Therefore, it's essential for employers to understand and fulfill their PF compliance obligations to ensure the financial well-being and security of their employees while maintaining regulatory compliance.
We conduct the helpdesk for employees to handle their issue related to Provident Fund. Mostly Employees face the issue while processing their PF Transfer Claim, Withdrawal Claims, KYC Related issues, Name Correction issue. We help to resolve such issues.
