Everything about the Employee Provident Fund

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What is your favourite food item? If you are a non vegetarian it must be Chicken Biryani. If you are a vegetarian it must be Vegetable Pulao. What happens if you eat this every day? .You would most probably be bestowed with a string of lifestyle diseases such as diabetes and heart attack to name a few. You must be wondering why everything which is good in life comes with strings attached. You must have got your salary slip at the end of the last month. You would have noticed an Employee Provident Fund deduction in your salary slip. You must be wondering why this amount is deducted from your salary .I think I heard you grumbling ” Another Forced Saving “ .Sometimes the best things in life come out of the most unexpected situations. You would certainly be pleased as punch when you obtained this lump sum with interest when you left your current organization. You must have heard the famous saying ” A Man Who Both Spends and Saves Money Is the Happiest Man as He Has Both Enjoyments “. Don’t know what that Employee Provident Fund is. Care to find out.

 

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What Is Meant By Employee Provident Fund (EPF)?

You must be knowing of the statutory rule that any organization which has more than 20 employees has to register itself with the Employee Provident Fund Organization (EPFO).You the employee would contribute 12% of your basic salary coupled with dearness allowance and the cash value of the food allowances. If your basic salary coupled with dearness allowance and cash value of food allowance is INR 6500 per month or less you have to compulsorily make contributions towards your employee provident fund. Contributions are voluntary for those whose basic monthly salary exceeds INR 6500.The contributions you make provides you a tax benefit under Section 80 C. You must be knowing that the employer of your organization also makes a 12% contribution towards this fund. You need to remember that 8.33% of the contributions made by your employer go towards what is known as the employee pension scheme (EPS).The maximum amount the employer can contribute is 8.33% on INR 6500 or INR 541 per month towards the employee pension scheme .The purpose of this is to contribute towards retirement pension, superannuation pension, permanent total disablement pension and so on for the employee. This means that the employer effectively makes a contribution of 3.67% on your basic salary, dearness allowance, cash value of food allowance and retained allowances either on the stated limit of INR 6500 or the actual basic salary whichever is higher as per the employer’s choice. You must be knowing that some of the organizations allow their employees to make a contribution in excess of the stipulated 12% known as the voluntary provident fund. However the employer is not mandated to match this level. The rate of interest offered for the employee provident fund is 8.5% per annum. You must be knowing that 8.33% of the contribution made by the employer goes towards the EPS. To this you have a contribution by the Central Government at a rate of 1.16%which translates to a net contribution of 9.49% towards the EPS.

What Is Employee Deposit Linked Insurance? (EDLI)

This scheme provides a life insurance cover for the members of the employee provident fund. You must be knowing that the insurance depends on the balance in this scheme subject to a maximum cover of INR 60000.Only the employer contributes towards this scheme which is 0.5% of INR 6500.

Table Showing The Employer/Employee Contribution Towards The Employee Provident Fund Calculated On Basic Salary+Dearness Allowances+Retained Allowances+Cash Value Of Food Allowances :

	Scheme Name:		Employee Contribution		Employer Contribution		Central Government Contributions
Employee Provident Fund		12%		3.67 %		0 %
Employee Pension Fund		0%		8.33 %		1.16%
Employee Deposit Linked Insurance		0%		0.50 %		0%
EPF Administration Charges		0%		1.1%		0%
EDLI Administration Charges		0%		0.01 %		0%

 

How to Transfer Your Employee Provident Fund

Let us consider that you have joined a new organization. You will be allotted a new PF account number. This is in the form of alphabets and numeric’s. The first two letters indicate the regional PF Office which is in charge of your account. The next five digits are the employer’s code followed by the employee’s code. The HR Department of your new company will give you a new EPF Form to fill. You will also be provided with a form 13 necessary to transfer your balance from the previous account to the new account. You have to fill in the details of your previous organization, Your previous EPF Number, and the regional provident fund office. Your HR will then fill in the relevant details of your current organization along with the new PF Number to the regional PF Office where your current organization holds its account. This regional office gets in touch with your previous regional PF office to effect the transfer which should take around 30 days. You must be wondering what happens if you do not transfer the balance from your previous account to the current account. You would then lose out on the interest offered on your earlier account. Interest is not offered on inoperative accounts which are defined as those in which no contributions are made for at least three years. You must be knowing that the EPFO charges 1.1% as administration charges taken from your employer. In the absence of contributions made by your employer EPFO would have to bear the charges itself. You must be knowing that if your service period is less than 10 years you can transfer the EPS Portions by obtaining a scheme certificate or you can even withdraw your EPS Corpus. This withdrawal option ceases to exist once the service period crosses 10 years.

 

How to Calculate Your Deductions under The Employee Provident Fund

Let us consider Mr Prakash earns a gross salary of INR 15000 per month with a basic pay of INR 8000 which includes the dearness allowance. You have to calculate his deductions under the Employee Provident Fund.

Calculations Of EPF For Employees Getting A Basic Salary Above The Statutory Limit Of INR 6500 On A Monthly Basis:

·         Mr Prakash Basic Salary+ Dearness Allowance Is INR 8000.(Most of the companies calculate the EPF on the Basic+DA).

·         Mr Prakash the employee’s contribution is 12% which is (12% * 8000) = INR 960.

·         Mr Prakash Employer contributes 12% on his (Basic salary + DA).

·         This 12% contribution by the employer is divided as 8.33% on the EPS and 3.67% on the EPF.

·         The maximum amount the employer can contribute is 8.33% on INR 6500 or INR 541 per month towards the Employee Pension Scheme.

·         This translates to 6500*3.67%=INR 239 on the employers contribution of the EPF.

·         EDLI Charges are contributed by the employer as 0.5% *6500=INR 33.

·         EDLI Administration charges are 0.01%* 6500=INR 1.

·         EPF Administration charges are 1.1% *6500=INR 72.

 

	Contribution		Calculations		Amount(INR)
EPF Employee’s Contribution		8000*12%		960
EPS Employer’s Contribution		6500*8.33%		541
EPF Employer’s Contribution		6500*3.67%		239
EDLI Charges payed by employer		6500*0.5%		33
EDLI Administration charges		6500*0.01%		1
EPF Administration Charges		6500*1.1%		72

Note: All Calculations are based on INR 6500 which is the limit set on the employer’s side contributions except in the case of the employee’s side contribution which is calculated on the actual basic pay in this case INR 8000.

You Can Calculate Mr Prakash Deductions Under The Employee Provident Fund Using Another Method called Method 2 :

·         Mr Prakash Basic Salary+ Dearness Allowance Is INR 8000.

·         Mr Prakash the employee’s contribution is 12% which is (12% * 6500) = INR 780.Here in spite of the salary exceeding the ceiling limit of INR 6500 you calculate the employees side contribution only on INR 6500.

·         Mr Prakash Employer contributes 12% on his (Basic salary + DA).

·         This 12% contribution by the employer is divided as 8.33% on the EPS and 3.67% on the EPF.

·         The maximum amount the employer can contribute is 8.33% on INR 6500 or INR 541 per month towards the Employee Pension Scheme.

·         This translates to 6500*3.67%=INR 239 on the employers contribution of the EPF.

·         EDLI Charges are contributed by the employer as 0.5% *6500=INR 33.

·         EDLI Administration charges are 0.01%* 6500=INR 1.

·         EPF Administration charges are 1.1% *6500=INR 72.

 

	Contribution		Calculations		Amount(INR)
EPF Employee’s Contribution		6500*12%		780
EPS Employer’s Contribution		6500*8.33%		541
EPF Employer’s Contribution		6500*3.67%		239
EDLI Charges payed by employer		6500*0.5%		33
EDLI Administration charges		6500*0.01%		1
EPF Administration Charges		6500*1.1%		72

You Can Calculate Mr Prakash Deductions Under The Employee Provident Fund Using Another Method called Method 3:

·         Mr Prakash Basic Salary+ Dearness Allowance Is INR 8000.

·         Mr Prakash the employee’s contribution is 12% which is (12% * 8000) =.INR 960.

·         Mr Prakash Employer contributes 12% on his (Basic salary + DA).

·         The maximum amount the employer can contribute is 8.33% on INR 6500 or INR 541 per month towards the Employee Pension Scheme. You have to calculate the EPF of the employers side contribution as INR 8000*12%=INR 960.You have to subtract INR 541=INR 419.

·         EDLI Charges are contributed by the employer as 0.5% *8000= INR 40.

·         EDLI Administration charges are 0.01%* 8000= INR 1.

·         EPF Administration charges are 1.1% *8000= INR 88.

	Contribution		Calculations		Amount(INR)
EPF Employee’s Contribution		8000*12%		960
EPS Employer’s Contribution		6500*8.33%		541
EPF Employer’s Contribution		(8000*12%)-(6500*8.33%)		419
EDLI Charges payed by employer		8000*0.5%		40
EDLI Administration charges		8000*0.01%		1
EPF Administration Charges		8000*1.1%		88

Let us consider Mr Satish earns a gross salary of INR 12000 per month with a basic pay of INR 5000 which includes the dearness allowance. You have to calculate his deductions under the Employee Provident Fund.

Calculations Of EPF For Employees Getting A Basic Salary Below The Statutory Limit Of INR 6500 On A Monthly Basis:

·         Mr Satish Basic Salary+ Dearness Allowance Is INR 5000 (Most of the companies calculate the EPF on the Basic+DA).

·         Mr Satish the employee’s contribution is 12% which is (12% * 5000) = INR 600.

·         Mr Satish Employer contributes 12% on his (Basic salary + DA).

·         This 12% contribution by the employer is divided as 8.33% on the EPS and 3.67% on the EPF.

·         This translates to 5000*3.67%=INR 184 on the employers contribution of the EPF. You have 8.33%*5000=INR 417.

·         EDLI Charges are contributed by the employer as 0.5% *5000= INR 25.

·         EDLI Administration charges are 0.01%* 5000=INR 1.

·         EPF Administration charges are 1.1% *5000=INR 55.

	Contribution		Calculations		Amount(INR)
EPF Employee’s Contribution		5000*12%		600
EPS Employer’s Contribution		5000*8.33%		417
EPF Employer’s Contribution		5000*3.67%		184
EDLI Charges payed by employer		5000*0.5%		25
EDLI Administration charges		5000*0.01%		1
EPF Administration Charges		5000*1.1%		55

How To Check Your Employee Provident Fund Account Online :

How To Register Yourself Online STEP – 1

·         You have to first register yourself on the website http://members.epfoservices.in/ and click on the registration link.

·         You will enter the member portal where you will have to fill in the compulsory details marked under the *.

·         Fill in your mobile number and your date of birth.

·         Select a particular document such as a PAN Card.

·         Type in your name as it would appear in the PAN Card and also fill in the PAN Card number.

·         Fill in your email id.

·         Type the characters shown in the box. Click on the ” GET PIN “ button.

·         An authorisation number will be sent to your mobile phone.

·         Tick on the ” I AGREE “ Button.

·         Enter the authorisation number provided on your mobile phone and complete the registration process.

Download The EPF Passbook Which Has Your Balance STEP 2 :

·         You have to select the ” DOWNLOAD E PASSBOOK “ Option.

·         You then have to select the State where your establishment is covered.

·         You could then select ” Karnataka “.

·         You then click on the Office Name ” Bangalore “.

·         You then enter your 7 digit Account Number and name as in the PF Slip.

·         You then type in the characters as shown in the text box.

·         Select the ” GET PIN ” Option and an authorisation pin will be sent to your mobile number.

·         Click the ” I Agree ” button and enter the Authorisation code sent to your mobile phone.

·         You need to remember not to close the page until you receive the authorisation pin which might take a few minutes

·         You can then access the E-Passbook.

I would like to end this article with the famous phrase ”If you want the rainbow; you have to put up with the rain“. This phrase means that you need to endure hardships initially in order to enjoy the eventual success and fruits of your labour.

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You can write back to us at PrajnaCapital [at] Gmail [dot] Com

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