What is Employee Provident Fund?
Employee’s Provident Fund (EPF) is a retirement benefit scheme that’s available to all salaried employees.
Who should apply for provident fund?
Every establishment employing 20 or more persons who is engaged in any one or more of the industries specified in Schedule I of the Employees’ Provident Fund and Miscellaneous Provisions Act 1952 must register and contribute for Employee provident fund.
Contribution
The Employee will contribute 12% his/her basic salary (Basic + DA) towards the EPF account. The employer contributes 12% out of which 3.67% goes towards the provident fund component; the other 8.33% goes towards pension.
Let’s look at an example:
Sam is working a company with a monthly salary of Rs 30,000. His salary break up is as below.
| Basic | 9,000 |
| HRA | 3,600 |
| Medical Expenses | 1,250 |
| Conveyance | 1,600 |
| LTA | 1,667 |
| Special Allowance | 12,883 |
| Total Salary | 30,000 |
The Employee contribution towards PF Account is Rs 1,080 per month (12%) and the employer contribution is Rs 330 per month (3.67%) and employer contribution towards pension is Rs 750 per month (8.33%).
Let’s say, Sam has worked for 35 years in a company and his salary has increased at an average of 5% every year.
| Contribution | INR | With interest of 8.5% |
| Sam’s Contribution towards PF (12%) | 6,18,543 | You will retire with an amount of Rs 86,49,396 |
| Employer contribution towards PF (3.67%) | 1,89,171 | |
| Employer contribution towards Pension | 4,29,372 | |
| Total | 12,37,086 |
Compliance:
The liability of the PF collection, payment and return filing is on the company and the company must pay the contribution and file return on or before the 15th of every month.
To know more about EPF registration for your company, please talk to our consultant today.
