Employees Provident Fund

✅Page Content:

o   Applicability

o   Eligibility

o   Employee under EPF

o   EPF Contribution

o   Due Date for EPF Payment & EPF Return

o   Interest & Penalty for Late Payment of EPF

o   EPF rate of interest

o   EPF Tax benefits

           

 

✅Applicability:

Every specified factory or establishment in which 20 or more persons are employed. With the amendment in the rule of EPF, the limit of the minimum employee is 10 employees.

It extends to the whole of India except the State of Jammu and Kashmir.

✅Eligibility:

Any person who is employed for work of an establishment or employed by the contractor in or in connection with the work of an establishment and drawing salary up to Rs.15,000/- p.m. The salary is calculated as Basic Salary plus Daily Allowance.

✅Employee Under EPF:

Any person who employed for wages in any kind & gets his wages directly or Indirectly from employer and includes any person:

Employed by or through a contractor in or in connection with the work of the establishment;

Engaged as an apprentice, not being an apprentice engaged under the Apprentice Act, 1961 (52) of 1961) or under the standing orders of the establishment.

✅EPF contribution:

EPF Contribution consists of two parts depending on the entity that makes the contribution Employee’s contribution and Employer’s contribution.

Contribution By	Contribution
Employee	12%
Employer	12%

In addition, Employer requires to pay 0.5% towards EDLI & 0.5% toward Admin Charges

The employee makes a contribution of 12% of basic salary + dearness allowance towards his EPF account. The employee has to make a lower 10% contribution in case the establishment has less than 20 employees or for industries such as (a) Jute (b) Beedi (c) Brick (d) Coir and (e) Guar gum Factories.

The employer makes a contribution of 8.33% towards the EPS (Employees’ Pension Scheme) account of the employee. Another 3.67% is added to the EPF account of the employee. The employer also makes 0.50% of contribution towards the EDLI (Employees’ Deposit Linked Insurance) account of the employee.The employer has to pay an additional charge for administrative accounts at a rate of 0.50% with effect from 1st June 2018. The minimum administrative charge is ₹ 500 and if there is no contribution for a specific month, the employer has to pay a fee of ₹ 75 for that month.

✅Due Date for EPF Payment & EPF Return:

EPF payment due date is the date by which PF from the employees’ salary should be deducted. This should be done on or before the 15th of every next month. However, the due date of PF return and the due date of PF payment are both the same, i.e. on or before the 15th of every month.

#EPF Payment Process & EPF Return Filing

✅Interest & Penalty for Late Payment of EPF:

Interest for late payment under Section 7Q- An interest of 12% per annum, for every single day is levied on the employer if he/she fails to deposit the EPF contribution before the deadline

Penalty for late payment under Section 14B- In case of failure of Challan payment, the following penalties should be incurred-

• 5% interest per annum for a delay of upto 2 months
• 10% interest per annum for a delay of 2-4 months
• 15% interest per annum for a delay of 4-6 months
• 25% interest per annum for a delay of more than 6 months

✅EPF rate of interest:

The rate of interest for EPF was 8.65 % for 2018-19 and has been decrease to 8.50% for the financial year 2019-20. Even though the contributions are deposited on a monthly basis, the interest on these contributions is calculated yearly as per the rates defined by the government. But the interest will only be collected for the EPF account balance and not for EPS funds.

The rate of interest is valid between the financial year of 2019 and 2020. When a financial year starts, you will have an opening balance in the EPF account that has been accumulated until that point. For the next financial year, the opening balance will be calculated as:

Opening balance + contributions that have accumulated monthly + interest for the previous opening balance along with the contributions

However, if no amount has been forwarded towards the EPF account for a period of 3 years continuously, the account becomes inactive. Retired employees will not receive interest on the amount collected in an inactive account.

✅EPF Tax benefits:

Your company or employer’s contribution to the EPF account is free from taxes. For your contribution, you can get a deduction of up to Rs 1.5 lakh according to Section 80C of the IT Act.

But, in case you do not wish to be registered under the EPF scheme, you have to opt-out of it at the beginning of your employment. You must notify the company about this by filling out Form 11. In case, you have already registered and have a valid account for EPF, you cannot opt-out.

It is recommended that you do not remove the account for future benefits. It might increase your in-hand salary, but you have to build your future cash reserve in other ways.