Licencing & Registrations -EPF Registration

Do you know what is Employee Provident Fund (EPF) ?

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The Employees’ Provident Fund (EPF) is a savings scheme introduced under Employees’ Provident Fund and Miscellaneous Act, 1952. It is administered and managed by the Central Board of Trustees that consists of representatives from three parties, namely, the government, the employers and the employees.  The Employees’ Provident Fund Organization (EPFO) assists this board in its activities. EPFO works under the direct jurisdiction of the government and is managed through the Ministry of Labour and Employment.

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When will it is mandatory to your organisation to get register with EPF ?

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EPF registration is mandatory for all establishments-

 

which is a factory engaged in any industry having 20 or more persons, and

to any other establishment employing 20 or more persons or class of such establishments which the Central Government may, by notification specify in this behalf.

Central Government may apply any establishment employing less than 20 employees after giving not less than two months’ notice for compulsory registration

 

Where the employer and majority of employees have agreed that the provisions of this act should be made applicable to the establishment, they may themselves apply to the Central PF Commissioner. The Central PF Commissioner may apply the provisions of this Act to that establishment after passing the notification in the Official Gazette from the date of such agreement or from any subsequent date specified in the agreement.

 

Some establishments having less than 20 employees would also be required to obtain PF registration but that is voluntary registration. All the employees will be eligible for a PF from the commencement of their employment and the responsibility of deduction & payment of PF lies with the employer.

 

The PF contribution of 12% should be divided equally between the employer and employee. The employer’s contribution is 12% of basic wages plus dearness allowance plus retaining allowance.

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How it will be beneficial to you and your employees ?

 

The Employee Provident Fund (EPF) is one of the most widely-used investment schemes by the salaried class in the country. The benefits of EPF are extended to all establishments with 20 or more employees.

Here's a look at the benefits of having a PF account:

1. Tax benefits: Apart from the fact that an employee's contribution towards an EPF account is eligible for tax exemption under Section 80C, the interest rate earned is exempt from income tax. According to experts, your EPF account continues to earn interest even if it has been lying dormant for more than 3 years. Also, EPF withdrawals are not taxable after five years of continuous service, unless the employer terminates his/her business or the employee voluntarily quits his/her job.

 

1. Lifelong pension: While employers and employees both contribute 12% of wages in EPF, 8.33% of the employer's share is diverted towards the Employees' Pension Scheme (EPS). According to the retirement fund body, 10 years of contributory membership ensures lifelong pension under Employees' Pension Scheme 1995.

 

1. Insurance benefit: Then there are the benefits promised under the Employees Deposit Linked Insurance (EDLI) Scheme, which is an insurance cover provided by the EPFO. The registered nominee will receive a lump-sum payment in the event of the death of the person insured, during the period of the service.

 

 

1. Premature withdrawal option: While EPFO strongly advises against treating PF money as a bank account - after all, the social security benefits accrue only when continuity is maintained - the body allows its members to make partial withdrawals after 5-10 years of service for meeting specific needs including medical treatment, home loan repayment and unemployment.

 

For instance, up to 50% of an employee's share of contribution to the EPF can be withdrawn for marriage or education purposes and an amount up to 36 times the monthly wage plus dearness allowance can be withdrawn forhouse construction. EPFO also allows withdrawal of up to 90% of the accumulation in the PF account for repaying a home loan.

 

1. Higher returns: That's not all. There is also the possibility of higher returns on your PF kitty in the future. The EPFO invests 5-15% of its investible deposits in exchange traded funds (ETFs). However, the ETF investments do not reflect in members' account and they do not have an option to increase the proportion of their retirement savings to be invested into stocks. Furthermore, 45-50% of the PF kitty has to be invested in government securities, 35-45 per cent in debt instruments and 5% each in money market instruments and infrastructure trusts. That is why the annual return on PF savings is much lower than that offered by NPS, which offers more aggressive investing options.

 

However, the EPFO has been working on a software that would help show retirement savings in cash and ETF components separately. The next big leap from there would be to give members an option to increase or decrease investments in stocks as per individual risk appetite. In fact, the EPFO's apex decision making body, the Central Board of Trustees, has already suggested exploring such possibilities. Hence, good things could be in store for subscribers in the year ahead.

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Do you require to give any documents and information ?

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It treats the nominations of the balance of EPF at the time of death. It must contain the details of the employee like name, address, age amount of the money, details and relation of the nominee.

 

How You and your employee have to contribute ?

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10% rate is applicable for

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• Any establishment in which less than 20 employees are employed.

• Any sick industrial company and which has been declared as such by the Board for Industrial and Financial Reconstruction

• Any establishment which has at the end of any financial year, accumulated losses equal to or exceeding its entire net worth and

• Any establishment in following industries:-

  1. Jute (b) Beedi (c) Brick (d) Coir and (e) Guar gum Factories.

 

1. Contribution is rounded to the nearest rupee for each employee, for the employee share, pension contribution and EDLI contribution. The Employer Share is difference of the EE Share (payable as per statute) and Pension Contribution.

2. Monthly  payable amount  under EPF Administrative charges is rounded to the nearest rupee and a minimum    of Rs 500/- is payable. Note:- If the establishment has no contributory member in the month, the minimum administrative charge will be Rs 75/-

3. In case Establishment is exempted under PF Scheme, Inspection charges @0.18%, minimum Rs 5/- is payable in place of Admin charges. In case the Establishment is exempted under EDLI Scheme, Inspection charges @ 0.005%, minimum Re 1/- is payable in place of Admin charges.

 

 

Notes:

UNDER EPF

• The contributions are payable on maximum wage ceiling of Rs. 15000/-

• The employee can pay at a higher rate and in such case employer is not under any obligation to pay at such higher rate.

• To pay contribution on higher wages, a joint request from Employee and employer is required [Para 26(6) of EPF Scheme]. In such case employer has to pay administrative charges on the higher wages (wages above 15000/-).

For an International Worker, wage ceiling of 15000/- is not applicable.

UNDER EPS

• Contribution is payable out of the employer’s share of PF and no contribution is payable by employee.

• Pension contribution not to be paid:

When an employee crosses 58 years of age and is in service (EPS membership ceases on completion of 58 years). When an EPS pensioner is drawing Reduced Pension and re-joins as an employee.

In both the cases the Pension Contribution @8.33% is to be added to the Employer Share of PF. (Pension contribution is not to be diverted and total employer share goes to the PF). In case an employee, who is not existing EPF/EP member joins on or after 01-09-2014 with wages above Rs 15000/- In these cases the pension contribution part will be added to employee share, EPF.

• In all other cases Pension Contribution is payable. A member joining after 50 years age, if not a pensioner does not have choice of not getting the Pension Contribution on grounds that he will not complete 10 years of eligible service. The social security cover is applicable till he/she is a member.

• For International Worker, higher wage ceiling of 15000/- is not applicable from 11-09- 2010.

Note:- In case an existing EPS member (as on 01-09-2014)whose Pension contribution was paid erstwhile EPS wage ceiling of 6500/- contribution to contribution above Rs 15000/- wage ceiling from 01-09-2014 he will have to give a fresh consent  and an amount of 1.16% on wages above 15000/- will have to be contributed by him in pension Fund (A/C No 10) through the employer.

UNDER EDLI:

1. Contribution to be paid on up to maximum wage ceiling of 15000/- even if PF is paid on higher wages.

2. Each contribution is to be rounded to nearest rupee. (Example for each employee getting wages above 15000, amount will be 75/-)

EDLI contribution to be paid even if member has crossed 58 years age and pension contribution is not payable. This is to be paid as long as the member is in service and PF is being paid.

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