INTRODUCTION SCOPE & EXTENT APPLICABILITY / ELIGIBLITY INTERESTS INVESTMENT PATTERN FOR A PF TRUST WITHDRAWL OF PF SETTLEMENTS EXEMPTION OF TDS ON SETTLEMENT FORMS & RETURSN BENEFITS CONCLUSION
Employee Provident Fund (EPF) is one of the mainplatforms of savings in India for nearly all peopleworking in Government, Public or Private sectorOrganizations. It is implemented by the EmployeesProvident Fund Organization(EPFO) of India. It is a mandatory, tax-qualified, defined, contribution retiral benefit plan wherein equal contribution at the specified rate is made by the employer and the employee and the same is payable in lump sum on retirement.
The employee provident fund act NGO’S 1952 implies to the whole of Considering the operations of India except the state of Jammu charitable institutions these & kashmir (section 2).This act includes the following: implies (section 3) to: Educational, scientific research Every establishment which is a & training institute ; factory engaged in any industry specified in schedule I & in Establishment known as which 20 or more persons hospitals; employed; Establishment rendering expert Any establishment employing 20 services; or more persons of such Establishments engaged in establishments which central poultry farming government may, by notification Establishment engaged in cattle in the official gazette specify. feed industry;
FOR NEW ENTRANTS FOR EXISTING ENTRANTS An employee is eligible for membership Enrolment: from the day he joins the company who has Any change in the family status, such as, – enrolled for EPF Scheme marriage of the member. If an Employer has equal to or more than 20 additions / deletion in the family. employees, it is mandatory for him or to Legal adoption of the children. join the Employee Provident Fund Scheme. Change of nominee, is to be filed in If the employee’s emoluments exceed Rs. Form No. 2 through the employer. 6,500/- per month, he has the option to join In the event the member is holding a the Scheme(s) with the consent of Scheme Certificate (under EPS, 95), he employer. should surrender the same to the Declare previous employment details, if concerned EPFO office, through his any, in Form No. 11 to the employer. employer. On becoming a member of the Schemes file A member is entitled to various benefits & details in Form No. 2 ( family particulars/ facilities such as withdrawals, advances, nominations) through the employer. pensions, death insurance etc. Rate of contribution payable by a member shall be @ 12% of his emoluments. A member can contribute statutorily over and above the prescribed rate.
WHAT IS THE EPFINTEREST RATE? The EPF interest rate of India is decided by the central government with the consultation of Central Board of trustees. In the past several decades, the interest rate has ranged from 8-12 % of the balances maintained in the fund. The EPF interest rate notification is available on the official website of EPF India on an annual basis. The same is communicated through major dailies in all cities
HOW MUCH ONECAN SAVE BYINVESTING IN EPF?Let’s say Swayam starts with abasic salary of Rs. 20,000. Everyyear, on an average, he gets a 5%increment. He started at 25years and worked till 60 years sohis working life is, 35 years. Hecontributes 12% of his basicsalary towards PF which ismatched equally by one’scompany, (EPF contribution is3.67%, EPS 8.67%). In this case,over the course of 35 years of hisworking life, his totalcontribution is Rs. 26.01Lakhs. Of course, his companymakes a contribution of Rs.7.955 Lakhs, total contributionof Rs 33.967 lakh. And thisamount grows into – Rs. 1.38Crores at the time of hisretirement.
HOW IS ITCALCULATED ?At the beginning of eachyear there would beopening balance, theamount accumulated tillthen. Contribution ismade monthly butinterest is calculatedyearly. On gets interest onopening balance andmonthly contribution. Sofor next year the newopening balance wouldbe: old opening balance +contribution throughout the year + interest on the(old opening balance +contribution)
HOW WOULD I KNOWTHE AMOUNT OFACCUMULATION IN MYPF ACCOUNT ?PF office sends an annualstatement through theemployer which givesdetails about the PFaccumulations. Thestatement contains detailslike, Opening balance,amount contributed duringthe year, withdrawal duringthe year, interest earnedand the closing balance inthe PF account. Thisstatement is sent by the PFdepartment on completionof the financial year.
AFTER REVISION IN WAGE CELLING NOTES FROM Rs.5000 to Rs.6500 w.e.f. 1-6-2001 • THE ABOVE CLARIFICATION IS GIVEN BY PER MONTH THE GOVERNMENT TAKING WAGES UPTO A MAXIMUM OF CONTINUE TO CONTRIBUTE 1.16% UPTO Rs.6500 TOWARDS WAGE (BASIC+DA). THE ACTUAL WAGE OF MAXIMUM Rs.6500 PER MONTH TOWARDS EMPLOYEES’ PENSION SCHEME. THE • SINCE AN EXCLUDED EMPLOYEE i.e. EMPLOYER’S SHARE IN THE PENSION DRAWING WAGES MORE THAN Rs.6500 SCHEME WILL BE Rs.541 w.e.f. 1-6-2001. CAN ALSO BECOME MEMBER OF THE FUND AND THE SCHEMES ON JOINT REQUEST AND IF, FOR INSTANCE, SUCH UNDER EMPLOYEES’ DEPOSIT- AN EMPLOYEE IS GETTING Rs.10,000 PER LINKED INSURANCE SCHEME THE MONTH, HIS SHARE TOWARDS CONTRIBUTION @ 0.50% IS REQUIRED PROVINDENT FUNDCONTRIBUTION TO BE PAID UPTO A MAXIMUM LIMIT WILL BE Rs.1200 e.g. 12% AND OF Rs.6500. THE EMPLOYER WILL PAY EMPLOYER’S SHARE TOWARDS ADMINISTRATIVE CHARGE @ 0.01% ON PROVIDENT FUND CONTRIBUTION MAXIMUM LIMIT OF Rs.6500. WILL BE Rs.659 AND Rs.541 TOWARDS EMPLOYEES’ PENSION FUND. THE EMPLOYER ALSO WILL PAY ADMINISTRATIVE CHARGES @ 0.01% ON MAXIMUM LIMIT OF Rs.6500 WHEREAS AN EXEMPTED ESTABLISHMENT WILL PAY INSPECTION CHARGES @ 0.005% ON THE TOTAL WAGES PAID.
• THE EMPLOYER SHALL PAY THE A/c – 1 EPF EMPLOYERS 12% + CONTRIBUTION PAYBLE TO THE EMPLOYEES 3.67% = 15.67 % EMPLOYEES PROVIDENT FUND, A/c – 2 EPF ADMIN CHARGES 1.10% EMPLOYEES DEPOSITE LINKED INSURANCE, AND EMPLOYEES A/c – 10 EPS EMPLOYEES 8.33 % PENSION FUND IN RESPECT OF THE A/c – 21 EDLI 0.50 % MEMBER OF THE EMPLOYEES PENSION FUND BY HIM DIRECTLY A/c – 22 EDLI ADMIN CHARGES 0.01% BY OR THROUGH A CONTRACTOR. TOTAL = 25.61%• IT SHALL BE THE RESPONSIBILITY OF THE PRINCIPAL EMPLOYER TO PAY THE CONTRIBUTIONS PAYBLE TO THE EPF, EDLI AND EPSBY HIM SELF IN RESPECT OF THE EMPLOYEES DIRECTLY EMPLOYED BY HIM AND ALSO IN RESPECT OF THE EMPLOYEES EMPLOYED BY OR THROUGH A CONTRACTOR.
WITHDRAWL BEFORE WITHDRAWL AFTERRETIREMENT RETIREMENT You can withdraw up to 90% of the amount in You can withdraw full amount in the you EPF account after you attain the age of 54 fund on retirement from service years, or within one year before actual retirement on superannuation whichever is after 55 years of age. You can also later. Claim application in form 19 has to be withdraw the full amount due to any submitted to the concerned Provident Fund of the following occurrences: Office. For other cases such as Ø Shifting of Jobs 1. If you have not attained the age of 55 year at the time of termination At such times, the PF balance could be transferred from one employer to another. The of service. existing balance would continue to stay. With 2. If you retired on account of fresh contributions made by the new permanent and total bodily or employer. mental disablement 3. If you migrated from India for Ø Quitting of Job permanent settlement abroad or for PF could be withdrawn, if you quit your job taking employment abroad. and provide a declaration that you do not 4. In the case of mass or individual intend to work for the next six month. retrenchment.
IMMEDIATE SETTLEMENT WITHOUT SETTLEMENT ONLY AFTER A WAITNGWAITING PERIOD OF TWO MONTH PERIOD OF TWO MONTHS69(1)(a)Retirement after attaining 58yrs of 69(1)(e)(i)Transfer of a non retrenchedage. employee from a closed establishment to uncovered establishment.69(1)(b)Retirement on a/c of total & 69(1)(e)(ii)Transfer of an employee from apermanent incapacity due to bodily or covered establishment to an un-coveredmental infirmity. establishment under the same employer.69(1)(d)Termination of service on 69(2)Other cases viz. Resignation,retrenchment. Leaving Service, etc.69(1)(dd) Termination on V.R.S NOTE: For female members leaving service for the purpose of getting married; waiting period not applicable.69(1)(c) Migration from India for 69(1)(e)(iii)Members discharged &permanent settlement abroad or taking retrenchment compensation paid underemployment abroad. I.D Act 1947.
Head Statutory PF Recognized PF UnRecognised PFEmployers contribution to PF Exempt from tax Exempt up to 12% of salary Exempt from tax (Basic +DA)Deduction under sec 80C Available Available Not availableInterest credited on PF account Exempt from tax Exempt up to 9.5% Exempt from taxLump sum payment received at Exempt from tax Exempt from tax: Only employees share ofthe time of retirement or contribution is exempttermination of service a. If the employee has worked for at least 5 years with the employer b. If the service is terminated on account of ill-health or by contraction or discontinuance of the employer’s business or any other reason beyond control of employee c. If the employee transfers the balance in his PF to his new PF a/c maintained by his new employer
Form No. 2 --Nomination form Form No. 11 –Declaration of previous employer & PF and Pension amount Form No. 13 –PF Transfer from previous employer
MONTHLY RETURNS ANNUAL RETURNS 12 A (Employees Strength and paid) 3 A : Employees individual detail month wise Form 5 - New Joining (Name, Father’s Name, (Period 1st April to 31st March) DOJ, DOB, Gender. Form 10 – Left Employees (Name, Father’s 6 A : All Employees combined detail month Name, DOJ, DOL, Reason. wise COMBINED CHALLAN A/C – 1,2,10,21 & 22 Note : Above all contribution count on Employees Basic Earnings. Nomination : Form – 2 (Revised) Nominee Change : Form – 8 For Withdrawal : Form 19 (Green) & 10 c (White) Loan : Form – 31 after 7 Years
Purchase dwelling site Construction of a dwelling house Completing construction of the house Buy a dwelling house /Flat from Agency Purchasing a newly constructed/old dwelling house or flat from an individual Purchasing house/flat from a promoter Additional Loan -alterations/improvements Further housing withdrawal Repayment housing loan
An employee may be allowed to make a nomination conferring on one or more persons the right to receive the provident fund amount If an employee nominates more than one person, he shall, in his nomination specify the amount or share payable to each of the nominees. Where an employee has a family at the time of making a nomination, the nomination shall be in favour of one or more persons belonging to his family Any nomination made by an employee in favour of a person not belonging to his family shall be invalid. If at the time of making a nomination the employee has no family, the nomination may be in favour of any person or persons A nomination made by an employee may, at any time, be modified by filing Form no. 2 g) Where the nomination is wholly or partly in favour of a minor, the Member may, appoint a major person of his Family to be the guardian of the minor nominee Provided that where there is no major person in the Family, the Member may, at his discretion, appoint any other person to be a guardian of the minor nominee. “Family” means: - For Provident Fund (PF): - in the case of a male member, his wife, his children, whether married or unmarried, his dependent parents and his deceased son’s widow and children; In the case of a female member, her husband, her children, whether married or unmarried, her dependent parents, her husband’s, dependent parents, her deceased sons’s widow and children;
• LESS THAN 2 MONTHS @17% p.a.• 2 MONTHS & ABOVE BUT LESS THAN UPTO 4 MONTHS @ 22% p.a.• 4 MONTHS & ABOVE BUT LESS THAN UPTO 6 MONTHS @ 27% p.a.• 6 MONTHS & ABOVE @ 37 % p.a.
• LIABLE TO BE ARRESTED WITHOUT WARRANT BEING A COGNISABLE OFFENCE.• DEFAULTS EMPLOYER IN PAYING CONTRIBUTIONS OR INSPECTION- ADMINISTRATIVE CHARGES ATTRACT IMPRISONMENT UPTO 3 YEARS AND FINES UPTO Rs.10,000 (Sec.14).• FOR ANY RETROSPECTIVE APPLICATION, ALL DUES HAVE TO BE PAID BY EMPLOYER WITH DAMAGES UPTO 100% OF ARREARS.
EMPLOYEES COVERED ENJOY A BENEFIT OF SOCIAL SECURITY IN THE FORM OF AN ATTACHABLE AND UNWITHDRAWABLE (EXCEPT I SEVERLY RESTRICTED CIRCUMSTANCES LIKE BUYING HOUSE, MARRIAGE, EDUCATION etc.). FINANCIAL NEST EGG TO WHICH EMPLOYEES AND EMPLOYERS CONTRIBUTE EQUALLY THROUGHOUT THE COVERED PERSONS EMPLOYMENT. THIS SUM IS PAYBLE NORMALLY ON RETIREMENT OR DEATH. OTHER BENEFITS INCLUDE EMPLOYEES PENSION SCHEME AND EMPLOYEES DEPOSITE LINKED INSURANCE SCHEME.
Contribution made to EPF and PPF gets deduction under Section 80C and the interest earned is tax free. That is both works under EEE (Exempt, Exempt and Exempt) tax regime. However, PF is better than PPF in two aspects - In the case of PF, the employer also contributes to the fund. There is no such contribution in case of PPF. The rate of interest on PF is also marginally higher (currently 8.50%) than interest on PPF (8%).