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Employee Provident Fund (EPF) is one of the main platforms of savings in India for nearly all people working in Government, Public or Private sector Organizations. This article is about what is Employee Provident Fund (EPF), Employee Pension Scheme (EPS), Employees Deposit Linked Insurance Scheme (EDLIS), how the contributions are calculated based on basic salary and dearness allowance, what are the EPF interest rate, how much would one save in EPF, how would one know about the amount accumulated in PF. What is Employee Provident Fund? A provident fund is created with a purpose of providing financial security and stability to elderly people. Generally one contributes in these funds when one starts as employee, the contributions are made on a regular basis (monthly in most cases). It’s purpose is to help employees save a fraction of their salary every month, to be used in an event that the employee is temporarily or no longer fit to work or at retirement. The investments made by a number of people / employees are pooled together and invested by a trust. Employee Provident Fund (EPF) is implemented by the Employees Provident Fund Organisation (EPFO) of India. An establishment with 20 or more workers working in any one of the 180+ industries ( given here) should register with EPFO. Typically 12% of the Basic, DA, and cash value of food allowances has to be contributed to the EPF account. EPFO is a statutory body of the Indian Government under Labour and Employment Ministry. It is one of the largest social security organisations in the world in terms of members and volume of financial transactions undertaken.
EPF, EPS, EDLIS The Constitution of India under “Directive Principles of State Policy” provides that the State shall within the limits of its economic capacity make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old-age, sickness & disablement and undeserved want. The EPF & MP Act, 1952 was enacted by Parliament and came into force with effect from 4th March,1952. A series of legislative interventions were made in this direction, including the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952. Presently, the following
Dr. Ravi Shekhar Vishal
EPS and EDLIS are calculated on Basic salary. (EPS)1952 2. widow pension. usually employers opt out of the EDLI scheme by going for group insurance scheme which usually provides higher coverage to employees without any increase in cost to the employer.000). for retaining his services. Employees Deposit Linked Insurance Scheme (EDLIS) Under the EDLI scheme life insurance cover is provided to the PF members.three schemes are in operation under the Acts:( Click on the link if interested in reading the acts which are in pdf format) 1. The purpose of the scheme is to provide for 1) Superannuation Pension: Member who has rendered eligible service of 20 years and retires on attaining the age of 58 years. EDLI.33% of 6500 or Rs 541) and government’s contribution of 1. Employees’ Provident Fund Scheme. Admin charges in India. The cost of the scheme is borne by the employer but as the amount of life coverage under this statutory scheme is very low (a maximum amount of Rs. Ravi Shekhar Vishal Page 2 . 1995 (replacing the Employees’ Family Pension Scheme.17 percent of the worker’s monthly wages. EPS. It is financed by diverting 8. EPS program replaced the Family Pension Scheme (FPS). 2) Retiring Pension: member who has rendered eligible service of 20 years and retires or otherwise ceases to be in employment before attaining the age of 58 years. Dearness allowances(DA). cash value of food concession and retaining allowances if any. 3) Permanent Total Disablement Pension 4) Short service Pension: Member has to render eligible service of 10 years and more but less than 20 years. EPF. Employees’ Pension Scheme. and pension for nominees. 60. Most of the organizations follow Basic+ DA Method. Table below gives the rates of contribution of EPF. Dr. 1971)(EPS) Employees’ Pension Scheme (EPS) of 1995 offers pension on disablement. Retaining allowances means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working.(EDILS) 1976 3.33 percent of employer’s monthly contribution from the EPF(restricted to 8. Employees’ Deposit Linked Insurance Scheme.
33% 292 EPF employer share 3500 x 3.5% EPF Administrative charges 0 1. Ravi Shekhar Vishal Page 3 .67% 128 EDLI charges 3500 x 0. coir industry (other than spinning sector) the Employee contribution is 10% while employer’s contribution is 1. Consider an employee getting a basic salary of 7500/.67% Employees’ Pension scheme 0 8. Employees drawing basic salary upto Rs 6500/.Scheme Name Employee contribution Employer contribution Employee provident fund 12% 3.that means the maximum amount is fixed to Rs 541. Employee’s contribution is matched by Employer’s contribution(till 12%) so extra money and it is helpful for tax purpose too.We can calculate it in different ways but EPS is calculated only up to 6500/.1% EDLIS Administrative charges 0 0. The employer contribution is exempt from tax and employee’s contribution is taxable but eligible for deduction under section 80C of Income tax Act. guar gum factories. jute. Contribution Towards Calculation Amount EPF Employees share 3500 x 12% 420 EPS Employer share 3500 x 8.to become member of Provident Fund as it is deducted from the salary before it is deposited on bank or given hence compulsorily saving happens. Dr.35 ( round up to Rs 1/-) Basic salary above Rs 6500 In such cases companies uses different method for calculation as per their pay roll policy.00.01% In industries like beedi.67%.5% 18 EPF Admin charges 3500 x 1.have an option to become member of the Provident Fund. The three methods mentioned below are based on the above example.have to compulsory contribute to the Provident fund and employees drawing above Rs 6501/.01% 0.33% Employees Deposit linked insurance 0 0.1% 39 EDLI Admin charges 3500 x 0. It is beneficial for employees who draw salary above Rs 6501/. Calculation of Employees Provident Fund Contributions Basic salary of Rs 3500 Let us calculate the contribution of an employee who is getting a basic salary of Rs 3500.
00 for PF calculation.00.67%?. Balance (900-541) goes to EPF account 359.33% 541 EPF employer share 6500 x 3.1% 72 EDLI Admin charges 6500 x 0.00 Contribution Towards Calculation Amount EPF Employees share 6500 x 12% 780 EPS Employer share 6500 x 8.Method-1 If company consider total basic salary above the limit fixed 6500.1% 72 EDLI Admin charges 6500 x 0.5% 38 EPF Admin charges 7500 x 1.33% 541 EPF employer share 6500 x 3. Ravi Shekhar Vishal Page 4 .67% 239 EDLI charges 6500 x 0.00 equal to 900. Contribution Towards Calculation Amount EPF Employees share 7500 x 12% 900 EPS Employer share 6500 x 8.in spite of higher basic salary than 6500.01% 0.00.1% 83 0. You may be thinking that.5% 33 EPF Admin charges 6500 x 1.01% Method -2 Some companies follows the below method in which employee share is calculated on 7500/.67% 239 EDLI charges 6500 x 0.and employer share is calculated on up limit Rs 6500/Contribution Towards Calculation Amount EPF Employees share 7500 x 12% 900 EPS Employer share 6500 x 8.33% 541 EPF employer share 7500 x 12% (-) 541 359 EDLI charges 7500 x 0. what about 3.75 ( Round up to Rs 1/-) EDLI Admin charges 7500 x 0. Here you don’t need to care about it.01% 0.65 ( Round up to Rs 1/-) Method-3 Some companies calculate both employer and employee shares on 6500/. Employer has decided to contribute on total basic salary which is 12 % on 7500.5% 33 EPF Admin charges 6500 x 1. EPS Share is fixed to 541.65 ( Round up to Rs 1/-) Dr.
26.000. 35 years. he gets a 5% increment.955 Lakhs. (EPF contribution is 3.38 Crores at the time of his retirement! Dr. EPF interest rate from 1951 Q. Q.01 Lakhs. SOME COMMON QUESTIONS: Q. What is the EPF Interest Rate? The EPF interest rate of India is decided by the central government with the consultation of Central Board of trustees. 20. his company makes a contribution of Rs. total contribution of Rs 33. the interest rate has ranged from 8-12 % of the balances maintained in the fund. Ravi Shekhar Vishal Page 5 .EPF scheme allows partial withdrawals for the purpose of marriage/illness/higher education/house construction etc. How much would one save by investing in EPF? Let’s say Swayam starts with a basic salary of Rs. on an average. over the course of 35 years of his working life. 1. In this case. He contributes 12% of his basic salary towards PF which is matched equally by one’s company.967 lakh. What is the interest on the PF accumulations? A : Compound interest as declared by Central Govt. his total contribution is Rs. is paid on the amount standing to the credit of an employee as on 1st April every year. The same is communicated through major dailies in all cities. To see Interest rate over the years from 1952 please click the image below.67%.67%). Of course. And this amount grows into – Rs. EPS 8. 7. The EPF interest rate notification is available on the official website of EPF India on an annual basis. In the past several decades. Every year. He started at 25 years and worked till 60 years so his working life is.
EPF calculation Q. You can also play with EPF calculator here. interest earned and the closing balance in the PF account. Opening balance. withdrawal during the year. Ravi Shekhar Vishal Page 6 . On gets interest on opening balance and monthly contribution.EPF Benefit How is it calculated? At the beginning of each year there would be opening balance. Contribution is made monthly but interest is calculated yearly. So for next year the new opening balance would be: old opening balance + contribution throughout the year + interest on the (old opening balance + contribution) To see the calculation for each year in above example click on the image below. Dr. How would I know the amount of accumulations in my PF account ? PF office sends an annual statement through the employer which gives details about the PF accumulations. amount contributed during the year. The statement contains details like. the amount accumulated till then.
Ravi Shekhar Vishal Page 7 . Click on image to enlarge. Sample PF statement Q.html 2) Select EPFO Office where PF account it maintained.This statement is sent by the PF department on completion of the financial year. Accept Terms and condition and Submit.epfindia. 4) Enter PF Account Number which is in the format: EPFO Office Code/Establishment Code (Max. 1) Go to www. the establishment code would be LD-LDH. Dr. Suppose the account is in Punjab. So select the office name Ludhiana. 5) Enter your Mobile and Name. it would then show code for various EPFO offices in Punjab. Say your EPFO office was in Ludhina. Sequence of steps is shown in the images below. 3 digits)/Account Number (Max 7 digit) PF Account Number may not have Extension code. Sample statement is shown below. Select Punjab from the Drop Down. in that case leave it blank. 3) Select the office name: Once you select state in earlier state.com/MembBal. Note: Your PF account number may have just two alphabets for EPFO Office Code then you can search the new Code at EPFI Establishment Information Search This is also available on 1st step mentioned above: Member Balance Information Search Your Establishment Code here. Follow the following steps. Enter the Account Number. 7 Digits)/Extension(Max. Is it also possible to check the EPF Account balance online? A: From July 2011 one can check the EPF Account balance online. This would take you to next screen which has LD LDH filled for establishment code.
EE = Employee Contribution and ER = Employer Contribution on date (shown in Account updated date) mentioned in your SMS. This is called voluntary contribution and a Joint Declaration Form needs to be filled up where the employer and the employee both have to give a declaration as to the rate at which PF would be deducted. The employer is liable to pay contribution only on 6500 whatever is the basic salary. Form 11 Form 2 Front Form 2 back Q. Ravi Shekhar Vishal Page 8 . Click on the image to enlarge.Which form has to be filled while becoming member of provident fund? To become a member of the Employee Provident Fund one has to fill Form 11 and Nomination Form. Can I voluntary contribute more than the statutory limit to EPF? You can contribute additional amount (over and above 12%) to Provident Fund by depositing VPF (Voluntary Provident Fund). For more details check out EPFI webpage for Employees.Know your balance Instructions Select PF office EPF Select PF Office EPF Enter account Number Code You will get SMS alert from EPFO: EE amount: Rs XXXXX and ER amount Rs:XXXXX as on <Today’s Date>(Account updated upto Date). However. It does not show current balance of PF Account as on Today Q. employer is not bound to do a matching contribution. Pension Benefits Q: When can an employee start receiving a Pension? Dr. Sample images of the Form 11 and Form 2(front and back) are given below.
Difference between EPF and PPF? If you find something missing or incorrect please let us know.09. EPS.000(3250 * 12) per year.263 as maturity amount.2008) for every year falling short of 58 years. Q: What is the formula for calculating the monthly pension? A: Under Employees’ Pension Scheme. In case of death / disablement. we shall correct is As Soon As Possible (ASAP). the monthly retiring pension is decided on the basis of ‘Pensionable Service’ and ‘Pensionable Salary’ and is worked out as follows Monthly pension=( Pensionable salary*Pensionable service)/70 Pensionable Salary is arrived at by considering the average contributing salary immediately preceding 12 months from the date of exit from the scheme.49. the calculation etc.A: A employee can start receiving the pension under EPS only after rendering a minimum service of 10 years and attaining the age of 58/50 years.m. Hope you found this article helpful. one would get monthly pension of Rs 10. 39. 26. Q: How long the pension is available? A: Lifelong pension is available to the member and upon his death members of the family are entitled for the pension.150 which is much more than Rs 3250. In the next article we shall cover about how to withdraw or transfer from EPF. and maximum contribution of Rs 6500. no pension is payable before the age of 50 years and early pension after 50 years but before the age of 58 years is subject to discounting factor @ 4% (w. Ravi Shekhar Vishal Page 9 .f.263 in the premium calculator of LIC with option as Annuity payable for life.e. If one would have invested Rs 541 in a recurring deposit at the rate of 8% for 35 years one would get 12. Pensionable Service is the service in years rendered by the member for which contributions have been received maximum cannot exceed 35 years Q: What is the maximum amount of Pension available under EPS? A: Based on a maximum employment period of 35 years. Q. Is the Monthly Pension paid under EPS just? The amount of pension is meager.500 p. However. EPS. If this maturity amount is put in buying the Pension plan say LIC’s Jeevan Akshay VI and put the above amount Rs 12.250 per month or Rs. normally this would be limited to Rs 6. unless certain enhanced contributions are made by the employer with permission. What are you thoughts on EPF? Does it make sense to contribute to EPF? Dr. the maximum amount of pension as per the Pension formula would be = 6500 * 35)/70 = Rs 3.49. the above restriction doesn’t apply. In this article we covered about EPF.
” Most of the organizations are following Basic+ DA Method. jute. for retaining his services. Below table tells you the rates of contribution of EPF. Ravi Shekhar Vishal Page 10 . guar gum factories.33% Paid to A/c No 1 10 0 0. Scheme Name Employee provident fund Employees’ Pension scheme Employees Deposit linked insurance Employee contribution 12% 0 Employer contribution 3. “Retaining allowances means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working.33% 0. EDLI. EPS. cash value of food concession and retaining allowances if any. Admin charges in India.1% 0.01% 2 22 Dr.EPF.01% 2 22 Sick industries like beedi. EPS.67% 8.67% 8. EDLIS rates in India EPF.5% 21 EPF Administrative charges 0 EDLIS Administrative charges 0 1.5% Paid to A/c No 1 10 21 Employees’ Pension scheme 0 Employees Deposit linked insurance 0 EPF Administrative charges 0 EDLIS Administrative charges 0 1. dearness allowances. coir industry other than spinning sector Scheme Name Employee provident fund Employee contribution 10% Employer contribution 1. EPS and EDLIS are calculated on Basic salary.1% 0.
Ravi Shekhar Vishal Page 11 .5% 3500 x 1. Some establishment are exempted from EDLI contribution as they are providing the same nature of benefit without any contributions from employee.35 ( round up to Rs 1/-) The above calculation is easy and thereon complication. The only thing you should take care is.00. EPF Ceiling Limit EPF ceiling limit is fixed to 6500/-. EPS is calculated only up to 6500/. Calculation of EPF for employees getting a basic salary over and above the ceiling limit 6500/In such cases companies uses different method for calculation as per their pay roll policy.that means the maximum amount is fixed to Rs 541.33% 3500 x 3.18% of Basic salary towards inspection charges.Inspection charges payable by employer Inspection charges must be paid by the employer in the following Cases.01% Amount 420 292 128 18 39 0. The three methods mentioned below are based on the above example.005% on Basic salary 2.The employer is liable to pay contribution only on 6500/Whatever is the basic salary Calculation of Employees provident fund Let us calculate the contribution of an employee who is getting a basic salary of Rs 3500/Contribution Towards EPF Employees share EPS Employer share EPF employer share EDLI charges EPF Admin charges EDLI Admin charges Calculation 3500 x 12% 3500 x 8.1% 3500 x 0. The establishments exempted under the scheme should pay 0. Dr. 1.67% 3500 x 0. Consider an employee getting a basic salary of 7500/We can calculate it in different ways. such establishments are liable to pay 0.
00 for PF calculation Contribution Towards EPF Employees share EPS Employer share EPF employer share EDLI charges EPF Admin charges EDLI Admin charges Calculation 7500 x 12% 6500 x 8.5% 6500 x 1.which is fixed for a basic salary greater than 6500/-.00 Total share 900.67%?. Employer is decided to contribute on total basic salary which is 12 % on 7500.00 EPS Share is fixed to 541.Method-1 If your company consider total basic salary above the limit fixed 6500.00 Out of Rs 900. Here you don’t need to care about it.00 equal to 900.33% 6500 x 3.65 ( Round up to Rs 1/-) I will explain how Employer contribution of EPS and EPF is calculated.01% Amount 900 541 359 32.33% 7500 x 12% (-) 541 6500 x 0.00 which willgo to EPF account.and employer share is calculated on up limit Rs 6500/Contribution Towards EPF Employees share EPS Employer share EPF employer share Calculation 7500 x 12% 6500 x 8.5 71. The balance amount is 900-541 = 359.00 EPS share is RS 541/. You may be thinking that. Ravi Shekhar Vishal Page 12 .5 0. Method2 Some companies follows the below method in which employee share is calculated on 7500/. what about 3.1% 6500 x 0.67% Amount 900 541 239 Dr.00 Balance (900-541) goes to EPF account 359.
1% 6500 x 0.1% 6500 x 0.01% Amount 780 541 239 33 72 0.33% 6500 x 3.5% 6500 x 1.65 ( Round up to Rs 1/-) SOURCE: http://www.67% 6500 x 0.65 ( Round up to Rs 1/-) Method3 Some are calculating both employer and employee shares on 6500/.5% 6500 x 1.bemoneyaware.in spite of higher basic salary than 6500. Ravi Shekhar Vishal Page 13 .EDLI charges EPF Admin charges EDLI Admin charges 6500 x 0.00 Contribution Towards EPF Employees share EPS Employer share EPF employer share EDLI charges EPF Admin charges EDLI Admin charges Calculation 6500 x 12% 6500 x 8.com/blog/epf/ Dr.01% 33 72 0.
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