Employee Provident Fund: Eligibility,

Calculation & Benefits Explained

Employees' Provident Fund is a scheme to save money for one's retirement. Both
employers and employees contribute to this plan. EPF India is one of the world's
largest retirement benefit schemes.
What is the Employees' Provident Fund?
EPF stands for Employees' Provident Fund. It is a retirement benefits scheme
where both an employer and employee contribute equally to this scheme. Both
must contribute around 12% of the basic salary to this fund.
At the time of retirement, the employee gets a lump sum and interest on it.
How does EPF Work?
In this Employees' Provident Fund, both employee and employer contribute to this
fund. The contribution is to the tune of 12% of basic salary, with dearness
allowance taken into account if paid.
However, not all of an employer's contribution goes to EPF. An employer
contributes around 3.67% of the 12% to this fund. The remaining 8.33% goes to
this Employees' Pension Scheme.
What are the Benefits of EPF?
There are plenty of benefits for investing in this Employees' Provident Fund. They
are as listed below:

Capital Appreciation
There is a fixed rate of interest available in this EPF India scheme. Moreover, the
EPF also earns an interest even when lying dormant.

Corpus for Emergencies

Because of specific premature withdrawal rules, the EPF can act as an emergency
corpus. In case of Unfortunate events EDLI scheme will compensate and Pension
benefits available for Dependents

Corpus for Retirement

The main reason people invest in the EPF is to get a retirement corpus. The corpus
gives investors a sense of security.
Tax Saving Scheme
Employees’ Provident Fund comes under Section 80C of the Income Tax Act.
Therefore, even the earnings from this EPF scheme are exempt from taxes.
What is the Eligibility Criteria for EPF?
The EPF eligibility criteria are as follows:
 Any company with more than 20 employees must register with the
Employees’ Provident Fund Organisation of India compulsorily.
 Companies with less than 20 employees can also register for the
Employees' Provident Fund voluntarily.
 All employees drawing a salary are eligible for EPF.
 Moreover, it is compulsory for all employees earning less than ₹15,000
to register for the EPF.
 However, employees earning more than ₹15,000 can also voluntarily
stay in the EPF scheme.
Hence, these were the EPF pension eligibility rules.
What is the Interest Rate on EPF 2020-21?
EPF interest rate 2020-21 is 8.5%,2021-22-8.10%.2022-23-8.15 as per the EPFO’s
(Employee Provident Fund Organisation) norms.
How is Interest Calculated on EPF?
Here's how to calculate EPF interest. Contributions to this Employees' Provident
Fund are made monthly. However, the interest is calculated at the end of a year.
An interest rate of 8.50% is divided monthly, and that amount is paid to the
employee. Therefore, monthly interest is 8.50%/12 = 0.7083%.
For a running balance of ₹6000, the interest calculated per month is shown below:
EPF Interest=Running balance for the month*0.7083/100%
Above was the EPF calculation for the years 2020-21 as an example.
 How to Calculate Employees' Provident Fund?

EPF Contribution
Employee's Contribution
No matter the employee's income, the contribution to PF is 12% of the Basic Pay +
DA.
Employee Contribution to EPF=12/100*(Basic+DA)

Employer's Contribution
The employer's contribution to PF is as follows:
Employer's Contribution to EPF=3.67/100*Basic+DA

8.33% goes to the Employee Pension Scheme.

Employees' Provident Fund Contribution Example

 Suppose an employee earns ₹15,000 per month.

 Then an employee's contribution is ₹1800 a month according to the

calculation shown below.
 Employee Contribution to EPF=12/100*₹15000=₹1800

 An employer's contribution is ₹ 550 a month, as shown below:

 Employer's Contribution to EPF=3.67/100*₹15000=₹550.5

What are EPF Tax Rules?

EPF is a EEE tax rule. Therefore, it is exempt from tax on EPF withdrawal. Further,
contributions and interest received are also exempt from tax. However, there are
some cases where EPF is taxable. These are:
  It is taxable if an employer's contribution to the Employees' Provident
Fund exceeds ₹7.5 lakhs in a financial year. An employee is liable to pay
tax on an amount that exceeds ₹7.5 lakhs.
 If an excess contribution from the employee's side to the EPF account
exceeds ₹2.5 lakhs in a financial year, then the interest earned on this
extra amount is taxable.
 If there is no employer contribution to an EPF account, which is the
case for government employees, then the interest will be tax-exempt
up to ₹5 lakhs in a financial year.
 Interest earned on inactive EPF accounts is taxable in the employees'
hands.
 Withdrawal from the Employee Provident Fund account is tax-exempt
except when withdrawal happens after less than 5 continuous years of
service. And if any withdrawal amount exceeds ₹50,000, then TDS is
applicable at the rate of 10%. However, withdrawals can be exempt in
an employee's poor health, closing of a business or other events
beyond the person's control.

In conclusion, the Employee Provident Fund is a good investment vehicle for

saving for their retirement. Having a triple exempt status means that the
withdrawal amount, the interest and the contribution are exempt from taxes.
Hence, it is popular among salaried persons.

Employee Need to Submit Form 11 quoting their previous UAN Number, with the details requires as per
form rest Employer will take care on remittance