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What is EPF Scheme in India in detail and How its work - Taxmania.in

What is EPF Scheme in India in detail and How its work - Taxmania.in


The Employees' Provident Fund (EPF) is a retirement savings scheme in India that is administered by the Employees' Provident Fund Organization (EPFO). It is a mandatory contribution that is made by both the employee and the employer, and it is intended to provide financial security to employees after they retire from their jobs.

What is EPF Scheme in India in detail and How its work - Taxmania.in
What is EPF Scheme in India in detail and How its work - Taxmania.in

Some of the key features of the EPF in India are:

  • Coverage: The EPF is mandatory for all establishments that employ 20 or more people. It is also optional for establishments that employ less than 20 people, but both the employer and the employee must agree to contribute to the EPF.
  • Contribution: Both the employee and the employer contribute 12% of the employee's basic salary and dearness allowance (DA) to the EPF. The employee's contribution is deducted from their salary, while the employer's contribution is an additional cost to the company.
  • Withdrawal: Employees are allowed to withdraw their EPF balance upon retirement, death, or when they have been unemployed for more than two months. There are also provisions for partial withdrawal in cases of medical emergencies, children's education, and the purchase of a house.
  • Interest: The EPF balance earns interest at a rate determined by the government each year. The current interest rate is 8.1% per annum.
  • Tax benefits: Contributions to the EPF are eligible for tax deductions under Section 80C of the Income Tax Act, up to a maximum of INR 1.5 lakhs per year. The interest earned and the final withdrawal from the EPF are also tax-free.

In summary, the EPF is a retirement savings scheme in India that provides financial security to employees after they retire. It is mandatory for establishments with 20 or more employees, and both the employee and the employer contribute to the fund. The EPF balance earns interest and is eligible for tax deductions, and employees can withdraw their balance upon retirement or in certain circumstances.
Employees' Contribution Towards EPF

Employees' Provident Fund (EPF) is a retirement savings scheme for employees in India. As an employee, you are required to contribute a certain percentage of your salary towards the EPF. The contribution is usually made by your employer on your behalf, and it is deducted from your salary before it is paid to you. The contribution made by the employee is known as the Employee's Contribution, while the contribution made by the employer is known as the Employer's Contribution.

The current rate of contribution to the EPF is 12% of your basic salary and dearness allowance. Out of this, 8.33% is contributed towards the Employees' Pension Scheme (EPS), and the remaining 3.67% is contributed towards the EPF. Your employer is also required to contribute an equal amount towards the EPF. So, in total, the contribution to the EPF is 12% of your salary, which is split equally between the employee and the employer.

You can also choose to contribute more than the mandatory 12% towards the EPF, but this is entirely optional. If you choose to make additional contributions, your employer is not required to match them.

It is important to note that the EPF is a long-term savings scheme, and the contributions made to it are meant to be used as a source of income during retirement. The EPF also provides several benefits, such as tax exemptions and loan facilities, which can help you save money and plan for your retirement.
Employers' Contribution Towards EPF

As an employer, you are required to contribute an equal amount towards the Employees' Provident Fund (EPF) as your employees. The current rate of contribution to the EPF is 12% of the employee's basic salary and dearness allowance. Out of this, 8.33% is contributed towards the Employees' Pension Scheme (EPS), and the remaining 3.67% is contributed towards the EPF.

Your contribution towards the EPF is known as the Employer's Contribution. It is your responsibility to ensure that the required contribution is made on behalf of your employees and that the necessary paperwork is completed and filed correctly.

In addition to the EPF, you may also be required to contribute towards other retirement savings schemes, such as the Employees' Pension Scheme (EPS) and the Employee State Insurance (ESI) scheme. It is important to familiarize yourself with these requirements and ensure that you are making the necessary contributions on behalf of your employees.

By making the required contributions towards the EPF and other retirement savings schemes, you can help your employees plan for their financial future and ensure that they have a secure source of income during retirement

EPF Eligibility Criteria


The Employees' Provident Fund (EPF) is a retirement savings scheme for employees in India. The following are the eligibility criteria for joining the EPF:

  • Age: You must be at least 18 years old to be eligible for the EPF.
  • Employment: You must be an employee in a company or organization that is covered by the EPF Act.
  • Salary: You must be earning a salary of more than ₹15,000 per month to be eligible for the EPF. If you are earning less than this amount, you can still join the EPF, but you will not be required to contribute towards it.
  • Work hours: You must be working at least 20 hours per week to be eligible for the EPF.
  • If you meet these eligibility criteria, you can join the EPF by filling out the necessary paperwork and submitting it to your employer. Your employer will then make the required contributions on your behalf and file the necessary paperwork with the Employees' Provident Fund Organization (EPFO).
  • It is important to note that the EPF is a long-term savings scheme, and the contributions made to it are meant to be used as a source of income during retirement. The EPF also provides several benefits, such as tax exemptions and loan facilities, which can help you save money and plan for your retirement.

How can Employers Register for EPF


As an employer, you are responsible for registering your company or organization for the Employees' Provident Fund (EPF) scheme if you have 20 or more employees who are eligible for the EPF. The following are the steps you can follow to register your company for the EPF:

Check eligibility: Make sure that your company meets the eligibility criteria for the EPF. To be eligible, you must have at least 20 employees who are earning a salary of more than ₹15,000 per month and working at least 20 hours per week.

Obtain a Permanent Account Number (PAN): You will need to obtain a PAN for your company in order to register for the EPF. You can apply for a PAN online or through a PAN service center.

Obtain a Factories Act License: If your company is a factory, you will need to obtain a Factories Act License from the local authorities.

Register for the EPF: Once you have obtained the necessary documents, you can register for the EPF by filling out Form 1 and Form 2 and submitting them to the Employees' Provident Fund Organization (EPFO). You can also register online through the EPFO's website.

Make contributions: Once your company is registered for the EPF, you will be required to make the required contributions on behalf of your employees. The current rate of contribution to the EPF is 12% of the employee's basic salary and dearness allowance.

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