In India, any employee receives a salary after the employer deducts a certain amount of money as PF (Provident Fund). One may believe that they are unable to spend their cash on hand. However, when a person wishes to retire from their job, the Employee Provident Fund comes into play. EPF is one of the most important contributions that helps them live. Employee Provident Fund (EPF) is a scheme that allows you to accumulate wealth while working for the government or a private company. The Employees' Provident Fund Organization administers the EPF (Employees' Provident Fund) retirement benefits scheme (EPFO). The employee and the employer each contribute 12% of the basic salary and dearness allowance to the EPF scheme on a monthly basis. Let's take a look at the contribution of employer and employee and its calculation.
What are the contributions that the employer and employee must pay?
The scheme requires employers and employees to contribute 12% of their PF wages. 8.33% of the employer's contribution is allocated to the Employees' Pension Scheme, while the remaining 3.67% is allocated to the EPF Scheme. The employer's contribution to the Employees' Deposit-Linked Insurance Scheme is 0.50%, as are the administrative charges.
Features of EPF Contribution-
The employer contribution of 12% is made up of 3.67 percent EPF and 8.33 percent EPS.
Businesses with 20 or fewer employees/organizations with losses greater than or equal to net worth (at the end of the fiscal year)/organizations declared ill by the Board for Industrial and Financial Reconstruction are eligible for the 10% EPF contribution.
The total contribution made by the employer is 8.33 percent to the Employees' Pension Scheme and 3.67 percent to the Employees' Provident Fund.
The employee's contribution goes entirely to his or her provident fund.
Aside from the contributions mentioned above, the employer must contribute an additional 0.5 percent to EDLI.
The employer must also pay 1.1 percent and 0.01 percent administration fees for EDLI and EPF, respectively. This means that the employer must contribute 13.61 percent of the employee's earnings to the plan.
PF Contribution of Employee
- Organizations or businesses with a maximum workforce of 19 people.
- Some industries have been designated as sick by the BIFR.
- Organizations that lose a significant amount of money each year in comparison to their net worth.
- Coir, guar gum, beedi, brick, and jute are examples of industries.
- Companies with a salary cap of Rs. 6,500
PF Contribution of Employer
The minimum contribution of the employer is Rs. 15,000 per employee. This equates to Rs. 1,800 per month. This means that each month, both the employer and the employee must contribute Rs. 1,800 to the plan. This sum was initially set at 12% of Rs. 6,500, which amounted to Rs. 780 in employer and employee contributions.
How to calculate EPF?
- EPF is based on salary in private companies, with salary equaling Basic + DA (Dearness Allowance).
- Typically, EPF contributions are 12% of salary.
- Your employer is also expected to contribute 12%. This 12%, however, is divided into two accounts:
- Employee Provident Fund (3.67%).
- Employee Pension Scheme (83.33%) (EPS)
- In addition, the employer must pay an additional 1% charge.
- Employee Deposit-Linked Insurance at 0.5% (EDLI)
- The EPF administration fee is 0.5%