Employee Provident Fund: Structure and Rates
PF Contribution – Calculation Overview
The Employee Provident Fund (EPF) is a retirement savings scheme mandated by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. Both employers and employees contribute towards this fund as follows:
- Employee Contribution: Usually 12% of basic salary plus dearness allowance (DA). In establishments with fewer than 20 employees or in specified sectors like Jute, Beedi, etc., the contribution rate is 10%.
- Employer Contribution Breakdown:
- 8.33% directed towards the Employees’ Pension Scheme (EPS).
- 3.67% credited to the Employee Provident Fund (EPF).
- 0.50% towards Employees’ Deposit Linked Insurance (EDLI).
- 0.50% administrative charges (effective since July 2018).
Interest Rate
- The EPFO sets the interest rate annually, subject to approval by the Ministry of Finance.
- Recent rates:
- 2018–19: 8.65%
- 2017–18: 8.55%
- Interest is calculated monthly on the account’s running balance and credited annually.
Salary Limit and Eligibility
- EPF contributions are generally calculated on salaries up to ₹15,000 per month.
- Employees earning above this threshold can choose to opt out of EPF contributions upon joining, subject to mutual consent.
Universal Account Number (UAN)
- A unique identifier assigned to each employee by the EPFO.
- The UAN links multiple PF accounts held by the employee across different employments.
- Upon job changes, employees must provide their UAN to the new employer using Form F-11 for seamless transfer of accounts.
Withdrawal Provisions
- Full EPF withdrawal is permitted upon reaching 58 years of age.
- Partial withdrawals or reduced pension benefits can be claimed between 50 and 58 years via Form 10D.
- Employees with less than 10 years of service can withdraw both EPF and EPS balances.
- Withdrawals are processed through the Composite Claim Form.
Taxation of EPF
- Contributions: Employee contributions are tax-exempt up to ₹1.5 lakh under Section 80C. Employer contributions are exempt up to 12%.
- Interest: Taxable if the interest rate exceeds 9.5%.
- Withdrawal: Tax-free if continuous service exceeds 5 years; otherwise, taxable under certain conditions.
