EPF is the main scheme managed by the Employees’ Provident Fund Organization (EPFO) under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, to provide social security cover to the members. The scheme generally covers employees of every organization in which 20 or more persons are employed.
Employees enrolled under the EPF scheme need to pay a certain contribution towards the EPF fund and an equal contribution is paid by the employer. It is a government guaranteed scheme where the employee gets a lump sum amount compounded with interest on retirement.
Don’t Know your Credit Score? Now Get it for FREE Check Now
EPF Contributions
- The contribution of an employer towards the employee’s EPF account is 12% of the salary (basic salary+ dearness allowance+ retaining allowance). The maximum salary limit on which the employer’s contribution is calculated is capped at Rs.15,000.
- Similarly, the employee contributes 12% of his salary to the EPF account. However, as per the employee has the choice to contribute more to his EPF account as per his discretion. There is no such prescribed cap on employee’s contribution towards EPF as per the law. The contribution in excess to the mandated 12% goes towards Voluntary Provident Fund (VPF). VPF contributions also earn tax-free interest income.
- However, it should be noted that not all of the employer’s contribution goes to the EPF account. Out of the 12% of employer’s contribution, 8.33% goes to the Employees’ Pension Scheme (EPS) and the balance will be credited to the EPF account. Further, the employer is not obliged to match any contribution made by the employee towards VPF.
- Additionally, the employer also pays 0.5% towards the Employee Deposit Linked Insurance (EDLI), 0.01% as EDLI handling fees and 0.50% or Rs.500 whichever is higher as the EPF administrative charges.
- In order to promote new employment opportunities, the government has also come out with Pradhan Mantri Rojgar Protshahan Yojna. Under this scheme, the government pays 8.33% (EPS part) of the employer’s side contribution for the first three years if the employee is earning wages of less than Rs.15,000. The scheme aims to especially promote MSME businesses to avail the benefits of the project and encourage job creation.
- In the current financial year (FY 2023-24), the rate of interest on EPF is 8.25%. Also, the interest on EPF savings is calculated on the basis of monthly average balance.
- In order to incentivize women employment in the organized sector and augment their in hand salary, the central government in the budget, 2018 has reduced the women employee’s contribution to 8% from 12% for the first three years. However, there will be no change in the employer’s contribution, it will stay at 12% only.
9 Comments
Yes that’s ok as a CTC. Employer ultimately paying it to you only. Its a cost for them.
HELLO SIR,
I WORK IN INDUSTRY IN WHICH ALONG WITH OUR SHARE EMPLOYER ALOS DEDUCTING FROM OUR SALARY
IS THAT LEGAL TO DEDUCT EMPLOYER SHARE FROM EMPLOYE SALARY ?
Hi Sai,
As per the rules laid down by the Employees’ Provident Funds Scheme it clearly state that the contribution made by the employer cannot be deducted from the member/employee’s salary component. This means that the employer can under no circumstances recover this amount from the salary of the employees.
hi
My basic salary is around 40000/- and accordingly i chose to contribute 12% towards employee PF.
I have observed in my appointment letter that the employer has put a max cap of Rs 1800/- for Employer contribution.
This way i will be contributing Rs 4800/- @ 12% of basic whereas my employer will only contribute Rs 1800/-
Can employer contribute less amount when compared with employee contribution? Can i take up with the employer and ask him to match my pf amount and contribute Rs 4800/- instead of Rs 1800/-
Yes, EPF contribution can be less from the Employer as compared to employee’s contribution because 8.33% of 12% (employer’s contribution) goes into EPS (Employee Pension Scheme). Please check your EPF account statement for the same. And if you still have any concerns, you can ask your HR to solve the same for you.
My employer created a new UAN for me though I have an exiting UAN in August 2016. As per the new epf rules, those sal is above 15k(new uan’s created after Apr 2016) is not eligible for eps contribution. But my employer contributed towards eps. I left that organization and applied for online pf transfer(using form 13) and my transfer got rejected with reason(non-eps member). Now pf office is asking for form 3a and my employer is not providing. What’s the solution for this?
If the new organization is providing EPS then it should not be an issue in transferring. I suggest to personally visit your ogranization when the economy is open.
Epf withdraw
Hi Avadh, if you want to withdraw EPF you have to login to EPFO site with your UAN number or you can also visit an EPFO office.