Employee Provident Fund (EPF)

29-08-2022:04:03:am

Employee Provident Fund (EPF)

Employee Provident Fund (EPF) is an old-age pension scheme maintained by the workers’ Provident Fund Organization (EPFO). The worker and also the leader contribute to the EPF scheme on monthly basis in equal proportions of 12% of the basic salary and costliness allowance. Out of the employer’s contribution, 8.33% is directed towards the employee Pension scheme. The rate on EPF is reviewed annually.

EPF rate for FY 2020-21 is 8.5%. Once EPFO notifies the rate for a year and also the year ends, rate is calculated for the month-wise closing balance then for the whole year. The year during which the new interest rates square measure proclaimed stays valid for future year i.e. from the year beginning on1st April of a year to the year ending on 31st March of future year. Here square measure a couple of vital facts to understand regarding EPF Interest Rate: The rate of interest i.e. 8.50% is valid and can be applicable solely on EPF deposits created between the months of Apr 2020 and March 2021.

The interest, even if calculated on a monthly basis, is transferred to the Employees’ Provident Fund account solely on a yearly basis on thirty first March of the applicable year. The transferred interest is summed up with future month i.e. April’s balance and is other than used for calculation of the interest. If the contribution isn't created into associate EPF account for 36 months continuously, the account becomes dormant or inoperative. Interest is obtainable on inoperative accounts of workers United Nations agency haven't earned the retirement age.

Interest isn't provided on the quantity deposited in inoperative accounts of retired workers.

The interest earned on inoperative accounts is nonexempt as per the member’s block rate. For contributions created towards the Employees’ Pension scheme by the employer, the employee shall not receive any interest.

However, a pension is paid out of this quantity once the age of fifty eight. EPF rate Calculation Contribution begin Month November 2018 Interest Rate (p.a) 8.5% Monthly Interest Rate 8.50/12 = 0.7083% Employee’s Contribution 12% of Rs. 15,000 = Rs. 1,800 Employer’s Contribution Rs. 1,800 (8.33% in Pension, 3.67% in EPF) Employer’s Actual Contribution to EPF account 3.67% of Rs. 15,000 = Rs. 550 Total Monthly Contribution in EPF account Rs. 1800 + Rs. 550 = Rs. 2,350 The leader and worker build equal contributions to the EPF account as shown below. Contribution by Monthly share Contributed Employer 12% Employee 12% or 10% Total 24% Key Points regarding EPF Contribution: 12% Employer’s contribution includes three.67% EPF and 8.33% EPS 10% EPF share is valid for the organizations wherever there square measure twenty or but twenty workers /organizations with losses incurred over or adequate to world wide web price (at the top of economic year) /organizations declared sick by the Board for Industrial and monetary Reconstruction Total contribution created by the leader is distributed as 8.33% towards Employees’ Pension scheme and 3.67% towards Employees’ Provident Fund. The contribution created by the employee goes all towards the provident fund of the employee.

Apart from the above-made contributions, an extra 0.5% towards EDLI must be paid by the employer.

Certain administration prices towards EDLI and EPF standing at the speed of 1.1% and 0.01% severally even have to be incurred by the employer. This implies that the employer must contribute a complete of 13.61% of the earnings towards this scheme.The contribution from each the parties is deposited into the EPFO (Employees Provident Fund Organization) This is a semi-permanent investment fund for the contributors that help them continue associate freelance life after retirement