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Employee Provident Fund [EPF]

The employee provident fund, in simple terms, is when an individual retires from their job, there is a stop of a salary. Though the salary stops, the expenses do not, that is the cost of living and the expenses after a person retires. In order to ensure these expenses and have a life maintained just as how it was before, this fund comes forward. For all of this, an absolute retirement corpus is essential. This is where the employee provident fund comes to play.

What is an EPF Payment?

The Employee Provident Fund (EPF) is a retirement savings plan that assists individuals in accumulating an adequate corpus. The Employees’ Provident Funds Act of 1952 established the scheme, which is now administered by the Employees’ Provident Fund Organisation (EPFO).

Per month, an individual would pay 12% of their basic salary to the fund under this program. This balance is matched by the boss, who contributes the same amount. When you retire, you will accept a lump sum payment that includes all your personal and company contributions, as well as interest. Since the EPF is managed by the Government of India and pays a fixed return, it is considered a low-risk fund.

Workers in companies with a minimum of 20 employees are required to have EPF accounts. EPF is often used by several businesses with less than 20 employees. 

Employees with a payroll of $15,000 and more are also required to open an EPF account. However, most businesses have the facilities available to all workers, regardless of their pay. You can also quickly move the EPF corpus from one task to another. It is made possible by a system known as the Universal Account Number (UAN).

Benefits of Contributing to EPF

Tax benefit Apart from the fact that an employee’s payment to an EPF account is tax-deductible under Section 80C, the interest rate paid is also tax-free. And if an EPF account has been dead for more than three years, it continues to earn interest. Unless there has been a termination, EPF withdrawals are not payable until five years of continuous service.
Lifelong Assured Pension  While all employers and workers pay 12% of salaries to the Employees’ Pension Fund, 8.33% of the employer’s share is transferred to the Employees’ Pension Scheme (EPS). Under the Employees’ Pension Scheme 1995, 10 years of contributory membership guarantees a lifetime pension, according to the retirement fund agency.
Insurance  Then there are the incentives offered under the EPFO’s Employees Deposit Linked Insurance (EDLI) Scheme, which is a form of insurance. If the individual insured dies within the service period, the licensed nominee will collect a lump-sum payout.
Premature Withdrawal Although EPFO firmly warns against using PF money as a bank account – after all, social security payments are only accrued where stability is sustained – the organization does encourage members to make partial withdrawals after 5-10 years of service for special needs such as medical care, home loan repayment, and unemployment.
High Returns There’s also a chance that your PF account will earn more money in the future. The EPFO spends 5 to 15% of its investible deposits in exchange-traded funds (ETFs) (ETFs). The ETF shares, on the other hand, do not appear in members’ accounts, and they cannot raise the percentage of their retirement assets held insecurities.

Furthermore, government securities would account for 45-50 percent of the PF fund, debt instruments for 35-45 percent, and money market instruments and infrastructure trusts for 5% each. As a result, the annual return on PF savings is somewhat smaller than that of NPS, which has more aggressive investment opportunities.

Death The accrued EPF fund balance is passed to the nominee in the event of the employee’s death, to assist the family in tough times.
Easy Access Employees can access their PF account through the EPF member portal using their Universal Account Number (UAN). When they move occupations, they will switch their PF account.

Monthly EPF Payment; Employer and Employee

If previously said, both the boss and the employee contribute equally to the employee provident fund. The EPF donation number is determined using the employee’s minimum wage and dearness allowance. The PF contribution is usually 12 percent of the minimum wage for most workers. The below are the specifics of employee and company EPF contributions:

Contribution of employees to the EPF

Per month, the company deducts 12 percent of the employee’s wages (basic + dearness allowance) as an EPF contribution. The total donation is deposited into the employee’s EPF account.

Contribution of the employer to the EPF

In the same way, the company pays 12% of the employee’s wages to the EPF. The employer’s share, on the other hand, is divided into the following sections.

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Making PF Online Payment

The Indian government has made it mandatory for all businesses and organizations to make provident fund payments online. The internet transfer can be made via the EPFO website or any approved bank’s website, and the employer must either provide an account or use the same bank’s net banking service.

The Below Mentioned Banks have a Tie-up with EPFO to Make Online Provident Fund Payment

  • State Bank of India
  • Punjab National Bank
  • Indian Bank
  • Allahabad Bank
  • Union Bank of India
  • Bank of Baroda
  • HDFC Bank
  • ICICI Bank
  • Axis Bank
  • Kotak Mahindra Bank

Steps to Make EPFO Online Payment

  • Log in to the [https://unifiedportal-emp.epfindia.gov.in/epfo/] portal, and use an Electronic Challan cum return credential.
  • Review details like establishment ID, Exemption status, Name, Address, and More.
  • Click on the option ‘payment’, from a dropdown menu and choose the ‘ECR Upload’ option.
  • After choosing the ‘Wage Month,’ ‘Salary Disbursal Rate,’ and ‘Rate of Contribution,’ upload the ECR text file.
  • The imported ECR will be checked if any of the predefined conditions are met.
  • If there is a validation error, the user will be prompted to update the ECR text file and upload it again.
  • TURN will appear on the screen, and you must choose the ‘Verify option.’
  • Generate the ECR summary sheet by selecting the ‘Prepare Challan’ choice.
  • After entering the admin costs, click on “Generate Challan.”
  • After checking the challan number, click the ‘Finalize’ button.
  • Select the ‘Pay’ alternative next to the appropriate TURN.
  • Select the ‘Online’ form of payment from the dropdown menu and the bank from which you want to pay.
  • You can get your account ID and electronic payment slip after a satisfactory payment.
  • The EPFO page will be updated with the final transaction status, and the user will receive a confirmation of the payment made.

EPF Online Payment – FAQs

Q1. What is the UAN number?

The Employee Provident Fund Organization (EPFO) assigns each employee of an EPF account a 12-digit number known as the Universal Account Number (UAN). Via the UAN, each new PF account associated with a new job is brought under the umbrella of a single consolidated account.

Q2. How to withdraw EPF after switching jobs?

Transferring the existing EPF assets into a new EPF account opened by the new employer is advised. Despite the development of a new EPF account, the UAN remains constant for the sake of convenience.

Q3. When can VPF be withdrawn?

The rules for withdrawing from the EPF and VPF ( Voluntary Provident Fund) are the same. VPF also has a 5-year lock-in period. However, if you leave before the 5 years are over, you will have to pay taxes. When you retire or resign, you will take money out of your VPF account. Withdrawals are also possible in the event of an emergency, such as a wedding, hospital bills, or the redemption of a home loan, among other things.

Q4. Is it true that both the employee and the company payments to my EPF account are tax-free?

The donation to your EPF made by your employer is tax-free, and your contribution is tax-deductible under Section 80C of the Income Tax Act. EPF has the status of Exempt, Exempt, Exempt (EEE) in terms of taxes.

Q5. Can an employee join a Provident Fund Scheme directly?

No, an employee cannot enter the EPF on their own. He or she must work for a company that is protected by the EPF and MF Act of 1952.

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