All you need to know about Employees' Provident Fund, applicability, contribution, benefits, and more

The Employees' Provident Fund Organisation (EPFO) is one of India's key social security organisations under the Ministry of Labour and Employment.

It is responsible for regulating and managing provident funds in the country. Another important social security organisation is the Employees' State Insurance.

Applicability

Under the EPF Act, there is a rule that makes EPF applicable to workplaces with more than 20 employees, whether they are factories or other establishments.

Every employee is required to be registered on the EPFO portal if their salary exceeds Rs 15,000. For those earning less than Rs 15,000, registration is optional.

After registration, employees receive a UAN number, which allows them to access the EPFO portal.

Contribution

The EPF consists of three schemes: 

1. EPF - Employee Provident Fund scheme
2. EPS - Employee Pension Scheme
3. EDLI - Employee Deposit Linked Insurance

An employee contributes 12% of their Basic salary plus Dearness Allowance (HRA is excluded) towards the EPF, and the employer matches this contribution.

The employer also covers EDLI, admin charges (0.5% each), and contributes 8.33% (up to Rs 1,250) towards the pension fund (EPS), with the rest added to the EPF.

For example, if an employee has a basic salary of Rs 10,000, their share of EPF is Rs 1,200, and the employer contributes an additional Rs 1,200.

This means the take-home salary is Rs 8,800, while the Cost to Company (CTC) is Rs 11,200.

Benefits

The EPF offers various benefits, including tax-free contributions under section 80C, fixed tax-free interest on EPF, a lifetime pension for the employee and their spouse if their service exceeds 10 years (EPS), and insurance coverage of up to Rs 7 lakh (EDLI).