Basics of Employee Provident Fund: EPF, EPS, EDLIS

Employee Provident Fund (EPF) is one of the main platforms of savings in India for nearly all people working in Government, Public or Private sector Organizations. This article is about what is Employee Provident Fund(EPF), Employee Pension Scheme(EPS), Employees Deposit Linked Insurance Scheme (EDLIS), how the contributions are calculated based on basic salary and dearness allowance, what are the EPF interest rate, how much would one save in EPF, how would one know about the amount accumulated in PF.

What is Employee Provident Fund?

A provident fund is created with a purpose of providing financial security and stability to elderly people. Generally one contributes in these funds when one starts as employee, the contributions are made on a regular basis (monthly in most cases).  It’s purpose is to help employees save a fraction of their salary every month, to be used in an event that the employee is temporarily or no longer fit to work or at retirement.  The investments made by a number of people / employees are pooled together and invested by a trust.

Employee Provident Fund (EPF) is implemented by the Employees Provident Fund Organisation (EPFO) of India. An establishment with 20 or more workers working in any one of the 180+ industries ( given here) should register with EPFO. Typically 12% of the Basic, DA, and cash value of food allowances has to be contributed to the EPF account. EPFO is a statutory body of the Indian Government under Labour and Employment Ministry. It is one of the largest social security organisations in the world in terms of members and volume of financial transactions undertaken.

EPFO logo

EPFO logo

EPF,  EPS, EDLIS

The Constitution of India under “Directive Principles of State Policy” provides that the State shall within the limits of its economic capacity make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old-age, sickness & disablement and undeserved want.

The EPF & MP Act, 1952 was enacted by Parliament and came into force with effect from 4th March,1952. A series of legislative interventions were made in this direction, including the Employees’ Provident Funds & Miscellaneous Provisions Act, 1952. Presently, the following three schemes are in operation under the Acts:( Click on the link if interested in reading the acts which are in pdf format)

1. Employees’ Provident Fund Scheme, (EPS)1952
2. Employees’ Deposit Linked Insurance Scheme,(EDILS) 1976
3. Employees’ Pension Scheme, 1995 (replacing the Employees’ Family Pension Scheme, 1971)(EPS)

Employees’ Pension Scheme (EPS) of 1995 offers pension on disablement, widow pension, and pension for nominees. EPS program replaced the Family Pension Scheme (FPS). It is financed by
diverting 8.33 percent of employer’s monthly contribution from the EPF(restricted to 8.33% of 6500 or Rs 541) and government’s contribution of 1.17 percent of the worker’s monthly wages.

The purpose of the scheme is to provide for
1) Superannuation Pension:Member who has rendered eligible service of 20 years and retires on attaining the age of 58 years.
2) Retiring Pension:member who has rendered eligible service of 20 years and retires or otherwise ceases to be in employment before attaining the age of 58 years.
3) Permanent Total Disablement Pension
4) Short service Pension: Member has to render eligible service of 10 years and more but less than 20 years.

Employees Deposit Linked Insurance Scheme (EDLIS)
Under the EDLI scheme life insurance cover is provided to the PF members. The cost of the scheme is borne by the employer but as the amount of life coverage under this statutory scheme is very low (a maximum amount of Rs. 60,000), usually employers opt out of the EDLI scheme by going for group insurance scheme which usually provides higher coverage to employees without any increase in cost to the employer.

EPF, EPS and EDLIS are calculated on Basic salary,Dearness allowances(DA), cash value of food concession and retaining allowances if any.Most of the organizations  follow Basic+ DA Method.

Retaining allowances means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.

Table below gives the rates of contribution of EPF, EPS, EDLI, Admin charges in India.

Scheme Name Employee contribution Employer contribution
Employee provident fund 12% 3.67%
Employees’ Pension scheme 0 8.33%
Employees Deposit linked insurance 0 0.5%
EPF Administrative  charges 0 1.1%
EDLIS Administrative charges 0 0.01%

In industries like beedi, jute, guar gum factories, coir industry (other than spinning sector) the Employee contribution is 10% while employer’s contribution is 1.67%.

Employees drawing basic salary upto Rs 6500/- have to compulsory contribute to the Provident fund and employees drawing above Rs 6501/- have an option to become member of the Provident Fund. It is beneficial for employees who draw salary above Rs 6501/- to become member of Provident Fund as it is deducted from the salary before it is deposited on bank or given hence compulsorily saving happens. Employee’s contribution is matched by Employer’s contribution(till 12%) so extra money and it is helpful for tax purpose too. The employer contribution is exempt from tax and employee’s contribution is taxable but eligible for deduction under section 80C of Income tax Act.

Calculation of Employees Provident Fund Contributions

Basic salary of Rs 3500

Let us calculate the contribution of an employee who is getting a basic salary of Rs 3500.

Contribution Towards Calculation Amount
EPF Employees share 3500 x 12% 420
EPS Employer share 3500 x 8.33% 292
EPF employer share 3500 x 3.67% 128
EDLI charges 3500 x 0.5% 18
EPF Admin charges 3500 x 1.1% 39
EDLI Admin charges 3500 x 0.01% 0.35 ( round up to Rs 1/-)

Basic salary above Rs 6500

In such cases companies uses different method for calculation as per their  pay roll policy. Consider an employee getting a basic salary of 7500/- We can calculate it in different ways but EPS is calculated only up to 6500/- that means the maximum amount is fixed to Rs 541.00. The three methods mentioned below are based on the above example.

Method-1

If company consider total basic salary above the limit fixed 6500.00 for PF calculation. Employer has decided to contribute on total basic salary which is 12 % on 7500.00 equal to 900.00. EPS Share is fixed to 541. Balance (900-541) goes to EPF account 359.00. You may be thinking that, what about 3.67%?, Here you don’t need to care about it.

Contribution Towards Calculation Amount
EPF Employees share 7500 x 12% 900
EPS Employer share 6500 x 8.33% 541
EPF employer share 7500 x 12% (-) 541 359
EDLI charges 7500 x 0.5% 38
EPF Admin charges 7500 x 1.1% 83
EDLI Admin charges 7500 x 0.01% 0.75 ( Round up to Rs 1/-)

Method -2

Some companies follows the below method in which employee share is calculated on 7500/- and employer share is calculated on up limit Rs 6500/-

Contribution Towards Calculation Amount
EPF Employees share 7500 x 12% 900
EPS Employer share 6500 x 8.33% 541
EPF employer share 6500 x 3.67% 239
EDLI charges 6500 x 0.5% 33
EPF Admin charges 6500 x 1.1% 72
EDLI Admin charges 6500 x 0.01% 0.65 ( Round up to Rs 1/-)

Method-3

Some companies calculate both employer and employee shares on 6500/- in spite of higher basic salary than 6500.00

Contribution Towards Calculation Amount
EPF Employees share 6500 x 12% 780
EPS Employer share 6500 x 8.33% 541
EPF employer share 6500 x 3.67% 239
EDLI charges 6500 x 0.5% 33
EPF Admin charges 6500 x 1.1% 72
EDLI Admin charges 6500 x 0.01% 0.65 ( Round up to Rs 1/-)

Ref:caclubindia.com

EPF scheme allows partial withdrawals for the purpose of marriage/illness/higher education/house construction etc.

Q. What is the interest on the PF accumulations ?

A : Compound interest as declared by Central Govt. is paid on the amount standing to the credit of an employee as on 1st April every year.

Q. What is the EPF Interest Rate?

The EPF interest rate of India is decided by the central government with the consultation of Central Board of trustees. In the past several decades, the interest rate has ranged from 8-12 % of the balances maintained in the fund.  The EPF interest rate notification is available on the official website of EPF India on an annual basis. The same is communicated through major dailies in all cities. To see Interest rate over the years from 1952 please click the image to enlarge.

EPF interest years since 1952-53

EPF interest years since 1952-53

Q. How much would one save by investing in EPF?

Let’s say Swayam starts with a basic salary of Rs. 20,000. Every year, on an average, he gets a 5% increment. He started at 25 years and worked till 60 years so his working life is, 35 years. He contributes 12% of his basic salary towards PF which is matched equally by one’s company, (EPF contribution is 3.67%, EPS 8.67%).

In this case, over the course of 35 years of his working life, his  total contribution is Rs. 26.01 Lakhs. Of course, his company makes a contribution of Rs. 7.955 Lakhs, total contribution of Rs 33.967 lakh. And this amount grows into – Rs. 1.38 Crores at the time of his retirement!

EPF how much

EPF Benefit

(Image courtesy Livemint)
How is it calculated?

At the beginning of each year there would be opening balance, the amount accumulated till then. Contribution is made monthly but interest is calculated yearly. On gets interest on opening balance and monthly contribution. So for next year the new opening balance would be: old opening balance + contribution throughout the year + interest on the (old opening balance + contribution)

To see the calculation for each year in above example click on the image below. You can also play with EPF calculator here.

EPF amount calculation

EPF calculation

Q. How would I know the amount of accumulations in my PF account ?

PF office sends an annual statement through the employer which gives details about the PF accumulations. The statement contains details like, Opening balance, amount contributed during the year, withdrawal during the year, interest earned and the closing balance in the PF account. This statement is sent by the PF department on completion of the financial year. Sample statement is shown below.

PF account statement

Sample PF statement

 

Q. Is it also possible to check the EPF Account balance online?
A:
From July  2011 one can check the EPF Account balance online.  Follow the following steps.
1) Go to www.epfindia.com/MembBal.html
2) Select EPFO Office where PF account it maintained. Suppose the account is in Punjab. Select Punjab from the Drop Down.

3) Select the office name: Once you select state in earlier state, it would then show code for various EPFO offices in Punjab. Say your EPFO office was in Ludhina. So select the office name Ludhiana, the establishment code would be LD-LDH. This would take you to next screen which has LD LDH filled for establishment code.

4) Enter PF Account Number which is in the format :

EPFO Office Code/Establishment Code(Max. 7 Digits)/Extension(Max. 3 digits)/Account Number (Max 7 digit)

PF Account Number may not have Extension code, in that case leave it blank.

Enter the Account Number.

Note: Your PF account number may have just two alphabets for EPFO Office Code then you can search the new Code at EPFI Establishment Information Search This is also available on 1st step mentioned above: Member Balance Information Search Your Establishment Code here.

5) Enter your Mobile and Name, Accept Terms and condition and Submit.

Sequence of steps is shown in the images below. Click on image to enlarge.

EPF Know your balance instructions

Know your balance Instructions

Select PF office

Select PF office

EPF Select PF Office Code

EPF Select PF Office Code

EPF Enter account Number

EPF Enter account Number

You will get SMS alert from EPFO : EE amount : Rs XXXXX and ER amount Rs:XXXXX as on <Today’s Date>(Account updated upto Date).

EE = Employee Contribution and ER = Employer Contribution on date(shown in Account updated date) mentioned in your SMS. It does not show current balance of PF  Account as on Today

Q.Which form has to be filled while becoming member of provident fund?

To become a member of the Employee Provident Fund one has to fill Form 11 and Nomination Form. For more details check out EPFI webpage  for Employees. Sample images of the Form 11 and Form 2(front and back) are given below. Click on the image to enlarge.

Form 11

Form 11

Form 2 Front

Form 2 Front

Form 2 back

Form 2 back

Q. Can I voluntary contribute more than the statutory limit to EPF?

You can contribute additional amount (over and above 12%) to Provident Fund by depositing VPF (Voluntary Provident Fund). However, employer is not bound to do a matching contribution.The employer is liable to pay contribution only on 6500 whatever is the basic salary. This is called voluntary contribution and a Joint Declaration Form needs to be filled up where the employer and the employee both have to give a declaration as to the rate at which PF would be deducted.

Pension Benefits

Q: When can an employee start receiving a Pension?
A: 
A employee can start receiving the pension under EPS only after rendering a minimum service of 10 years and attaining the age of 58/50 years.However, no pension is payable before the age of 50 years and early pension after 50 years but before the age of 58 years is subject to discounting factor @ 4% (w.e.f. 26.09.2008) for every year falling short of 58 years. In case of death / disablement, the above restrictions doesn’t apply.

Q: How long the pension is available?
A: Lifelong pension is available to the member and upon his death members of the family are entitled for the pension.

Q: What is the formula for calculating the monthly pension?
A:Under Employees’ Pension Scheme, the monthly retiring pension is decided on the basis of ‘Pensionable Service’ and ‘Pensionable Salary’ and is worked out as follows

Monthly pension=( Pensionable salary*Pensionable service)/70

Pensionable Salary is arrived at by considering the average contributing salary immediately preceding 12 months from the date of exit from the scheme, normally this would be limited to Rs 6,500 p.m. unless certain enhanced contributions are made by the employer with permission. Pensionable Service is the service in years rendered by the member for which contributions have been received maximum cannot exceed 35 years

Q: What is the maximum amount of Pension available under EPS?
A: Based on a maximum employment period of 35 years, and maximum contribution of Rs 6500, the maximum amount of pension as per the Pension formula would be = 6500 * 35)/70 = Rs 3,250 per month or  Rs. 39,000(3250 * 12) per year.

Q. Is the Monthly Pension paid under EPS just?

The amount of pension is meager. If one would have invested Rs 541 in a recurring deposit at the rate of 8% for 35 years one would get 12,49,263 as maturity amount. If this maturity amount is put in buying the Pension plan say LIC’s Jeevan Akshay VI and put the above amount Rs 12,49,263 in the premium calculator of LIC with option as Annuity payable for life, one would get montly pension of Rs 10,150 which is much more than Rs 3250.

In this article we covered about EPF, EPS, the calculation etc. In the next article we shall cover about how to withdraw or transfer from EPF, EPS. Difference between EPF and PPF? If you find something missing or incorrect please let us know, we shall correct is As Soon As Possible(ASAP). Hope you found this article helpful. What are you thoughts on EPF? Does it make sense to contribute to EPF?

63 Responses to Basics of Employee Provident Fund: EPF, EPS, EDLIS

  1. Parshav says:

    What is best to withdraw PF amount or to transfer??
    the interest i earn over my PF amount will it be taxable??
    Who’s responsibility to update PF account no update in UAN?

  2. I want to withdraw only EPS amount and tranfer EPF ampount.
    Is it possible and how…?

    • Kirti says:

      You can apply for withdrawing EPF only if you are not employed for two months after leaving the previous job. It is recommended to transfer EPF account at the time of joining a new company instead of withdrawing it as EPF forms the debt part of your portfolio and gives good tax-free returns.

      For EPS, if the service period is less than 10 years, you have an option to either withdraw your corpus or get it transferred by obtaining a ‘scheme certificate’, if there is a break in service. This way the number of years of service that you have put in gets transferred to the new account that you open in the new organisation.

  3. Biswanath Roy says:

    will you please tell me that where the accumulated money goes in EPF, which i had contributed throughout my service period for pension scheme, after death of mine & my wife?

    In “Atal Pension Yojana” they returned the 8.5 lakh money to the nominee after death of the pensioner & his/her spouse who would getting the Rs. 5000 as pension.

    • Kirti says:

      Sir Good question Sir.
      The money goes into a fund managed by the Employees’ Provident Fund Organisation or EPFO , which comes under the labour ministry. The government allows employers to manage own provident fund schemes, provided they adhere to certain conditions.
      The private trusts have to seek separate approval from the Income Tax Department for tax benefits on employees’ contribution to the fund.

      Where your money is invested: till Apr 2015 .Only in fixed-income securities. Investment in equities is not allowed. The securities where your money can be invested are central and state government bonds, bonds issued by public sector companies, fixed deposits of public sector banks and mutual fund schemes that invest in government securities.
      Going forward:
      According to the investment pattern for 2013, the EPFO could invest up to 55 per cent in government securities, up to 55 per cent in debt securities and term deposits of banks, and up to five per cent in money market instruments. The new pattern will allow the organisation to park 45-50 per cent of its funds in government securities, 35-45 per cent in debt securities and term deposits of banks, up to five per cent in money market instruments, 5-15 per cent in equity and related instruments and five per cent in asset-backed securities and units of infrastructure investment trusts.
      For more details one can refer to Business Standard article EPFO may invest up to Rs 90,000 cr in equities

  4. ARUN SHARMA says:

    What happens… When an employee joins a new company and transefer his PF balance from his/ her EPF Account.
    1. Does his/ her EPS balance also automatically transefer in another EPS Account? Or, Do we need to transefer the EPS balance separately? If yes, what will be the procedure??
    2. Does his/ her Account with EPS remains same, and his/ her EPS deductions continues to increase the previous EPS balance in the same former EPS Account?

    • Kirti says:

      Good question Sir.
      Earlier before UAN to claim EPS one had to fill separate form. now with online transfer of EPF it seems that EPS is also getting transferred.
      We are trying to find more about it and shall update as soon as we have information.
      EPS contribution would remain same Rs 1250 per month of Rs 15,000 per year from Oct 2014. This contribution limit is set by EPFO

  5. ARUN SHARMA says:

    Hi,

    Ofcource this knowledge is helpful, but I think there’re many changes have been made in last few year, which needs to be updated with this sharing.

    I have a “question???”.

    What will be….
    If an employee leaves an organisation, and withdraws all amount from EPF, at the same time he/ she joins a new company, and start contributing in different EPF & EPS accounts opened by new company.

    1. Can he/ she withdraw or transefer balances from his/ her former EPS Account?
    2. If yes, so is there any specific age or time of service which must be completed for being eligible to do so?
    3. Will he/ she get interest on that amount balance with EPS? If yes, so what will be the interest rate?
    4. What will be the procedure to withdraw or transefer balances from EPS Account?

    • Kirti says:

      Yes Sir we shall update this post ASAP.

      Sir now with UAN number it would be difficult for one to withdraw from the EPF account if one is working. Transfer would be the only option.
      EPS would also get transferred (looking for confirmation on that)
      EPS does not earn interest.
      Earlier Form 19 used to be filled to withdraw EPS.

  6. Ritika says:

    As we all know that PF ceiling limit has been increased to 15000 from 6500, I just want to confirm that what all components 15000 includes.
    As before we used to deduct pf on basic+DA so is it same or not.

    • Kirti says:

      PF limit has been increased but calculations remain same.
      Covered in depth in our article What are EPF,Pension and Insurance Changes from1 Sep 2014
      Now an employee with monthly salary above Rs 6,500 but up to Rs 15,000 will also be covered under the three schemes. Unlike PF and insurance scheme, voluntary membership is not available under the pension scheme for an employee with monthly salary of above Rs 15,000.

      The government has also fixed monthly pension benefit at Rs 1,000 for the financial year 2014-15 . Those who started job after 1 Sep 2014 and earning more than 15,000 Rs in basic and DA will not be contributing to the Pension scheme.

  7. Bhuvaneswari P says:

    Hi Sir,

    Pls clarify me on the below :

    how should NCP be shown in the following case :
    1) if a person is drawing 25,000/- p.m and is contbn is 1800/- pm. If due to 3 days lop his salary gets reduced to 22500/- (25000/30*3days), does his contbn remains same @ 1800/- or shud 15000/- ceiling and 1800/- contbn be reduced proportionately????

    2 ) if there will not be any change in 15000/- ceiling and 1800/- contbn, shud NCP be shown ?

  8. M.D.AHUJA says:

    AGE INCREASE PROPOSAL FOR EPS FROM 58 TO 60 IS IMPLEMENTED.

  9. Michael Adackapara says:

    I worked as a Professor in Mumbai from 1970 to 1974. I know provident fund contributions were made at that time. I did not get a Provident Fund account number. Then I migrated to the US and I want to know if I am eligible to get any of the provident fund contributions I made during my four years of employment in Mumbai. I went back to the college where I worked and they were not very helpful. They could not provide me with my Provident Fund account number.

  10. Rahul says:

    Hi,

    Very Helpful post indeed!

    Could you kindly help me out in my situation?

    I recently joined my second job, after a break of two years for studies after my first job.

    I got my PF statement from my previous employer, that shows my EPF amount, wherein the employer’s contribution to PF stands at my contribution minus 541, hence proving the 541 amount went to EPS.

    Now when I checked for EPF balance at EPFO website, that also shows the EPF amount, and not the full amount including EPS.

    My query is, where can I check my EPS balance, and get it transferred to my new account or alternatively withdrawn?

    thanks!

    • Kirti says:

      Hi Rahul,
      Congratulations on your new Job.
      You can transfer your old PF account to the new one. Do you have a UAN number?
      You can transfer your old PF account to new one through:
      UAN : Earlier, transferring EPF account from one employer account to another was a tedious process. But the UAN will do away with the need to transfer your funds at all. All you have to do is furnish your UAN and KYC details to new employer. Once the new employer verifies these details, the money from the older account will get transferred to the new account. But for old accounts (opened before the allotment of UAN), you still need to apply for funds transfer either in digital or physical form. Our article UAN or Universal Account Number and Registration of UAN explains about UAN
      Or
      OTCP: EPFO launched its Online Transfer Claim Portal (OTCP) on Oct 2, 2013 to ensure timely transfer of EPF account from one employer to another when an employee changes job. Our article Transfer EPF account online : OTCP explains process in detail.

  11. Saurabh says:

    Hi

    Do we have any medium in place where we can check our EPS Balances?

  12. shankar bhat says:

    Dear Sirs
    Can you please let me know if employees working in Temples / Religious places are covered under the PF Act. In their case also should they be more than 20 employees or if there are lesser number also they will be covered under the PF rules?

    Thanks in advance.
    Shankar.

  13. Umesh says:

    I’ve been working for 2 years, I will be resigning to pursue my higher studies. When I withdraw my PF will I get both EPF and EPS?

    Thanks
    Umesh

    • Kirti says:

      Yes Umesh. You would get both EPF and EPS but it would be taxable.
      When the PF amount is withdrawn before five years of continuous service, it is be taxable in the hands of the individual as if the fund was not recognised from the start of the contributions.Provident Fund would be treated as an Unrecognised Fund from the beginning.

      If you are planning to join back after higher studies then you can leave your money in PF. For 3 years it would earn interest.
      Best of Luck for higher studies

  14. Anil says:

    An employee resigned from our company on 27Feb2015, but we are making his FFS on 10Apr’15 we are making his date of exit from PF is on 10Apr’15. But 27Feb’15 to 10Apr15 during this period his date of joining in the new employer is 25Mar’15. During his PF A/c transfer there will be clash of date of leaving from previous employer is 10Apr’15 and date of joining is 25Mar’15. How to tackle this?

    • Kirti says:

      Anil some questions that I have are:
      What was the last working day of the employee?
      Did the employee serve the notice period after date of resigning?
      Till when did the company contribute to EPF – Feb or also Mar
      Typically HR has to clear off the settlement within two weeks of date of leaving the company.

  15. Jayeshkumar Shah says:

    I started my pension at age of 50 years with reduction. There was a notification to pay minimum Rs.1000 pension to every pensioners. I was receiving Rs.835 per month. I was not paid Rs.1000 as minimum amount. What should I do? Is there any application or form to be filled out for it? Is this due my early started pension at reduced rate?
    Thank you for your help.
    Regards,
    Jayesh

  16. Prakash G R says:

    Method-1

    If company consider total basic salary above the limit fixed 6500.00 for PF calculation. Employer has decided to contribute on total basic salary which is 12 % on 7500.00 equal to 900.00. EPS Share is fixed to 541. Balance (900-541) goes to EPF account 359.00. You may be thinking that, what about 3.67%?, Here you don’t need to care about it.

    Contribution Towards Calculation Amount
    EPF Employees share 7500 x 12% 900
    EPS Employer share 6500 x 8.33% 541
    EPF employer share 7500 x 12% (-) 541 359
    EDLI charges 7500 x 0.5% 38
    EPF Admin charges 7500 x 1.1% 83
    EDLI Admin charges 7500 x 0.01% 0.75 ( Round up to Rs 1/-)

    In this contribution I have one doubt about EDLI contribution. always EDLI contribution will be calculated EPS basic salary (6500/-). but hear calculated on earned Basic Salary (7500/-).

    Please explain me why we should calculate by earned basic salary (7500/-)

  17. Inderjeet says:

    Sir,

    Please help in my EPS case. My date of joining is 01.04.2014 & date of leaving job is 31.12.2014. My monthly contrybution is Rs.541/- for EPS. But when I am withdrawn my EPS amount I got only RS.3876/- instead of Rs.4869/-. I know that there is Table “D” formulate the amount, but still amount is not matched. Sir, Can you explain me the calculation. My basic salary is 6500/-.

  18. Rama Rao says:

    While explaining Employee Deposit Linked Insurance Scheme (EDLIS), the author made a statement “usually employers opt out of the EDLI scheme by going for group insurance scheme which usually provides higher coverage to employees without any increase in cost to the employer”. This may be misleading. I observed that in a specific case, group insurance scheme with an Insurance Company costed the employer around Rs.30,00,000 for about 1000 employees whereas 0.5 percent of basic wage subject to the prescribed max. limit was just around Rs.5,00,000. The statement that opting out from EDLI and going for a group insurance scheme doesn’t involve any increase in cost to the employer.

    • Rama Rao says:

      is not correct.

    • Kirti says:

      Thanks for input Sir. In the article we have mentioned that usually employers opt out of the EDLI scheme by going for group insurance scheme which usually provides higher coverage to employees without any increase in cost to the employer. But it may not always be the case.
      Sir have you come across a situation when in spite of higher cost Employer moved to Group Insurance

  19. s. k. jain says:

    I have started getting monthly pension under EPS. Let me know if this is taxable and if so under what head?

    It does not fall under the definition of salary as it is not being paid by employer. It does not fall under the definition of pension as it is not paid by employer. It doesn fall under family pension as I am receiving it directly. It seems more like annuity payment from a super annuation fund which is tax exempt.

  20. thanks and very much thanks for all information this website so Am Relay get knowledge this side So thanks Again …….

  21. Anshul says:

    Hi,

    Thanks for writing this article. A lot of really useful information.

    One question: The EPF account balance that we receive from the EPFO website (through SMS), does it include details of Employer’s contribution to the Pension Scheme as well?

    If not, is there a way for me to find out the Pension Scheme fund balance.

    Thanks again,
    Anshul

  22. Yash says:

    Hi,

    I got the PF account details from SMS, but had a question does the EE and ER portion also include interest earned? As in my case, it seems to only show the principal me and my employer have contributed.

  23. PP says:

    Hi,

    Thanks for the detailed information you provided on the topic! It clearly reflects how much effort you must have put in obtaining all the info.

    After reading this article, when I checked the salary deduction practice at my father’s business, I was surprised to find that for last 3 years, for 3-4 of his employees with salaries over 6500, 8.33% of their salary was getting put in their EPS account even if it was much more than 541! 1.67% was put in their EPF accounts.

    This incorrect practice went on for last 3 years at our end, but surprisingly there were no checks/corrections from the PF office, who went on putting over Rs. 541 in employees’ accounts month after month (which otherwise should have gone in their EPF A/c). It is hard to believe that their software didn’t throw any red flags to prevent such a blunder.

    So I went to the regional PF office and brought the issue to their attention. They agreed it should not have happened but said now nothing can be done since the accounting for those financial years is already complete! I’m not sure if there is a way to make them go back and make corrections.

    Also, you mentioned that typical employer contribution is 12%, while for some industries (like beedi, jute, etc.) it is 10%. My father has a pharma-related business and he has been contributing 10%. Is it there a clear-cut mentioning anywhere stating if it should be 10% or 12% or on your choice?

    • admin says:

      Thanks Pratham. Thanks for sharing the details of how you went to regional EPF office. It would help others too.
      No it is not a choice of 10% or 12%. As per EPF website there are specific cases for 10% deduction. Hope it helps. Quoting from it:

      As per amendment-dated 22.9.1997 in the Act, both the employees and employer contribute to the fund at the rate of 12% of the basic wages, dearness allowance and retaining allowance, if any, payable to employees per month. The rate of contribution is 10% in the case of following establishments:

      Any covered establishment with less then 20 employees, for establishments cover prior to 22.9.97.

      Any sick industrial company as defined in clause (O) of Sub-Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction,

      Any establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and

      Any establishment engaged in manufacturing of (a) jute (b) Breed (d) coir and (e) Guar gum Industries/ Factories. The contribution under the Employees’ Provident Fund Scheme by the employee and employer will be as under with effect from 22.9.1997.

      • analyst says:

        Thanks for directing to the appropriate source. Its good to know the exact underlying rule regarding 10%/12%, because up till now I was getting all uncertain, unreliable answers to my inquiry. This again underlines the great job you guys are doing!

        • admin says:

          Thanks Pratham for your encouraging words. Infact we started this blog because we also found incomplete info and decided to fill the void.

  24. MALLI says:

    very useful

  25. [...] Public Provident Fund(PPF). This is continuation of our earlier posts on Employee Provident Fund Basics of Employee Provident Fund: EPF, EPS, EDLIS, Withdrawal or Transfer of Employee Provident Fund. For employees who are covered under PF, [...]

  26. JaiKumar says:

    Hi Thank you for very clear and Nice post.

    One clarification, in the PF calcumation section you have mentioned 3 methods companies may use. In the illustation “How much would one save by investing in EPF” the calculation says employer will match 12% “(EPF contribution is 3.67%, EPS 8.67%)”, However the table “epf_returns.jpg” shows employee contribution of 28800 and company contribution of 8808 for the first year. Now if company is contributing 12% then it should be 22308(20000×12% x 12 – 28800 and considering EPS 541Monthly EPF should be 20000×12%-541 x 12 = 22308). If the company contributes only 8808 instead of 22308, they are just contributing total of 6.38%(3.67% for EPF plus 541monthly for EPS) and their %contribution for EPF+EPS goes down Year on Year.
    Please provide your thoughts.

    Note : I believe/hope as of now non of the establishments will work with the method of considering Rs6500 as the guideline amount for their EPF contributions (This is my experience but I may not be same for others). (However I do know a lot of companies trying to make the Basic of the CTC as low(stupidly low maybe) as possible to save on company contribution – This happens mostly in fully indian owned companies and not in MNCs)

    Thanks
    JaiKumar

    • admin says:

      Thanks JaiKumar. The calculations can be verified by using the EPF calculator
      Starting Basic Pay is Rs 20,000
      Your Yearly contribution = 20,000 * 12* 12 = 28,800
      Your company yearly contribution to EPF = 20000 * 3.67 * 12 = 8,808
      Total Ist year contribution is: 37,608
      Hope it helped!

      • JaiKumar says:

        Hi,

        I think the calculator needs to be updated to consider the company contribution as {[12%*(Basic+DA)]-541} * 12.
        For this Example it should be, {[12%*(20,000+0)]-541} * 12 = 1859 * 12 = 22,308.

        The calculator considers company contribution to EPF as 3.67% which is to be corrected as 12% – 541. The calculator assumes that the company works out the EPF with the idea of Maximum Basic+DA being 6500. I belive this might not be the case in practical scenarios. I mean if someone has a Basic Salary of 20000, they will be contributing Rs2400 PM from his/her salary and company should be contributing the same amount for EPF+EPS. So company contribution for EPF should be total company contribution -(minus) 541 PM.

        If still anyone has doubts please check your salary slip / salary structure papers, one of which should clearly show the company contribution especially where the salary is mentoined in CTC(Cost to Company) format.

        Thanks
        JaiKumar

        • admin says:

          Yes you are right JaiKumar, the calculator considers the Employer’s EPF contribution as 3.67%. Your suggestion is good, we need to have a calculator suggested by you. We shall work on it and update the Calculator once it is done.
          Thanks a lot.

  27. santhosh says:

    1. What is the maximum of VPF contributions

    2. PF deduction ( Ex. Gross salary is 20,000/ in this Basic + DA is 4,500/ (As per minimum wages act) is it ok or we have to in-cries the Basic + DA please help me.

    please revert back to me If any amendments or notification please send me it is very grateful to you.

    Thank you
    Santhosh

  28. [...] our earlier post Basics of Employee Provident Fund: EPF, EPS, EDLIS we had talked about What is Employee Provident Fund(EPF), How is it Calculated, What is Employee [...]

  29. Sharat Trehan says:

    My name has been mis-spelt in the PF records, and this mis-spelling crops up in the PF slip. My concern is that I might have a problem at the time of withdrawing the balance in my PF account. I have already written twice to the Regional PF Commissioner in this regard but nothing has come out of it yet. What should be done in the given circumstances?

    • admin says:

      Sharat your concern is justified, you need to get it corrected. Twice you have written to Regional PF Commissioner. Do you have the written acknowledgement that you submitted the letter? Was the letter attested by your office?
      We shall try to find out. In the meanwhile we found these two links hope they would help.
      Mistakes in PF slips and RTI website
      name change in pf account.
      Quoting from RTI’s
      Better to get the name corrected as wrong name may create Income tax problem and also while getting refund of PF amount. U can write to concerned PF Commissioner where U have PF account, with proof of name through your present employer. If name is not corrected despite completing all the formalities you can file RTI appln to activate the PF Commissioner Office.
      Is possible please update us on how you are getting it changed?

    • admin says:

      Sharat you can file a EPF grievance redressal form online. The Epfi Grievance Management System

      If that doesn’t work you can maybe file RTI. For details checkout http://www.jagoinvestor.com/2012/03/rti-for-epf-withdrawal-or-transfer.html">Jagoinvestor’s article on filing RTI. Though article is about RTI for Withdrawal or Transfer of EPF you would get to know basic steps for filing RTI.
      We would be obliged if you could share your steps taken, it would help other readers. Best of Luck.

  30. Paresh says:

    Article itself reflects great and hard work behind it.

    Just read the post 2-3 times and still require to read more times to grasp it completely.

    But just focusing on last sentence:”Does it make sense to contribute to EPF?” is it mean that you do not find sense contributing EPF?

  31. very helpful post.
    much needed

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