This blog post is crucial to you if you are a business owner, chartered accountant, or employee. Today we’ll be explaining everything you need to know about the EPF Act(Employee Provident Fund), 1952, and its amendments. Some of the topics we will be covering in this post are:
- What is the EPF Act?
- What is the applicability of the EPF Act?
- EPF benefits
The EPF Act is the big brother of the ESI Act, with a much greater contribution rate. It covers over 7 crore Indians, making it the world’s biggest social security scheme!
Table of Contents
The EPF Act: Basics
The story of the Employee Provident Fund and the miscellaneous provisions Act began in 1952. It is administered by the Central Board of Trustees, assisted by the employee provident fund organisation(EPFO).
The EPF Act consists of 3 separate schemes:
- Employee Provident Fund, 1952 (EPF):
- This scheme aims to promote retirement savings.
- Employee Pension Scheme, 1995 (EPS):
- This scheme aims to provide a post-retirement pension.
- Employee Deposit Linked Insurance Scheme, 1976 (EDLI):
- This scheme gives life insurance to family members in case of sudden death.
Applicability of the EPF Act:
Applicability of a company:
- All the industries under schedule 1 of the EPF Act are applicable. This covers over 180 industries. For the full list, visit this link: www.comply4hr.com/docs/nat/epf/EPFSI.htm.
- The company must have at least 20 employees, and theaters must have at least 5 employees.
- Once a company is covered under the EPF Act, even if its employee strength drops below 20, it will still be covered.
Applicability of an employee:
An employee is applicable to the EPF Act if his/her wages(Basic + DA) are under INR 15,000. Although, in the future, the wages might include HRA along with basic pay and DA, and the government might raise the limit.
Benefits of the EPF Act:
The EPF Act has a wide range of benefits:
Tax-free savings:
- This is arguably one of the most important benefits of the EPF Act. It provides one of the highest interest rates in India at over 8%.
- The contribution made to the PF account along with the interest is completely tax-free, as long as it is withdrawn after 5 years of deposit or after maturity. This falls under section 80C of the income tax act.
Post Retirement Benefits
- Upon retirement, the employee receives the full amount in his EPF account.
- The employee also receives his/her pension from the EPS account provided that the employee has completed over 10 years of service.
Emergency Benefit
- The amount in the PF account can be withdrawn in emergencies such as:
- Death
- Marriage
- House construction
- Home loans
- Medical emergencies
- Death
- Loss of income:
- If the benefactor is unemployed for a period of over 2 months, he or she can withdraw the amount from the EPF account.
- Life insurance:
- Through the EDLI, the employee’s family receives relief in case of the sudden death of the employee.
- Universal Access:
- After the release of the Universal Account Number(UAN), the employee can easily transfer his/her EPF account from the old employer to the new one.
Still confused? Check out this video by Labour Law Advisor:
We genuinely hope you have learned something new from our blog, and stay tuned for more informative blog posts.
P.I. Jain and Company serves more than 500 companies across India and helps them with their payroll processing needs and EPF consultancy.
The Labour Law Advisor has also served more than 300 learners with our A to Z of PF compliance courses to make them understand the EPF act and its amendments in a more practical manner.
For even more information, you can order some books from Amazon by clicking on the link: https://amzn.to/2D0cVfx
