Provident fund is a scheme for the welfare of the employees at the time of their retirement. Under this scheme, the employees get the monetary benefit at the time of their retirement. It is regulated under Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 by Employees’ Provident Fund Organization (EPFO). This organization is the world’s largest social security organization whose main objective is to protect the old age employees and provide them with financial support. The organization can be a sole proprietorship or partnership firm or a Private Limited Company or LLP or any other type of business enterprise.
Any organization that has more than 20 employees shall have to register itself with the provident fund organization mandatorily. The employer needs to file the registration application to the government for its registration with Digital Signature (DSC). The organization has to apply for registration within a month from the day it reaches the limit of 20 employees. If any organization has less than 20 employees it can also take the registration for providing provident fund benefits to its employees. Employees include regular employee, part-time employees, contract-based employees, like a housekeeper, security guard, and contract labour as per the requirement. Both the employee and employer needs to contribute toward the provident fund, and the employee can contribute 12% of his salary or wages, and the employer shall have to contribute 12% of the salary in which 8.33% to the pension scheme and remaining 3.67% toward the provident fund. Here the salary includes the basic salary of the employee along with the dearness allowances and retaining allowances.
After the amendment in the companies act, 2013 now the PF registration and GST registration can also be applied at the time of company registration in the subsequent form provided along with the company registration form.
Provident fund is governed under Employees Provident Funds and Miscellaneous Provisions Act, 1952, this act applicable all over India except Jammu & Kashmir.
Eligibility of PF registration is as follows:
- Establishment under industry sector having employee 20 or more
- Other establishments having employees 20 or more during the previous year
- For the employees drawing less than Rs. 15000
It is mandatory for those establishments who employ 20 or more employees in their establishment but if any establishment has less than 20 employees then they can register itself voluntarily.
The following are the benefits of the PF registration:
The employee gets a lump sum amount after his/her retirement.
The employee also gets the benefit of the Pension Scheme as the employer also contributed to the pension scheme as a part of the PF contribution. From 12% of the PF contribution 8.33% goes into the pension scheme
The employee can withdraw this fund in any case of an emergency like marriage, loan repayment, etc.
There is no need to create a different PF account at the time of switching the job. The same PF account is carried forward to the new employer. UAN linked with Aadhar Number of the employee gives the benefit in case of transfer.
The employee can appoint or hire any nominee of himself to get the fund in case of his deceased or death.
If a person retires after the age of 58 years, he can avail the benefit of both EPF and EPS
The employee gets the benefit of insurance under Employee Deposit Linked Insurance Scheme by the deduction of 0.5% of his salary as a premium.
Under this 12% of the basic salary is saved and the employee also gets the interest on his saving, which increase his savings. The current interest rate is 8.5% but it is usually increased from time to time as per the notification or guidelines of the Government.