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Provident Fund

Provident Fund

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Employees’ Provident Fund is a statutory benefit payable to employees working in India. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (“Act”) is applicable pan-India. The administration and management of Employees’ Provident Fund (EPF) is carried out by the Central Board of Trustees (CBT) established by the Central Government consisting of representatives of the Government, employers and employees respectively. The Employees’ Provident Fund Organization (EPFO) assists this Board in its activities.

Concept of Employees’ Provident Fund

The respective state governments in India levy the professional tax on income from profession or employment. The professionals earning an income from salary or other practices such as a lawyer, teacher, doctor, chartered accountant, etc. are required to pay professional tax. In case of salaried and wage earners, the professional tax is liable to be deducted by the employer from the salary/wages and the same is to be deposited to the state government. In case of other class of individuals, this tax is liable to be paid by the employee himself. The tax calculation and amount collected may vary from one state to another, but it has a maximum limit of INR 2500/- per year.

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Types of schemes under the Act

  1. Employees’ Provident Fund Scheme, 1952: Employees’ Provident Fund Scheme was set up under the Act for the purpose of providing a post retirement benefit for the employees or a class of employees or their legal heirs in case of death, employed under an establishment to which this Act applies.

  2. Employees’ Pension Scheme, 1995: Employees’ Pension Scheme was framed under the Act for the purpose of providing the superannuation pension, retiring pension or permanent total disablement pension to the employees of any establishment or class of establishments to whom this Act applies; and widow or widower’s pension, children pension or orphan pension payable to the beneficiaries of such employees.

  3. Employees’ Deposit-linked Insurance Scheme, 1976: Employees’ Deposit-linked Insurance Scheme (EDLI Scheme) was framed under the Act for the purpose of providing insurance benefits to the employees of an establishment or a class of establishments to whom this Act applies in case of death while in service.

Applicability

The states which impose professional tax in India are listed below: (Click on the state name for more details)

Eligibility to be the member of EPF

Enrollment for PF membership is mandatory for:

  1. Any person employed for wages for any work of an establishment either manual or otherwise.

  2. Any person employed through a contractor or engaged as an apprentice but not being an apprentice under Apprentices Act, 1961.

  3. Any person under the standing orders of an establishment, earning less than or equal to Rs. 15,000 per month other than the excluded and exempted employees under Section 17 of the Act.

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Withdrawals from EPF account

  1. The funds from an EPF account can be withdrawn completely in full settlements on attaining 58 years of age or at the time of retirement the employee can claim for a complete settlement or if an employee remains unemployed for a period of 2 months or more or in the case of death while in service before attaining the age of retirement, in which case the nominees or legal heirs are entitled to withdraw the accumulated fund.

  2. The partial withdrawal of funds from the EPF is available for educational opportunity, medical treatment, repayment of home loan, marriage, purchase of land/house/flat, in case the establishment/factory is closed, natural calamity, an year before retirement and unemployment for a period of more than one month.

Benefits

The employees covered under the various schemes of the Act are entitled for the following benefits

  1. Employees can take advances or make withdrawals*.

  2. PF amount of a deceased member is payable to the nominees or legal heirs.

  3. The employer not only contributes towards the PF but also makes the necessary contributions towards the employee’s pension which can be used by the employee post-retirement

  4. Under the EDLI Scheme employees are properly insured in order to avail the lump sum benefit at the time of death while in service.

  5. EEE (Exempt, Exempt, Exempt) tax benefit under the Income Tax Act enables tax-free returns for the employees.

  6. Employees receive special benefits in the form of added income to their savings in the form of interest.

  7. PF account can be transferrable if any member changes employment from one establishment to another where such Provident Fund scheme is applicable.

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