Who is Eligible for Provident Fund?

• Companies having 20 or more employees are usually required to register under EPF. For smaller companies, the scheme is voluntary.
• Employees with a salary up to ₹15,000 per month are covered mandatorily. For those earning higher, they can join with employer’s mutual consent.
• Employees contribute 12% of basic + DA with an option to contribute higher.
• The employer also matches the employee’s minimum contribution.
• Contract workers, gig workers and freelancers usually dont fall under EPF.
• International employees also qualify for EPF subject to specific terms and conditions
• EPF offers tax advantages, although specific contribution, interest and withdrawal conditions can affect taxability.

Employees provident fund is a collection of funds between the employee and the employer. As of now the employee's contribution to this fund is 12% of the basic salary, and the employer contributes 3.67%. The contributions then earn a fixed interest as set by the EPFO. The withdrawal process of this accumulated fund is totally tax-free, i.e. the contributed fund as well as the interest received on the fund are exempt from tax. This fund can be withdrawn by the employee post-resignation or by the nominee/legal heir in case of the death of the employee.

• Any salaried employee who is a resident of India is liable to be a member of the employee provident fund scheme.
• The employee is liable for this scheme right from the first day of his/her joining to any job.
• Once the employee becomes a member, he/she is accountable for provident funds benefits along with the insurance and pension benefits.
• It is mandatory for employees having a salary of Rs. 15,000 or more to be a member of this scheme although the employee can voluntarily apply for it at any wage.
• The employee contributes a minimum 12% of salary (can voluntarily contribute more).

• An employer is exempt from EPF scheme registration if the total employment of the organisation is less than 20 employees.
• An employer can also get an exemption if maximum employees voice their consent over the exemption although the latter case involves certain conditions and requires a lot of formalities.
• But in case, the total employees are more than 20 then it becomes mandatory for the employer to register for the EFF scheme.

• Mandatory: Factories and establishments employing 20 or more employees are required to register for and comply with the EPF scheme.
• Voluntary: Organisations with fewer than 20 employees are not mandatorily covered but can opt in to the EPF scheme voluntarily.
• Excluded: Certain specific industries and categories of establishments notified under Schedule I of the Employees' Provident Funds Act (EPFA) are excluded from mandatory coverage.

1. EPF schemes come in handy for those who do not have the know-how for financial investments.
2. One can withdraw 90% of the accumulated amount if he/she is unemployed for a period of 60 days or if the person is nearing retirement.
3. Though a person can withdraw the entire amount at the age of 58.
4. For women, this scheme has an added benefit as the government has decreased the EPF contribution to 8% in a bid to increase the take-home salary.

Also Read: Employees Provident Fund: Meaning, Eligibility & Calculation

For employees whose basic salary exceeds ₹15,000 per month, EPF membership is not mandatory. However, such an employee and their employer can jointly opt in to the EPF scheme by mutual consent. Once an employee is enrolled in EPF, contributions must continue even if their salary subsequently increases beyond ₹15,000 - the employee cannot opt out at that stage.

• Contract employees: If engaged through a registered contractor and included on the payroll, contract employees are eligible for EPF coverage.
• Gig workers and freelancers: They are not eligible for EPF, since there is no formal employer-employee relationship in such arrangements.

Employees of international companies who are working in India are covered under the EPFO if their country has a social security agreement with India.

Both the employer and the employee each contribute 12% of the employee's monthly salary to the EPF. Employees are free to contribute more than 12% of their income on a voluntary basis, but the employer is not required to match that amount.

Also Read: How to withdraw (EPF) pension contribution online?

Step 1: Go to the EPFO website to register your company in order to receive EPF benefits.

Step 2: Download the user guide.

Step 3: Create an account on the Unified Shram Suvidha Portal.

Step 4: Fill out the registration form.

Step 5: Attach the DSC.

• Employer: Register the establishment with the EPFO.
• Employee: Activate the Universal Account Number (UAN) and link it with Aadhaar and bank account details.

The withdrawal from an EPF is not subject to tax. Additionally, tax exemptions apply to donations and interest payments. EPF is, nevertheless, subject to taxation in specific circumstances.

Which are:

• It is taxed if an employer contributes more than Rs. 7.5 Lakhs to the Employees' Provident Fund in a fiscal year.
• The interest gained on a surplus payment from the employee's side to the EPF account that exceeds Rs. 2.5 Lakhs in a fiscal year is taxed.
• For government employees who do not have employer contributions to their EPF accounts, the interest is tax-free up to a maximum of Rs. 5 Lakhs every fiscal year.
• Employees are taxed on interest received on dormant EPF accounts.
• Except for withdrawals made before five consecutive years of employment, withdrawals from the EPF account are tax-free. 10% TDS is applied if any withdrawal amount is higher than Rs. 50,000. However, withdrawals may be excused in cases of a worker's bad health, the closure of a business, or other unavoidable circumstances.

If you are a salaried employee, understand the EPF eligibility and enrol under the scheme to plan for your retirement when you are actively working. The additional tax benefits and easy liquidity add more benefits to the scheme making it a quintessential employee welfare benefit.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

Also Read: EPF vs PPF: Difference, Interest Rate & Taxation