Who is Eligible for Provident Fund?

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 This fund can be withdrawn by the employee post-resignation or by the nominee/legal heir in case of the death of the employee.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.

To apply for an EPF scheme one needs to do it through the employer. The employee needs to provide all previous employment details (if any) through Form 11.

EPF schemes come in handy for those who do not have the know-how for financial investments. 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.Though a person can withdraw the entire amount at the age of 58. 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.

The following criteria apply to EPF eligibility:1. A company must compulsorily enrol with the Employees' Provident Fund Organization of India if it has more than 20 employees.2. Businesses with fewer than 20 employees may voluntarily enrol in the Employees' Provident Fund.3. Everyone who receives a wage is eligible for the EPF (Employee Provident Fund). 4. Additionally, enrolling in the EPF is required of all employees making less than Rs. 15,000 per year.5. Employees who make more than Rs. 15,000 per year might elect to remain in the EPF programme.

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.

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.

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.

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.