What is the employees’ provident fund?
The employees’ provident fund is a retirement scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The employee and the employer each pay 12 percent of basic wages, dearness allowance, and retaining allowance.
When does the Act apply?
The Act applies to a factory in Schedule I, and to any other establishment the Central Government notifies, once that establishment employs 20 or more persons. An establishment with fewer than 20 persons can join if the employer and a majority of the employees agree. The Act applies throughout India. Annual company filings are a separate calendar, on the stay-compliant page.
Who must become a member?
An employee whose basic wages, dearness allowance, and retaining allowance do not exceed ₹15,000 a month joins the scheme. A person above that ceiling is not forced in. That person can be covered if already a member, or if the employer and the employee agree. An international worker is covered under the special provisions of the scheme. A social-security agreement with another country can change that worker’s contribution.
Where does the 12 percent go?
The employee’s 12 percent goes to the provident fund. Of the employer’s 12 percent, 8.33 percent goes to the pension scheme, counted on the ₹15,000 wage ceiling, so the pension portion is at most ₹1,250 a month. The balance of the employer’s share goes to the provident fund. The deposit-linked insurance and the administration charge are extra. A late deposit draws interest under section 7Q and damages under section 14B. The employee’s own contribution is eligible for deduction under section 80C, within that section’s limit. The return itself is on the income-tax return page.
What is the Universal Account Number?
The Employees’ Provident Fund Organisation allots a 12-digit Universal Account Number to the member. The number stays with the member when the job changes. The member identity at the new establishment changes, and the new identity is linked to the same Universal Account Number. The member activates the number to use the organisation’s portal. The portal login is not the registration of the establishment.
Frequently asked questions
Four questions cover a smaller establishment, a job change, the tax deduction, and company registration.
Does a firm with fewer than 20 people have to join?
No. Coverage at that size is voluntary. The employer and a majority of the employees can agree to bring the establishment in.
Does the number change when the employee changes jobs?
The Universal Account Number stays. The member identity at the new establishment is a new number, and it is linked to the same Universal Account Number.
Is the employee’s own contribution deductible?
Yes. The employee’s own contribution is eligible for deduction under section 80C, within the limit of that section.
Does company registration open the provident fund?
No. Incorporation and the provident-fund registration are separate. The establishment registers with the Employees’ Provident Fund Organisation when the Act applies to it.
Sources
The scheme sits under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The Employees’ Provident Fund Organisation administers it.