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Employers' Provident Funds (EPF) Payment

Every employed person tries to save for rainy days and their retirement. The EPF provision is specially made to have a steady income after retirement. In the EPF fund, the contribution is made by both the employee and the employer at a certain percentage of your basic salary.

As per Indian law, the employer must contribute 12% of the basic salary to the EPF payment fund. The employee also contributes the same amount from their salary. A benefit of having an EPF account is that it is tax-free; hence, you can have a reasonable sum of money available for your use after retirement.

The Employers' Provident Funds and Miscellaneous Rules Act, 1952 governs provisions relating to the fund to maintain the security of the fund and prompt payments by both employers and employees (PF Act). According to the law, all businesses must register with the PF Act, including those that only employ contract employees with more than 20 employees. It should be emphasized that upon the PF Act's activation, the employer organization will continue to be subject to it even if the number of employees falls below 20.

The business registered with the PF Act must make the payment, even if both the employer & the employee are required to contribute to the PF account. All registered employers must make payments online as of September 2015 or face penalties. If the bank offers direct payment through its website, it can be made there and on the EPF's official website. To collect EPF debt, EPFO presently has agreements with the following banks: Union Bank, SBI, Axis Bank, Kotak Mahindra, BOB, Indian Bank, HDFC, ICICI, and PNB.

Online EPF Payment Procedure

To make the EPF payment online, follow the instructions provided.

  • Utilize your Electronic Challan cum Return (ECR) login information to access the EPFO portal.
  • Verify that the information is accurate, including the business ID, name, address, exemption status, etc. Go to the payment option in the dropdown list and choose 'ECR Upload.'
  • Upload the ECR text file after choosing 'Wage Month,' 'Salary Disbursal Rate,' and 'Rate of Contribution.'
  • The uploaded ECR file will subsequently be verified in light of the established criteria.
  • A screen displaying the message "File Validation Successful" will appear if all the requirements are satisfied.
  • If the file is not verified, an error message will appear and instruct you to correct the ECR text file in the proper format before uploading it again.
  • Then, the TRRN produced will appear; select the page's 'Verify' option.
  • Select the 'Prepare Challan' option to create the ECR summary sheet.
  • Add the administrative and inspection fees, then select 'Generate Challan.'
  • Verify the Challan amount and then select 'Finalize.'
  • Select 'Pay' next to the appropriate TRRN.
  • Select 'online' as the payment method, and then from the dropdown box, choose the bank you want to use to process the transaction.
  • You will now be required to use net banking to make a payment on the bank's internet login website.
  • Upon successful payment, you will receive the transaction ID and an electronic payment slip.
  • Once the transaction status has been updated on the EPFO page, you will be notified that a payment has been made using the TRRN number provided by EPFO.
  • There are, however, some banks that have their unique payment process. Go to the bank's website to verify the information and make the appropriate payment.

EPF Payment and EPF Return Deadlines

The date through which PF from an employee's salary should be withheld is known as the EPF payment due date. Every subsequent month's 15th should be used for this. However, the PF return and payment deadlines, which are on or before the 15th of each month, are the same.

EPF Late Payment Penalty

Two penalties are imposed upon the late payment of an EPF Challan:

  • If the employer fails to deposit the EPF contribution by the deadline, interest for late payment under Section 7Q is assessed at 12% annually for each day.
  • The following penalties should be charged if the Challan payment is not made on time as required by Section 14B:
    • 5% annual interest for a delay of up to two months
    • 10% annual interest for a two to four-month delay
    • 15% annual interest for a four to six-month wait
    • 25% interest is charged annually for delays longer than six months. 

EPF Objectives

The Ministry of Labor established the Employee Provident Fund with the following goals:

  • The fund's primary goal is to administer the provident funds of public, private, and government employees to assist them financially when they retire.
  • Employers and employees must contribute to the fund, which mobilizes savings.
  • The Employee Provident Fund seeks to maximize profits on investment while favoring its members.
  • The fund allows its members to engage in research projects and investigate specific welfare programs.
  • EPF focuses on carrying out the tasks that ultimately provide social security to the fund's participants.

Eligibility

To get EPF benefits, the following qualifying requirements must be fulfilled:

  • Employee must actively participate in the program.
  • Suppose a registered company employs a person. In that case, they can receive insurance and retirement benefits as soon as they start working there. The company must have at least 20 employees.
  • It should be noted that the program does not benefit workers in J&K.

Benefits of EPF Fund

Tax Benefits: For starters, the contribution from your salary to the EPF fund is deductible under Section 80C, under which you can save tax in the current year. Also, the interest accumulated from the fund over the years is tax-free. Until you have completed your five years, the EPF accumulated will not be payable.

Lifelong Pension: From the 12% contribution from employees and employers, 8.33% goes to EPS, a national pension scheme under the Employee's Pension Scheme 1995. It guarantees a lifetime pension if you contribute it continuously for at least 10 years, ensuring a smooth retirement.

EPFO Insurance: You can also avail of the EPFO's EDLI scheme, where the nominee can get certain payments in case of death.

Unemployment: If employees lose their current work, these funds may be utilized to cover expenses.

Resignation/Quitting Job: After resigning, an employee can withdraw 75% of their EPF funds after one month and the remaining 25% after two months of being out of work.

Death: If an employee passes away, their nominee will be handed the money collected plus interest, which will assist the family gets through the terrible times.

Employee disability: If workers can no longer work, they may use this money to help them get through a trying time.

EPF Fund Interest Rate:

Every year, the EPF interest rate is reviewed. For FY 2021–2022, the EPF interest rate is 8.10%. The interest rate is determined for the month-by-month closing balance and the entire year once EPFO announces the interest rate for a financial year and the year concludes.

The financial year, which runs from the year beginning on April 1 to the year ending on March 31 of the following year, is the one in which the new interest rates are released.

e-Nomination for EPF

The EPFO has made submitting nomination information for EPF members necessary. To ensure that, in the tragic event of the member's passing, the family receives the sufficient savings that the person had amassed during employment. Online and offline options are available for this. UAN members won't be able to access their passbooks online if they haven't submitted their e-nominations.

To submit an e-nomination, an EPFO member must include their Aadhaar, name, DOB, sex, relationship, correspondence address, bank information, & photograph. The e-Sign process must then be used to confirm the submitted information.

COVID Emergency

For COVID-19 emergencies, EPFO permits members to withdraw funds from their EPF accounts twice.

The EPFO member login page now allows EPF members to withdraw twice from their EPF accounts to cover emergency costs brought on by the Coronavirus epidemic, according to a statement from the labor ministry. Members may take a non-refundable withdrawal of up to 75% of the funds in their EPF accounts or, if that amount is less, three months' worth of their basic salaries and dearness allowance. Additionally, EPFO has established an automatic claim procedure for members whose KYC is fully compliant and is set to settle such withdrawal claims in 3 days.

Online PF Withdrawal

It is possible to withdraw partially from your EPF account to pay for things like a house, a wedding, or medical bills. The amount that can be withdrawn depends on the reason for the withdrawal.

It's important to remember that partial withdrawals have a lock-in time that varies based on the withdrawal's cause. The entire PF balance may be withdrawn in specific instances. A few instances are reaching retirement age, leaving due to a total and permanent mental or physical incapacity, moving permanently to another country, or passing away.

Here are a few justifications why EPF shouldn't be withdrawn before five years of service:

  • Benefits under Section 80C of the IT Act are not available; if someone does so and withdraws money from their PF account, the interest earned on the employee contribution will have to be taxed.
  • Suppose a withdrawal from a PF account is made within the first 5 years of employment. In that case, the amount is added to taxable income. If the withdrawal is made within 5 years and the amount is over Rs. 50,000, the tax is reduced by 10%. Individuals are exempt from paying this amount by submitting Forms 15G and 15H to the IT Department.

New Rules

Up until 2020, EPF deposits and interest were tax-exempt. However, the government stated in Budget 2021 that beginning in FY22, interest was received on deposits made to EPF and VPF (Voluntary Provident Fund) that exceed Rs. 2.5 lakh in a financial year will be subject to taxation. The interest component would be exempt up to the deposit of Rs. 5 Lakh in the given financial year if there is no employer contribution to the EPF account.

Two separate PF accounts must be kept for this purpose, one for taxable contributions & the other for non-taxable contributions starting with the current fiscal year 2021–2022, according to the CBDT (Central Board of Direct Taxes). 

It means that starting on April 1, 2022, PF contributions that exceed the threshold will be put in a taxable account, where interest will be taxed. Additionally, this change has been implemented to rationalize the tax exemptions offered to high-income earners.

Conclusion

The EPFO administers the EPF retirement benefits program. The employee and the employer monthly contribute 12% of the base income and dearness allowance to the EPF plan. 

EPF is a tax-saving tool that provides investments with substantially higher interest rates. The Employees' Pension Scheme receives a portion of the employer's contribution (8.33% of 12%). 

Frequently Asked Questions (FAQs):

Q. How to pay my EPF online?

You should have your ECR number before trying to pay your EPF online. Go to the EPFO website for your EPF online payment.

Q. How do I check the balance of my EPF online?

You can check your EPF balance through the Umang App, EPFO Member e-Sewa online, SMS, or a missed call, among other services. To check the provident fund balance if your EPF is run by an exempted organization (such as a Trust), get in touch with your employer.

Q. What is an EPF salary?

Employers and employees each contribute 12% of the fund's basic and dearness allowance to the EPF (Employee Provident Fund), a retirement saving plan (DA). It makes up a total of 24% of the contribution. Before retiring, you can withdraw a portion of this deposit.

Q. Can we make online deposits to our EPF accounts?

Employers can make online PF payments via the EPFO website or authorized bank websites (if the bank permits direct payments through their websites and the employer has an account and net banking with that bank).

Q. When may I take a PF withdrawal?

Although early retirement is not permitted until the person is 55 years old, the EPF corpus can only be taken after retirement. 90% of the EPF corpus may be withdrawn by an employee up to one year before retirement, providing they are at least 54 years old.

The UIDAI has stated that EPFO may continue to use Aadhaar-based authentication services for EPF programs following the most current circular issued by the EPFO. So, if you delink your Aadhaar from your UAN for the time being, you won't be able to use your EPF online services. 

The further circular states that the PRO will support Aadhaar seeding on-site so that a member can submit an EPF claim online if they visit the EPFO office to submit an offline claim using Aadhaar KYC. 

Q. In light of the Covid-19 problems, which EPF regulations have been modified?

The following are a few changes the finance ministry made to lessen the negative consequences of the nation's COVID-19 outage. To address their liquidity issues, employees will be permitted to withdraw either 75% of their PF balance or three months' worth of income, whichever is less.

For a set period, the Indian government paid the EPF contribution, which amounted to 24% of the employee's pay (base wages plus deferred compensation plus retaining allowance), on behalf of the employer and the employee. It only applied to the first three months of the lockdown. However, only enterprises with fewer than 100 employees, with 90% making less than INR 15,000 per month, will be subject to taxes.

Q. How is the PF amount determined?

Add both company and employee contributions to determine your provident fund contribution. The employee contributes 3.67% of the PF balance, compared to the employer's 12% contribution. The employer contributes 12% of the PF balance based on the employee's basic salary.

Q. Is PF required for salaries over INR 21,000?

While the EPF benefit is only voluntarily offered to employees making more than 15,000, many employers do so voluntarily.

Q. What happens if I don't take my PF money out for a while?

However, the account won't be considered inactive if you leave a job and don't ask for an EPF withdrawal or transfer within 36 months. According to a 2016 change to the EPF program, it will continue to accrue interest for 3 years after you reach retirement age or until you are 58.

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