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  • Know about the Provident Fund Rules

    Employees’ Provident Fund is a small saving scheme that is offered to Indian workers as well as international workers through the EPFO of India. The scheme allows accumulation of funds as well as accrual of interest on the accumulated funds. The funds thus collected are made of contributions partly from employees and partly from their employers.

    A Universal Account Number system was started in October 2014 to allow portability of provident fund accounts of employees in case of change of employment. The 12-digit UAN is also helpful in keeping track of the provident fund account details and allows a centralised login to conduct many additional functions related to a provident fund account.

    Rules pertaining to Employees’ Provident Fund

    Contributions from employees as well as employers add to the EPF However, unlike what is commonly thought to be, the entire portion of contribution from an employer doesn’t go exclusively towards the Employees’ Provident Fund. The division of funds as of November 2015 is mentioned as follows –

    1. 12% of Salary of Employee goes directly towards Employees’ Provident Fund
    2. 12% of Salary of Employer is divided as follows –
      • 3.67% of contribution towards Employees’ Provident Fund
      • 1.1% of contribution towards EPF Administration Charges
      • 0.5% of contribution towards Employees’ Deposit Linked Insurance
      • 0.01% of contribution towards EDLI Administration Charges
      • 8.33% of contribution towards Employees’ Pension Scheme

    Rules regarding Employees’ Provident Fund have undergone many changes over time and accordingly, inclusion and exclusion of employees as per those rules also change. As per the latest changes made to the EPF rules, the following should be borne in mind –

    1. Revision of minimum salary limits – Earlier, an employee having salary below INR 6500 per month had to mandatorily contribute towards EPF. The minimum salary limit has been revised to INR 15000. Thus, employees with monthly salaries less than or equal to INR 15000 now have to contribute mandatorily towards EPF
    2. Changes to pension amount – The minimum monthly pension amount has been now set at INR 1000 for the widow of a member of the Employees’ Provident Fund. For children and orphans, it has been set at INR 250 and INR 750 per month respectively. The pension amount henceforth will be calculated as per the average salary of the last 60 months, instead of 12 months
    3. Insurance Coverage – The initial coverage amount under EPS had been INR 156,000. As per the recent changes, this amount has now been increased to INR 300,000 per member
    4. Employer Contribution towards EPS – Due to the change in the minimum salary amounts, employer contribution has increased to INR 1250 per month towards EPS irrespective of if the salary is below or above INR 15000 per month
    5. Change in threshold limit – Instead of 20 employees per organisation as the minimum group size, 10 employees in an organisation will be considered eligible for EPF contribution
    6. Withdrawals – Withdrawals can be made from an EPF account through claim forms for financing an insurance policy, buying or building a house and a few other acceptable situations as per the EPFO
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