Provident Fund is a compulsory Government managed Social Security scheme for employees, who contribute a part of their salary towards their retirement fund every month.
The savings accumulate monthly, and the annual Interest is credited to the PF Account.
To calculate Provident Fund, you must add the contributions made by the employer and employee.
According to the Rules, 12% of your PF Salary will go towards the Provident Fund.
Your employer is also required to contribute the same 12%, out of which 8.33% would go towards the Employee Pension Scheme or EPS, and the remaining 3.67% is credited into the PF Account.
Salary for PF Calculation is:
Monthly Basic + Monthly DA, and
if Monthly Basic + Monthly DA is less than INR 15,000/-, then (Monthly Fixed Gross – Monthly HRA)
Para 26 (6) allows employees & employers to contribute higher than the Statutory PF Salary limit. A Joint option of employee and employer should be submitted to PF Department and obtain approval for the same.
The benefits of this fund are as follows:
- Retirement Fund – At the time of retirement accumulated contribution along with Interest is paid.
- Lifetime pension from the EPS for the member
- Widow Pension post death of a member.
- Non-refundable loan for Marriage, Higher Education, Hospitalization, construction/purchase of site/house/apartment, Payment of Life Insurance Premium
PF Calculation on Non- Restricted wages will be:
12 % of Basic + DA
PF calculation on Restricted Wages will be:
If Basic + DA > 15000, PF = 12 % of 15000
b. If Basic + DA < 15000, PF = 12 % of (PF Wages or INR 15000 whichever is lower).
For international workers (IW), the wage ceiling of Rs 15,000 is not applicable. An employee who holds a non-Indian passport is considered an International Worker. The Government of India has signed Social Security Act (SSA) with certain countries and for employees from those countries, the compliance must be as per the SSA.
Every employee who is covered under the PF Act will be assigned a Universal Account Number (UAN) by the PF Department. The UAN number must be linked with Aadhaar for remitting the contribution.
Employees Deposit Linked Insurance (EDLI) Scheme
The PF Department provides insurance coverage to all employees under the Employees Deposit Linked Insurance (EDLI) Scheme. In the event of the death of an employee while in service, the registered nominee will be paid a lump sum amount.
The EDLI contribution is calculated at 0.50% of PF Salary with a Cap of INR 75/-
If your Company is exempted from EDLI Scheme, then EDLI Inspection needs to be remitted at 0.005% of Restricted PF Salary with a minimum INR 1/-
- PF remittance should be made on or before the 15th of the following month.
- Irrespective of whether you have an IW or not, IW returns must be submitted on or before the 15th of the following month.
- Any delay in remittance will attract,
- Interest @ 12% PA under Section 7Q
- Damages under Section 14B
- 5% PA for delays up to 2 months,
- 10% PA for the delay between 2 to 4 months,
- 15% PA for the delay between 4 to 6 months &
- 25% PA for delay beyond 6 months (Subject to a Maximum of 100%)