Provident Fund Registration

Introduction:

Employees can pay a portion of their savings to their pension fund every month through the Provident Fund, which is a government-managed retirement savings system. These monthly funds grow over time and can be accessed as a lump-sum payment upon retirement or termination of employment. In India, Singapore, and other emerging countries, a provident fund is a government-managed, mandated retirement savings scheme. Employer-provided pension funds have several traits in common with these funds. A worker contributes a portion of his or her pay to the provident fund, and an employer should contribute on their behalf. In certain countries, the money in the fund is retained and managed by the government before being retrieved by retirees or their surviving families. In some situations, a provident fund will even pay payments to disabled people who are unable to work. A salaried employee will get a monthly paycheck that includes many deductions. The provident fund is one such deduction, which is clearly indicated on an employee’s payslip. Employee contributions are pooled and managed by a trust. Interest is frequently paid on pooled funds at a rate set by the government. With an employee’s monthly contributions and the required annual compound interest, the balance continues to rise.

Eligibility

The employee provident fund scheme is available to any salaried employee who is a resident of India. From the first day of employment at any work, the employee is responsible for this scheme. When an employee joins the organization, he or she is responsible for provident funds, as well as insurance and pension benefits. Employees with a salary of Rs. 15,000 or more are required to be members of this scheme, while they can apply for it voluntarily at any wage. The employee must contribute a minimum of 12% of his or her wage (can voluntarily contribute more). If the total number of employees employed by the company is fewer than 20, the company is excluded from EPF scheme registration. An employer can also seek an exemption if the majority of employees agree to it, although this instance comes with its own set of restrictions and needs a lot of paperwork. However, if the total number of employees is greater than 20, the employer is required to join the EPF system.

Employees Pension Scheme

The Employees Pension Scheme (EPS) was founded in 1995 with the primary objective of aiding employees in the organised sector. EPS will be available to all employees who are eligible for the Employees Provident Fund (EPF) plan. The Employees’ Provident Fund Organisation (EPFO) administers the system, which assures that employees receive a pension after they reach the age of 58. The scheme’s benefits are available to both existing and new EPF members. The EPF receives 12% of the employee’s base pay and Dearness Allowance (DA) from both the employee and the employer. While the person contributes their entire share to the EPF, the employer contributes 8.33 percent to EPS. After the employee retires, the plan provides a steady stream of income. If an employee has worked for six months or more, his or her service tenure is counted as one year. The working length will not be taken into account if the service period is less than 6 months. As a result, if an employee has worked for ten years and seven months, the number of years of service will be calculated as eleven. If the employee has worked for ten years and five months, the number of years of service will be ten.

Features of EPS

The following are the key aspects of the EPS scheme:

• Because EPS is backed by the Indian government, the returns are guaranteed, and investing in the scheme carries no risk. The amount that will be refunded will be set in stone and will not be altered.
• Individuals who participate in the EPF plan will be automatically registered in the EPS plan
• If the widow or widower is receiving an EPS payment, they will continue to receive it until he or she dies. After that, until they reach the age of 25, the children will get the pension amount.
• If the widower/widow remarries, the children will be classified as orphans and would receive the additional pension amount.
• Employees who earn a base salary plus DA of Rs.15, 000 or less are required to enrol in the scheme.
• Once you reach the age of 50, you will be entitled to withdraw your EPS. However, the money you receive will be at a lower interest rate.
• If the child is physically challenged, the pension amount will be paid to them until he or she dies.

Registration of EPF

The business must be registered online by the employer. Employers can use the ease of online registration to register their business by supplying the following information:

Details on the Establishment

• The Name of the Establishment, Address, Incorporation Date, PAN, and Type of Establishment are the details that must be submitted.
• The Factory License Number, Date of License, and Place of Issue of License must be included in the establishment is a factory.
• If the business is a micro, small, or medium-sized enterprise, it must present MSME registration information.

Contacts

• The email address and phone number of the authorised person must be provided by the employer.

Who to Contact

• Employers must identify a contact person, such as a manager, and provide contact information.
•  Name, Date of Birth, Gender, and Contact Information are all needed information.

Identifiers

• The licence information that the employer must supply is known as the identifiers.

Employment Details

• Employee strength, gender, type of activity, earnings over the limit, and total wages are all essential employment details.

Branch/Division

• Details about the branch, such as its name, premise number, and address.

Activities

• The employer must choose the type of business and activities to be covered from the drop-down menus.

Documents Required for EPF Registration

The employer must attach the following documents to the “Registration Form for EPFO”:

• The Proprietor’s/Partner’s/PAN Director’s Card.
• Proof of address, such as the registered office’s electricity, water, or telephone bill (not older than 2 months).
• Proprietor/Partner/Aadhar Director’s Card
• Any government-issued licence for the establishment, such as a shop and establishment certificate, a GST certificate, or any other government-issued licence.
• The Proprietor/Partner/digital Director’s signature.
• Entity’s Cancelled Cheque or Bank Statement
• If applicable, a Hired/Rented/Leased Agreement

EPF Charges

As previously stated, both the employer and the employee contribute equally to the employee provident fund. The EPF contribution amount is determined using the employee’s basic income and dearness allowance. The PF contribution is usually 12 percent of the basic pay for most employees. The following are the details of employee and employer EPF contributions:

Contribution of Employees to the EPF

Every month, the employer deducts 12 percent of the employee’s salary (basic + dearness allowance) as an EPF contribution. The entire contribution is deposited into the employee’s EPF account.

Contribution of the Employer to the EPF

In the same way, the employer contributes 12% of the employee’s income to the EPF. The employer’s contribution, on the other hand, is divided into the following categories. However, in other cases, EPF contributions might be as high as 10%. For example, suggest the following scenarios:

• If a company has up to 20 employees, it is considered a small business.
• The corporation suffers losses that exceed its whole net worth.
• If a business is involved in the beedi, jute, brick, guar gum, or coir industries, it is considered a beedi, jute, brick, guar gum, or coir business.

The contribution of female employees may be different. According to the union budget for 2018-2019, new female employees can contribute 8% instead of 12% to the EPF. This benefit is only available during the first three years of employment. This revision was prompted by the following factors:

• To enable women to earn more money at home
• To encourage businesses to hire more women in order to close the gender gap

Even if a woman employee contributes 8% to EPF, the employer is required to maintain a 12 percent EPF contribution. Employees can also contribute more than 12% to their EPF. This is known as VPF which stands for Voluntary Provident Fund (VPF).

Withdrawal

A set amount is placed into the PF account each month. This money earns interest and grows into a sizable fund. A large amount is collected in the EPF account at the conclusion of employment to assist an individual in meeting their financial demands throughout their retirement time. When a person reaches the age of 58, he or she is eligible to withdraw the entire corpus. If a person is 54 years old or older, he or she can withdraw 90% of their EPF corpus before one year of retirement. Despite the fact that EPF is a retirement savings plan, funds can be withdrawn in specific circumstances.

Only limited circumstances allow for a partial withdrawal of an EPF balance. They are:

• Medical reasons
• Marriage\Education
• Purchase of land or house purchase/construction
• Repayment of a mortgage
• Renovation of a home
• Before retiring, undertaking a partial withdrawal.

In the event of unemployment, while changing jobs, EPF withdrawal is also possible. If a person resigns from their job and is unemployed for a month, they can withdraw 75 percent of their PF account to cover their costs. If an individual is unemployed for more than two months, the remainder of their EPF can be withdrawn. This feature can be used at any moment if you are unemployed. The withdrawal of EPF funds does not require the fulfilment of a specific number of years. As a result, these withdrawals can be claimed using the various composite forms accessible on the EPFO e-portal.

Case Laws Related to Employees Provident Fund

Venkatesh Co. Ltd. v. Union of India and Others[1]

When the PF Authority withdraws an establishment’s exemption, the removal orders cannot be contested after more than four years have passed.

Pragati Metal Works vs. Regional Provident Fund Commissioner[2]

It cannot be argued that a textile unit was purchased to run there a unit manufacturing stainless steel utensils on a continuous basis. Some of the licences that were previously used for the purpose of manufacturing will no longer be valid.

Motor Industries Co Ltd. Vs Reg Provident Fund Commissioner and other[3]

Under the EPF and MP Act, an employee who earns more than Rs. 5000/- is considered an excluded employee. The question of whether there is any legal obligation to pay a 12 percent contribution over and above the monthly wage of Rs. 5000/- cannot be raised. The employer’s contribution of 12 percent up to Rs. 5000/- and 10% above Rs. 5000/- was absolutely legal.

Pushpa, Widow of Virendra Kumar Yadav Vs Jiyabai, Widow of Babulal Yadav[4]

As per Paragraph 61 of the EPF Scheme, an employer is legally obligated to pay the PF money to the nominee named. He is unable to give the amount on the basis of a succession certificate produced by another family member. However, the nominee cannot claim absolute ownership of that sum without regard to heirs’ rights. As a result, they have an equal right to share.

Conclusion

Employee Provident Fund and Miscellaneous Provisions Act, 1952 governs EPF. EPF is a great way for salaried people to save and establish a suitable retirement fund. Over the course of a career, one may change jobs several times. However, under UAN, the benefit of this programme is continuously added. EPF is a wonderful investment option since it offers tax advantages. It ensures that employees earn more money and save more money in the long run. However, there are a few stumbling blocks. An ELSS fund, for example, maybe a better investment plan or alternative (tax saver fund). ELSS funds are a form of an equity fund that helps investors achieves inflation-beating returns during their retirement years. This tax saver fund draws many investors because of its low lock-in time and strong returns.

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References:

[1] Venkatesh Co. Ltd. V/s Union of India and others [2003-I-llJ-P.227 (Rajasthan High Court)]

[2] Pragati Metal Works Vs. Regional Provident Fund Commissioner [2001-III LLN P. 985 (Bombay High Court)]

[3] Motor Industries Co Ltd. Vs Reg Provident Fund Commissioner and other [2000 LLR P. 1309 (Karnataka High Court) ]

[4] Pushpa, widow of Virendra Kumar Yadav Vs Jiyabai, widow of Babulal Yadav [1998-IV LLN P. 361 (Madhya Pradesh High Court)]