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PF registration for businesses having less than 25 employees.
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Employee Provident Fund
The Employees Provident Fund (EPF) is a scheme for Indian employees governed by the Provident Funds and Miscellaneous Provisions Act, 1952. Oversight of the Employee Provident Fund falls under the jurisdiction of the Employees Provident Fund Organization (EPFO).
Any establishment with 20 or more employees can apply for PF registration in India. However, under certain circumstances and exemptions, establishments with fewer than 20 employees may still be eligible for PF registration. Upon retirement or resignation, employees receive a sum comprising both self and employer contributions along with accrued interest.
Who is eligible to get EPF registration?
For Employer
PF Registration is mandatory for all the establishments-
- That has engaged 20 or more than 20 people.
- For any other establishment that has less than 20 people then the central government has to specify the same in the notification on the behalf.
For Employee
Employees earning less than Rs. 15,000 per month are mandated to become members of the EPF. As per guidelines, employees with a basic pay exceeding Rs. 15,000 at the time of joining are not obligated to make PF contributions.
However, even if an employee's pay exceeds Rs. 15,000, they have the option to voluntarily become a member and contribute, in coordination with both the employer and the Assistant PF Commissioner.
The amount for the contribution of PF
The employer is required to obtain PF registration within one month of reaching the stipulated employee strength; failure to comply may result in applicable penalties. Once registered, an establishment remains under the purview of the Act, even if the number of employees falls below the required limit.
Employers contribute 12% of the (Basic Salary + Dearness Allowance + Retaining Allowance), with an equal contribution from the employee. In cases where an establishment has fewer than 20 employees, EPFO rules stipulate that both employee and employer contributions are limited to 10%. Typically, for employees in the private sector, the contribution is calculated based on the basic salary.
The breakup of the PF contribution
- The 12 % contribution is divided into the following subdivision:
- 3.67% of the contribution towards the Employees Provident Fund
- 1.1% of the contribution towards the EPF administration Charges
- 0.5% of the contribution towards the employee's deposit linked insurance
- 0.01% contribution towards the EDLI administration charges
- 8.33% towards the Employees Pension Scheme.
What is the Employees Pension Scheme?
8.33% of the employer's contribution is directed towards the Employees' Pension Scheme, calculated based on a capped amount of Rs. 15,000. For instance, if the basic pay is Rs. 15,000, the amount routed to the Employees' Pension Scheme would be Rs. 1,250. In cases where the basic pay is less than Rs. 15,000, 8.33% of that amount will be directed to the pension scheme, and the remaining balance will be retained in the EPF scheme.
Upon superannuation, the employee receives their full share, with the employer's share reserved for credit in the EPF account.
Who is eligible to get EPF registration?
The employer has to attach the following documents with the registration form:
1. PAN of the Partner, Proprietor, or the Director
2. Address proof (can be any utility bill but should not be older than 2 months)
3. Aadhar card of Proprietor, Partner, or Director.
4. Canceled Cheque Or Bank Statement
5. Digital Signature of the Proprietor/ Partner or Director.
6. Hired/ Rented or Leased Agreement If there is any.
EPF charges
- The contribution is rounded to the nearest rupee for each of the employees for the employee share, the contribution towards pension, and the EDLI contribution.
- The employer share is the difference between the employee Share and the pension contribution.
- The monthly payment amount towards the EPF administrative charges is rounded to the nearest rupee and a minimum of Rs.500 is payable.
- In case the establishment has no member in the month the minimum administrative charges applicable will be Rs.75.
- The monthly payment amount under the EDLI administrative charges is rounded to the nearest rupee and a minimum of Rs.200 is payable.
- In case the establishment has no member in the month, the payable minimum administrative charge is Rs.25
- Suppose the establishment is exempted from the PF scheme inspection charges of 0.18% ( Minimum Rs 5 ) is payable in place of the admin charges
- In case the establishment is exempted under the EDLI scheme. The inspection charges of minimum Rs.1 @0.005% are payable in place of the administrative charges.
Due date
Before disbursing employee salaries, the employer is obligated to deduct the employee's contribution from their wages. Subsequently, both the employee's portion and the employer's share must be remitted to the EPFO within 15 days of the close of each month.
EPF stands out for its returns from a debt instrument, enjoying sovereign backing, and the interest earned being tax-free. With an EEE (exempt, exempt, exempt) status, where contributions are deductible from income, EPF offers high returns with safety and assurance. Therefore, it is advisable to transfer the PF account when changing jobs and resist the temptation to withdraw the money.
| Features | Proprietorship | Partnership | LLP | Company |
|---|---|---|---|---|
| Definition | Unregistered type of business entity managed by one single person | A formal agreement between two or more parties to manage and operate a business | A Limited Liability Partnership is a hybrid combination having features similar to a partnership firm and liabilities similar to a company. | Registered type of entity with limited liability to the owners and shareholders |
| Ownership | Sole Ownership | Min 2 Partners Max 50 Partners | Designated Partners | Min 2 Shareholders Max 15 Directors Max 200 Shareholders 1 Director 1 Nominee Director |
| Registration Time | 7-9 working days | |||
| Promoter Liability | Unlimited Liability | Limited Liability | ||
| Documentation | Partnership Deed | LLP Deed Incorporation Certificate | ||
| Governance | – | Under Partnership Act | LLP Act, 2008 | Under Companies Act,2013 |
| Transferability | Non Transferable | Transferable if registered under ROF | Transferable | |
| Compliance Requirements | Income tax filing if turnover is more than Rs.2.5 lakhs | ITR 5 | ||
Frequently Asked Questions
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