PF Law in India: A Comprehensive Guide to Provident Fund Regulations
A Provident Fund mostly known as PF is a social security scheme that can be availed after retirement, established under the Employees Provident Funds & Miscellaneous Provisions Act, 1952. This act was established to provide pension funds and deposit-linked insurance funds for the employees working in factories and other sectors, to provide financial security during retirement. The employer and employee make a certain amount of contribution for EPF, promoting employee welfare. The employer is responsible for making sure the contributions are being deposited to the employee’s account. PF laws ensure that employees save a few amounts of their salary each month. While the PF mainly focuses on retirement savings, it also provides financial support during emergencies like medical needs, education, and other issues. In this blog, we will learn about PF law in India and PF law
Applicability of The PF Law
The PF Law applies to:
- Factory: Any factory that employs 20 or more people falls under Schedule I of the Act.
- Establishments: Any establishments or class of establishment that employ 20 or more people are eligible for PF.
This Act also applies to establishments that employ less than 20 employees.
Non-Applicability of the PF Law
This PF Law does not apply to the following institutes:
- Any institute having less than 50 employees, without power, and which is registered under the Co-operative Societies Act, or any other state law related to co-operative societies are not applicable for PF.
- Any Central or State Government-controlled organization, where the employees are likely to benefit from such schemes as contributory provident funds or old-age pensions granted by the respective government.
What is PF RC in Law
Role of the Regional Committees
- Issuing Annual Account slips to members of the Fund
- Settling claims fast
- Making recommendations with regard to the extent of progress achieved in recovering contributions to Provident Fund, etc., and other charges
- Authorising advances fast
The Act Mainly Focuses on Three major Schemes
The main goal of the PF Law in India is to ensure that retirement savings for workers in the organized and unorganized sectors are easily accessible.
- Employees’ Provident Fund (EPF): The largest scheme of the Act, a retirement fund.
- Employee’s Pension Scheme (EPS): provides pension on retirement.
- Employees’ Deposit Linked Insurance Scheme (EDLI): This scheme provides employees with life insurance.
- Employees’ Provident Fund (EPF): The largest scheme of the Act, a retirement fund.
- Employee’s Pension Scheme (EPS): provides pension on retirement.
- Employees’ Deposit Linked Insurance Scheme (EDLI): This scheme provides employees with life insurance.
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Key PF Law in India
Employees and Eligibility
- It is compulsory for employees with a salary of less than ₹15,000 per month.
- Employees with salaries above ₹ 15,000 are also eligible to join on a voluntary basis.
- Once an employee joins the EPF, they become eligible for the benefits of PF even after switching jobs.
Rates of Contribution
A certain percentage of the salary of the employee has to be contributed both by the employee as well as the employer into the Provident Fund. The contribution is as follows:
- Employee Share: The employee contributes 12% of their basic pay.
- Contribution by Employer: This is 12% of the salary income of the worker. From this, 8.33% goes to the Employee Pension Scheme, and 3.67% is transferred to the EPF account.
Interest on PF Contributions
Every financial year, the government declares the rate of interest payable on the PF balances. The interest rate for the year 2023-2024 is 8.15%. The interest increases each year which helps employees save more over time. The interest earned on the employee’s and employer’s contributions is credited to the employee’s accounts every year.
- Employee Share: The employee contributes 12% of their basic pay.
- Contribution by Employer: This is 12% of the salary income of the worker. From this, 8.33% goes to the Employee Pension Scheme, and 3.67% is transferred to the EPF account.
Interest on PF Contributions Every financial year, the government declares the rate of interest payable on the PF balances. The interest rate for the year 2023-2024 is 8.15%. The interest increases each year which helps employees save more over time. The interest earned on the employee’s and employer’s contributions is credited to the employee’s accounts every year.
Universal Account Number (UAN)
A UAN is issued to each employee enrolled under the EPF scheme. It is not transferable or changeable; the same number remains with the employees throughout their career even if they change their job. Through UAN, one can easily access the PF account, balance, and transfer the amount of PF between employers.
Withdrawal Rules
Although the purpose of the Provident Fund is mainly savings for retirement, the account has some conditions under which the employees are allowed partial or full withdrawal.
Here are the basic rules of withdrawal:
- Full Withdrawal: Employees are allowed to withdraw their PF balance completely upon retirement after reaching 58 years or if they do not have any job for more than two months.
- Partial Withdrawal: Employees can withdraw partial withdrawals on various conditions including;
- Medical emergencies.
- Higher education
- Marriage
- Home purchase or renovation.
Penalties for Non-Compliance
Employers must follow all the Provident Fund regulations. Delay in depositing contributions can lead to penalties, including:- Fines: Employers may be fined for not registering with EPFO or failing to make contributions timely.
- Interest: They have to give interest on delayed contributions.
- Legal Action: In extreme cases, failing to not deposit their proper contribution can lead to imprisonment for up to one year.
How to Check PF Balance
The PF balance can be checked in the following ways.- EPFO Portal: Employees can log in to their account on the EPFO portal using the UAN and password, through which they can check their balance.
- UMANG App: The UMANG app from the Government allows employees to look at their PF balance and raise withdrawal requests.
- SMS Service: Employees can obtain information about their balance by sending an SMS to 7738299899.
- Missed Call Service: For obtaining account balance details through SMS, employees can dial a missed call to 011-22901406.
Conclusion
In the Provident Fund scheme, the government requires employees and employers to contribute a portion of the employee’s salary every month, to help employees build up considerable retirement savings. Even though this provident fund aims more for retirement savings, it is also one of the ways that provide financial support to employees during emergencies, such as medical needs, education, or housing.
