Provident Fund Concepts
I need to learn more about PF. What are the rules and regulations?
The best source of information on this topic is the website of Employee's Provident Fund Organization, India. It has extensive FAQs, articles and other material on its website on all matters pertaining to PF. There is a separate section called For Employers and we recommend you go through the various links in this section.
In this topic, I focus on PF is from an employer's perspective.
Can you explain the various terms and concepts related to PF?
Sure, here is a small glossary for your reference.
Provident Fund (PF) A savings scheme mandated and administered by the Government of India
Employee PF, employee contribution According to PF rules, an employee is supposed to contribute a certain percentage (12%) of his basic salary as PF. This is normally called as PF or Employee PF .
Employer PF, employer contribution Just like an employee, the employer also makes a contribution (12%) towards PF in the employee's favour. This is called as Employer PF.
PF Number Every employee and employer is assigned a unique identification number called the PF number. This is similar to a bank account number and required for checking the PF balance or for any other transactions.
PF Basic This is the salary component (usually the Basic) on which the amount of PF is to be deducted. It could also be a sum of multiple salary components like (Basic + DA). In most companies,
PF Basic = Basic + DA + Basic Arrears + DA Arrears.
Greytip Online lets you configure the formula and select the various components that make up the PF Gross.
PF Gross See PF Basic
PF Year PF accounting is done from March to February of every year. This period is called as PF Year.
Voluntary PF (VPF) An employee can decide to save a much higher amount towards PF. There is no need for a matching contribution from the employer since this is purely voluntary.
Employee Pension Scheme (EPS) A pension scheme
Can you explain the concept behind PF?
Provident Fund (PF) is a statutory deduction to be done by employers as per the rules made by Government of India. It is applicable to most employees but there are some exceptions.
As per the PF rules, both the employee and the employer make a contribution to the PF fund of the employee. Every month, the contributed amount gets added to the balance of the employee. The PF contributions earn a fixed interest (9% p.a.) and accumulate over the span of service of an employee. The intention is to make the employees to save for retirement, pension, etc.
In most cases, the Government (PF Board) collects this amount and keeps it in the employee's name. After an employee retires, all the contribution made by the employee along with interest is paid back to the employee. This is handled by the PF Board and the employer or company has no role to play in it.
For e.g. If my salary is Rs. 100/-, then I should contribute Rs. 12 as my PF. This will be deposited into my PF account. Along with my contribution, my employer also make a matching contribution of Rs. 12/- into my account. So, every month, my PF account increases by Rs. 24 (12-my contribution, 12-my employer's contribution) till the end of service.
Any salary revisions will automatically lead to changes in the PF contribution. However, if the salary changes are done to components that are not a part of PF Gross, there is no impact.
Is it possible to specify the PF Basic on which the PF will get deducted?
Certainly. You can define the PF Basic formula to include all the components that should be considered.
What is the rate of contribution / deduction for PF?
As per the latest laws in effect, an employee needs to contribute 12% of his PF Gross as PF contribution.
The employer needs to contribute 12% of the PF Gross to the employee's account.
The rate is generally published by the government.
In case of change in the percentages, it is easy to update Greytip Online to be in tune with the new policy.
Is PF applicable to everyone? Does every employee contribute to PF?
According to the PF rules, all employees who draw a PF Basic of less than 7500 must contribute to PF. This is mandatory.
For employees having PF Basic more than 7500, the deduction/contribution is voluntary. If they want, they can opt for the deduction. Else, there need not be any deduction (from both the employee and employer perspective).
But in most companies, PF is applicable to all employees. There are exceptions (people who don't contribute), but these are few.
How does Voluntary PF work? Should we offer VPF option to employees?
An employee informs the employer that he wants to contribute to VPF and the amount to be deducted towards VPF. The deduction is configured in the application and every month this amount will be deducted from the employee's salary and transferred to the PF account. There is no impact to the employer and helps the employees in meeting their goals.
Since Greytip Online handles all the work, there is no administrative overhead / headache for the employers to not provide such a facility to employees.
What are PF Admin Charges? What is PF Admin Charges Percentage?
Since government is managing the PF accounts of all employees, it charges an administrative fees to the employers. These are called as PF Admin charges.
PF Admin charges is generally a percentage of the total PF Basic. This is called as PF Admin percentage.
What is the link between PF and Income Tax?
As per Indian Tax laws, any contribution done by the employee towards PF, can be considered as an investment under Chapter 6. This can help reduce the tax liability of the employee while offering a decent return on investment.
What is Employee Pension Scheme or EPS?
The contribution made by an employer towards PF is split into contribution towards PF and the pension scheme.
Is PF compulsory to Pvt. Ltd. Company
PF is mandatory only when
1. Total number of employees touch the figure of 20
2. All of them should have worked for 3 months continuously
3. Any one of 20 employees have a salary less than Rs 6500/- p.m
4. once registered then you are required to file returns for all time to come
Bookmark this post: | 
|
Save And Share :
0 comments:
Post a Comment