Employee’s Provident Fund (EPF)

It is applicable:

a) Every factory engaged in any industry in which 20 or more persons are employed;

b) Every other establishment employing 20 or more persons or class of such establishments

which the Central Govt. may notify;

c) Any other establishment so notified by the Central Government even if employing less than
20 persons after giving not less than two months’ notice for compulsory registration

Who is Eligible for PF?

1. It is obligatory that employees’ drawing less than Rs 15,000 per month, to become
members of the EPF.
2. As per the guidelines in EPF, employee, whose ‘basic pay’ is more than Rs. 15,000 per
month, at the time of joining, is not required to make PF contributions.
3. Every employee, including Daily Rated and Piece Rated Employees and the one
employed through a contractor (but excluding an apprentice engaged under the
Apprentices Act or under the standing orders of the establishment and casual
laborers) can become member of the scheme.
4. Nevertheless, an employee who is drawing a pay of more than Rs 15,000 can still
become a member and make PF contributions, with the consent of the Employer and
Assistant PF Commissioner.

Amount of PF Contribution

Employees’ Provident Fund (EPF) is a retirement benefits scheme where the employee
contributes 12% of his basic salary and dearness allowance every month. The employer also
contributes an equivalent amount (8.33% towards EPS and 3.67% towards EPF) in the
employee’s account.

The employee makes a contribution of 12% of basic salary + dearness allowance towards his
EPF account. The employee has to make a lower 10% contribution in case the establishment
has less than 20 employees or for industries such as (a) Jute (b) Beedi (c) Brick (d) Coir and (e)
Guar gum Factories. The employee can withdraw the accumulated corpus at the time of
retirement and also during the service period for specific purposes.

Income Tax Liability on PF withdrawal

Serial Scenario Taxability

No

1 Amount withdrawn is < Rs 50,000 before No TDS.

completion of 5 continuous years of service But while filling return
amount of pf shall be shown.
2 Amount withdrawn is > Rs 50,000 before TDS @ 10% if PAN is
completion of 5 years of continuous service furnished;
No TDS in case Form 15G/15H
is furnished No TDS.

3 Withdrawal of EPF after 5 years of continuous No need to mention in

service return as the amount is not
taxable. No TDS.

4 Transfer of PF from one account to another upon a No need to mention in

change of job return as the amount is not
taxable.

5 Before completion of 5 continuous years of No TDS.

service/if employment is terminated due to Further, the individual need
employee’s ill health. The business of the not offer the same in the
employer is discontinued or the reasons for return of income as such
withdrawal are beyond the employee’s control withdrawal is exempt from
tax