Employees’ Provident Fund Organization (EPFO)

Employees’ provident fund organization  is a statutory body established under the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 and is under the administrative control of the Ministry of Labour and Employment, Government of India.

Employees Provident Fund (EPF) is a scheme under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and is regulated under the purview of Employees’ Provident Fund Organisation (EPFO).  It is basically a social security scheme.

IMPORTANT POINTS

1. All those establishments (factory or service industry) which has more than 20 workers , it is mandatory to get registered with EPFO. But all the employees working in such a registered establishment (with EPFO) don’t need to subscribe to the Employees’ provident fund scheme.
2. Only those workers whose salary is up to Rs. 15000 need to contributes 12% of his/her basic salary (including dearness allowance) into this scheme and the same amount is also contributed by the employer.
3. For other employees earning more than Rs. 15000, it is voluntary.  Due to this clause , some rich people with huge salaries were exploiting this scheme and were contributing more money (in absolute terms) and were getting benefits in terms of TAX free interest income.
4. From Financial Year 2021-22, Government has put a cap that if the employee is contributing till Rs. 2.5 lakhs annually in the scheme then the interest income will be tax free otherwise not. And in case there is no employer contribution then the interest income will be tax free till Rs. 5 lakhs contribution. Beyond that if anyone is contributing then they need to pay tax on the interest income.
5. The EPF Interest Rate is determined by EPFO in consultation with the Finance Ministry for every financial year .
6. Once the “The Code on Social Security 2020” becomes effective, the Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 will be repealed. And new rules and regulations may kick in.
7. Once an establishment gets registered under EPFO, then it becomes a ‘formal’ establishment and once the employee gets enrolled under the EPF scheme, he becomes a formal sector worker. This is not a standard definition but its an accepted norm.