Breakup of EPF Contribution

As you may be aware that your Provident Fund is a compulsory contribution made by all salaried individuals working in an organization that employs over 20 employees and it is maintained by the Employees’ Provident Fund Organisation of India.

 

The EPF benefit or purpose of the Employee Provident Fund is to help all employees save a percentage of their salary they can avail in an event of unemployment or retirement.

 

Now, you may also be aware that the amount you and your employer contribute is 12% of your basic salary in total that is 24%. But do you know how this 24% is broken up? Let’s see below.

 

The entire 12% of an employee’s basic salary goes into his/her employee Provident Fund account, however, an employer’s EPF contribution is split and distributed into other components of the EPF.

 

Let’s look at how an Employer’s EPF contribution is split

 

  • 3.67% of the contribution goes into the EPF account
  • 8.33% of the contribution is put into the EPS (Employee Pension Scheme)
  • 0.5% is contributed to the EDLI scheme (Employees’ Deposit Linked Insurance )
  • 1.1% goes towards EPF administration charges
  • 0.01% goes towards EDLI administration charges

As the premium and management charges are borne by the employer and the maximum limit is set at 0.5% of Rs.15,000; therefore, an employer contributes 13.61%.

 

Important points to remember:

 

  1. The PF contribution percentage of 12% payable by the employer and employee is on a maximum wage ceiling of Rs.6,500.
  2. As an employee, your EPF contribution can be at a higher rate but employers are not under any obligation to pay a percent
  3. If you want to pay a higher percentage toward your EPF contribution a joint request from you and the employer is required, however, the employer will have to pay administrative charges for the higher wages.
  4. Wage ceiling of Rs.6,500 for international employees is not applicable.
  5. EPS contribution is made by the employer.
  6. No contribution to the pension scheme will be made once the employee crosses the age of 58 and is still in service.
  7. If the EPS pensioner was drawing a reduced pension and re-joins any organization as an employee, the employer is liable to pay a contribution of 8.33% to the EPF.
  8. If a member regains employment after the age of 50 years and has no choice of stopping the pension contribution as they may not have completed 10 years of service. The social security cover will still be applicable till he or she becomes a member.
  9. Contributions to EDLI is paid by the employer up to the maximum wage ceiling of Rs.6,500.
  10. EDLI contribution will stop once the employee crosses 58 years of age.
  11. EDLI contribution is paid only if a member is in service and PF is being paid.

By reading the above points, you will now be aware of how much you can contribute to your Provident Fund, how much your employer contributes to your EPF and what are the various components your PF amount is distributed into.