Provident Fund & ESI Registration

What is EPF (Employees' Provident Fund) in India?

Almost all salaried professionals end up not receiving an elusive chunk of their monthly salary towards EPF deduction. Hence the question arises, why this deduction and where does this money get accumulated? The answer is Employee’s Provident Fund. Commonly known as EPF, this is typically a retirement benefit scheme which is available to all salaried employees. EPF is looked after and maintained by the Employees Provident Fund Organisation of India (EPFO) and a registered company with over 20 employees is mandated by law to register with the EPFO. Employee Provident Fund is a good savings platform that assists employees in saving a fraction of their salary every month. This amount can be used in the event that you are rendered unable to work, or upon retirement.

Deduction of Provident Fund from Salary

From the moment you start working, you and your employer start contributing 12% of your basic salary (plus dearness allowances, if any) into your EPF account. The complete 12% of your contribution goes into your EPF account along with 3.67% (out of 12%) from your employer. The remaining 8.33% goes from your employer’s side and is diverted to your Employee’s Pension Scheme. It is imperative to note that if your basic salary is above Rs. 6,500 per month, then your employer can only contribute 8.33% of 6,500 to your EPS and the balance amount gets credited to your EPF account. It is important to note that Contribution to provident fund is compulsory for the employees drawing up to Rs. 15,000 per month. Employees earning more than Rs. 15,000 per month can opt for the membership of provident fund.

Why is EPF useful?

This is useful because these funds are pooled together from many employees and invested by a trust. This pool generates an interest of 8% - 12%, as determined by the government and the central board of trustees. The current annual interest rate on the official EPF India website is 8.55% for the year 2017-18. EPF is applicable for you each time you receive your pay. In case you are changing jobs, it is important you update your EPF information with your new company, by providing your EPF number so that your contribution is not hindered.

Tax Benefits associated with EPF

There are a couple of benefits associated with EPF contribution, as your employer contribution to your EPF is tax-free. Your contribution is eligible for getting you a deduction of up to Rs. 1.5 lakhs under Section 80C of the Income Tax Act. The money that you accumulate in your EPF, the interest earned and the money that you will eventually withdraw after the mandatory specified period (5 years), all are exempt from Income Tax.

The list of documents required for PF and ESI registration is given below:

  1. Name of the company.
  2. Date of the setup of the organization.
  3. Scanned copy of the company’s PAN (Proprietor’s, in case of proprietorship concern).
  4. Scanned copy of the licenses available in the name of the company. (like GST).
  5. Scanned copy of cheque of company’s bank account.
  6. Address of the company with address proof.
  7. List of Directors / Partners.
  8. Address proof of Proprietor / Director / Partner of the company.
  9. Email address, Mobile number of Proprietor / Director / Partner of the company.
  10. Copy of First sale bill / Job work bill and First purchase bill.
  11. The monthly strength of employees from the date of setup.
  12. Current list of employees with their details:
  13. Name
  14. Father’s Name
  15. Date of joining
  16. Date of birth
  17. Mobile number
  18. Postal address
  19. Name of nominee
  20. Grade
  21. Salary
  22. Designation
  23. ID proof (Aadhaar and PAN)
  24. Bank A/c number with IFSC code
  25. Digital Signature of the Proprietor / Director / Partner