HomeEPF

Employees Provident fund(EPF) ,EPS,EDLI its calculation&ceiling limit

Employees Provident fund(EPF) ,EPS,EDLI its calculation&ceiling limit
Like Tweet Pin it Share Share Email

Here I am discussing about the practical section of EPF  & Miscellanious Act 1952.EPF contribution calculation,ceiling limit,base of calculation,rate of contribution, exceptions & important points to be considered while doing a payroll linked with this Act.

EPF is expanded as Employees provident fund.In 1952 4th March government has passed The Employees Provident Fund Act with the object of ensure the employee better future on his retirement and of his dependents on his death.The organisation created for governing such rules is called EPFO,The Employees Provident Fund Organisation.

Applicability of EPF

  • The act is applicable to whole India except the state of Jammu&Kashmir.
  • To every establishment which is a factory engaged in any Industry specified in Schedule I and in which 20 or more person are employed.
  • To any other establishment employing 20 or more persons or class of such establishment,Which the central government by notification,may specify in this behalf.
  • Cinema Theatres employing 5 or more persons
  • Any employer who wish to give such benefits to his employee can also join the scheme voluntarily

The Act does not applies to

Section 16 of EPF Act states that following establishment will not covered under this Scheme.

  • Co-operative societies registered under co-operative societies act 1912 employing less than 50 working without power.
  • Central or state government establishment or establishment set up under any Central, Provincial or State Act, providing such equivalent benefit like contributory provident fund or  old age pension.

EPF Ceiling limit

It is not necessary to bring all employees under the scheme.But it is mandatory to bring such employees who earn 15000 per month as BASIC + DA+ Retaining Allowance If Any. The new ceiling limit was introduced from 1st September 2014(01-09-2014). Earlier it was 6500 from 01-06-2001 to 31-08-2014.

However, If employer wish to provide contribution for employees whose basic+da is greater than 15000, then he can enroll such employees by submitting a joint request of both employer and employee to the EPFO department (Section 26(6) of EPF Scheme). However there is no statutory obligation arises  to the employer for such cases. It is a voluntary action.

But for a international employee. EPF should be applicable irrespective of ceiling Limit 15000.

EPF Contribution on Total salary or Basic salary or Basic + DA?

Still confusions are going on whether the EPF is calculated on whole salary which includes allowances or only Basic+ DA only?. Lets have a look at the section.

Section 2b of the PF Act. ( This section talking about What is basic wages?)

2(b) “basic wages” means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include-

(i) the cash value of any food concession;

(ii) any dearness allowance that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living, house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;

(iii) any presents made by the employer;

Section 6 of the PF Act  ( This section talking about Contribution)

Contributions and matters which may be provided for in Schemes. – The contribution which shall be paid by the employer to the Fund shall be ten percent. Of the basic wages, dearness allowance and retaining allowance, if any, for the time being payable to each of the employees whether employed by him directly or by or through a contractor, and the employee‟s contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten percent of his basic wages, dearness allowance and retaining allowance if any, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section:

Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words “ten percent”, at both the places where they occur, the words “12 percent” shall be substituted:

Explanation I – For the purposes of this section dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee.

Explanation II – For the purposes of this section, “retaining allowance” means allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.

Conclusion

Section2(b),is  talking about what is basic wages and Section 6 talking about contribution. Hence

EPF Contribution is calculated on

BASIC Salary +  Dearness Allowance( DA) + Retaining Allowance If Any

Since house-rent allowance, overtime allowance, bonus, commission or any other similar allowance does not included as basic salary under section 2(b).These allowances need not be included in EPF contribution calculation.

EPF Pension or EPS-Employees Pension Scheme.

Employees pension scheme was introduced in the year 1995 in exercise of the powers conferred by section 6A of the Employees’ Provident fund and miscellaneous provisions Act 1952 for the benefit of retired employees through out the country.

It gives the financial security of every retired employee covered under the scheme or its family members on his death .The contribution towards EPS is made by employer and government. An employer should  contribute 12% of under  Section 6 of the Employees Provident Fund Act. out of which 8.33% represent the contribution towards EPS. and government is contributing 1.16% subject to a marginal limit of 180/month/employee.

EDLI-Employees Deposit Linked Insurance Scheme

EDLI is the short form of Employees deposit linked insurance scheme. It gives insurance coverage subject to a maximum amount of six lakh (600000) .The coverage was increased from 3.6 lakh (360000)  in the event of natural death,Illness & accident.The scheme is applicable to all establishment covered under EPF Act 1952.

The funding of EDLI or contribution towards EDLI is done by employer on behalf of his employee apart from EPF & EPS contribution.

The prevailing rate of EPF ,EPS EDLI & Admin charges contribution is as follows.

Contribution by EPF Contribution EPS Contribution EDLI Charges EPF Admin charges EDLI Admin charges
Employer 8.33% 3.67% 0.5% 0.85% 0.01%
Employee 12% 0 0 0 0

Special EPF rate for –

  • Any establishment in which less than 20 employees are employed.
  • Any sick industrial company and which has been declared as such by the Board for Industrial and Financial Reconstruction.
  • Any establishment which has at the end of any financial year, accumulated losses equal to or exceeding its entire net worth and.
  • Any establishment in following industries:- (a) Jute (b) Beedi (c) Brick ( d) Coir and (e) Guar gum Factories.

Here is the rate table for the above industries

Contribution by EPF A/c No EPS A/c No EDLI A/c No EPF Administration A/c No EDLI Administration A/c No
Employer 1.67 8.33 0.5% 0.85% 0.01%
Employee 10

Very important points to be noted for contribution calculation.

  • The Employee contribution towards EPF, EPS & EDLI should be rounded up to the nearest big value.
  • EPF Administration charges is rounded up to the nearest big value. Employer should remit minimum 500 towards EPF administration charges/ Month in case total calculated of all employees is less  than 500 in a month.
    • This is discounted in case, the prevailing month has no contributory members, the minimum  administrative charges will be 75.
  • The EDLI Admin charges also to be rounded as stated above.The minimum EDLI Administration charges will be 200.
    • If there is no contributory member in a month, the minimum administration charges will be 25

Pension contribution is not required to deduct from employee in case

  1. When an employee crosses 58 years of age and is in service (EPS members ceases on completion of 58 years).
  2. When an EPS pensioner is drawing Reduced Pension and re-joins as an employee.

Charges to be paid by All exempted Organisations

  • EPF inspection charges to be paid at the rate of 0.18% or a minimum of 5
  • EDLI Admin charges to be paid @0.005% subject to a minimum of 1

How to calculate EPF,EPS,EDLI,Admin charges contribution.

Lets learn how to calculate EPF,EPS & EDLI contribution on various scenarios like employees covered under the scheme, employees joined in the scheme under voluntary enrollment by employer etc.

PF Calculation of Employees getting less than 15000

Consider an employee is getting 10500/Month .He is covered under EPF scheme. and his salary is structured as follows.

Basic 6300 + DA 2400 + HRA 1500 + Uniform Allowance 300 = Total  10500

The contribution calculated as follows.

As explained earlier in this article, Basic & DA is considered for the calculation & HRA  uniform allowance is not considered for contribution calculation. Hence PF Gross Salary is 6300+2400=8700.  The Contribution calculated on chargeable salary is as follows.

Contribution By EPF EPS EDLI Charges EPF Admin Charges EDLI Admin Charges
Employer 8700 x 3.67 %= 319.29 rounded up to320 8700 x 8.33%=724.71 rounded up to725 8700 x 0.5%=43.5 rounded up to 44 8700 x 0.85% =73.95 8700 x 0.01% =0.87
Employee 8700 x 12 %= 1044

Note:

  • The contribution of EPF ,EPS & EDLI is rounded individually, That is  each employees contribution is rounded, Rounding up is always recommended.
  • The EPF & EDLI Admin charges rounded on total of all employees contribution subject to a minimum of 500 & 200 respectively.

Calculation of EPF above the ceiling limit of 15000 

Any organisation is desirous to give benefit to its employees whose salary is above ceiling of 15000.

Example: An employee is getting 20000 /Month,The break up is as follows.

BASIC 10000+ DA 7000+ HRA 2000+ Conveyance Allowance 1000= 20000 EPF Gross = 17000

In this case we can calculate the EPF contribution in the following 3 methods.

Method 1

In this method employee & employer is contributing on Total Basic of 17000.

Contribution By EPF EPS EDLI charges EPF Admin charges EDLI Admin charges
Employer 17000x 12%-= 2040-1250 =790 15000 x 8.33%=1249.50 rounded up to 1250 15000 x 0.5% =75 17000 x 0.85 %=144.5 15000 x 0.01%= 1.5
Employee 17000 x 12 % = 2040

Note: EPS & EDLI cannot be calculated above the ceiling. the calculation is as follows.

However there is a confusion in the calculation EPF & EPS. EPS must be on 15000 maximum as per rule. Then how to calculate contribution?

EPS share is always fixed as 15000 x 8.33% =1249.5 rounded up to 1250.

EPF is calculated as 17000 x 12 % = 2040 – (EPS 1250) = 790

Method 2

In this method Employer share is calculated on ceiling limit 15000 where as employee share is calculated on total of 17000.

Contribution By EPF EPS EDLI charges EPF Admin charges EDLI Admin charges
Employer 15000 x 3.67% =550.5 rounded up to 551 15000 x 8.33% =1249.5 rounded up to 1250 15000 x 0.5 % =75 15000 x 0.85% = 127.50 15000 x0.01 % = 1.50
Employee 17000 x 12% =2040

Method3

Both Employee & Employer share is calculated on ceiling limit 15000

Contribution By EPF EPS EDLI charges EPF Admin charges EDLI Admin charges
Employer 15000 x 3.67% =550.50 rounded up to 551 15000 x 8.33% =1249.50 rounded up to 1250 15000 x 0.5 % =75 15000 x 0.85% = 127.50 15000 x0.01 % = 1.5
Employee 15000 x 12% =1800

Account Number for EPF contribution deposit.

The contribution deducted from employee and by employer should be deposited into various account provided by department. These account number is specified in the EPF deposit challan. below is a table where EPF is to be deposited.

Sr No Payment Towards A/c No
1 Employees provident fund 1
2 Employees pension Fund 10
3 EPF Admin charges 2
4 EDLI Charges 21
5 EDLI Admin charges 22

Here I am concluding my research & opinion based on my experience, You can comment, agree & disagree on my view regarding  the practical area of Employing provident fund  Act.

Comments (22)

  • Sirji lovely presentation of PF act it will really helpful to professional as well student

    Thanks

    Amit trada

    9712343947

    Reply
  • Dear Sir,
    Thanks for giving the important information about deduction/contribution of EPF.
    In our establishment as you Method 3 is using. As deduction on ceiling Rs 15000/- for both Employer & Employees.
    EPS contribution 8.33% as Rs 1250/- And Employees deduction is Rs 1800/-

    Thanks
    Kashinath Matale
    9822945546

    Reply
  • Dear sir,

    Fantastic Article.. What to be known in PF clearly elaborated.

    Further i have one query, i would be thankful if the same is cleared.

    For excluded employee under PF, whether Gross salary to be cosidered or Basic and DA to be considered ?

    Reply
  • i am confused about,It gives the financial security of every retired employee covered under the scheme or its family members on his death .The contribution towards EPS is made by employer and government. An employer should contribute 12% of under Section 6 of the Employees Provident Fund Act. out of which 8.33% represent the contribution towards EPS. and government is contributing 1.16% subject to a marginal limit of 180/month/employee.

    Pls explain

    Reply
  • Sir,
    Thanks for giving useful information
    Umasankar

    Reply
  • How to calculate EPF EDLI EPS admin charges on arrear wages

    Reply
  • What are EDLI charges for employee?
    Please help

    Reply
  • Dear sir,
    The presentation by you on EPF & MP Act. is so helpful for me to calculate contribuion and Admin. charges.

    Please provide the formate of ECR 2 Challan in txt formate
    Thanks
    shankar Bhandari
    9576168019

    Reply
  • Dear Sir,

    I am study in MHRM, my self its very help for all HR for freshers and experience guys.
    Thanking you sir
    Dharma Channaveerappa

    Reply
  • Sir,

    Thank you so much for such a great work

    kindly upload the interest rate regarding late deposit of EPF.

    Reply
  • what will be the inspection charge ( A/c 2 & 22)

    Reply
  • Thanks for providing such useful information and it is quite sufficient for a learner and request you to add date of payment also which will give a complete picture on the subject
    vasu

    Reply
  • How to calculate EPF EDLI EPS admin charges on arrear wages

    Reply
  • Sir,

    can u explain, how to calculate EDLI amount ? (in case of dearth)
    Refer with present amendments minimum EDLI benefit is 2.5 L to Max. is 6L.
    So, on what basis they will calculate ?

    Reply
  • Superb sir…thanks for sharing information… Kl

    Reply
  • Is there any provision in Employee Pension scheme to become a member of ESI by deducting monthly contribution from pension, basically to provide social security to retired employees

    Reply
  • sir may know the calculation of EDLI

    Reply
    • mohan joshi sir my basic salary is Rs. 13500/- per month maximum contribution i can deducted for my EPF

      Reply

Leave a Reply

Your email address will not be published. Required fields are marked *