EPF Deduction Rules In Hindi: If you are employed in a private company, a part of your monthly salary is deducted and deposited in your provident fund (PF) account. Both you and your employer contribute the same percentage, resulting in a total of 24% of your salary going into your PF account.
However, a significant portion (8.33%) of this PF money is further deducted and deposited in your pension account. As a result, the computation of advance PF withdrawal is based on only 15.67% of the total deposits instead of the full 24%.
To make it easier to understand these facts, we have prepared this article to explain the new PF deduction rules of 2023. The Employees’ Provident Fund Organization (EPFO) is responsible for managing the money deposited in the PF and pension accounts of private employees. A government organization in India. EPFO establishes and enforces rules relating to EPF accounts of employees, which are implemented by companies. The PF deduction rules for 2023 are as follows:
- 1 12% of the Basic Salary gets Deposited in PF Account:
- 2 Certain Industries are Exempted From a 10% EPF Deduction:
- 3 Company’s Contribution to EPF Account:
- 4 8.33% of the Employer’s Contribution Goes to The Pension Fund:
- 5 Employees Can Contribute More Than 12%:
- 6 Interest Added Every Month in EPF Account
- 7 Interest is Added to Previous Month’s Balance:
- 8 PF Deduction is Mandatory for 20 Employees
12% of the Basic Salary gets Deposited in PF Account:
Every month 12% of the salary of the employees, which includes Basic Pay and Dearness Allowance (Basic Salary + DA), is deducted and deposited in their EPF account. This rule applies to companies or organizations with 20 or more employees registered with the EPFO.
Note: If a company has less than 20 employees, it has the option of deducting either 10% or 12% from the basic salary, depending on their preference. The company will have to deposit the amount deducted by the employee in the PF account of the employee.
Certain Industries are Exempted From a 10% EPF Deduction:
The specified industries like jute factories, beedi factories, brick factories, coconut coir factories, guar gum factories, etc. are allowed to deduct only 10% of PF. Other industries can also opt for a 10% PF deduction if they are facing economic difficulties due to a shortfall in profits or losses. However, this option is available only if the company has been declared a sick enterprise by the Board of Industrial and Financial Reconstruction of the government.
Company’s Contribution to EPF Account:
The company or organization is required to deposit an equal amount (12%) along with the employee’s contribution to the employee’s PF account. Therefore, every month a total of 24% of the employee’s salary is deposited into their account, which includes 12% from the employee and 12% from the company.
In cases where the employee’s PF deduction is 10%, the company can also contribute only 10%. In such a situation, 20 percent of the total amount is deposited in the EPF account of the employee.
8.33% of the Employer’s Contribution Goes to The Pension Fund:
Out of 12% employer’s (company or institution) contribution, 8.33% is deposited in the employee’s pension account (EPS), while the remaining amount is deposited in the EPF account. On retirement, the employee receives his full contribution and the balance accumulated after deducting the pension contribution made by the employer. This amount is subject to interest accrual.
Employees Can Contribute More Than 12%:
Employees have the option to increase their fixed 12% share in PF by applying to their company or organization. This additional contribution is known as Voluntary Provident Fund (VPF) and follows the same interest and tax exemption rules as EPF.
Under VPF, employees can opt for deduction to the extent of their entire basic pay (including DA). VPF contribution is calculated separately.
It is important to note that for VPF, the employer is not required to make an equal contribution; Only the employee’s additional contribution is credited. The condition of equal contribution is applicable to EPF only.
Interest Added Every Month in EPF Account
For the financial year 2022-23, the government announced an interest rate of 8.15% on the PF account. The interest rate of PF accounts during the last 5 years has been as follows-
|for FY 2022-2023||8.15%|
|for FY 2021-2022||8.10%|
|for FY 2020-2021||8.50%|
|for FY 2019-2020||8.50%|
|for FY 2018-2019||8.65%|
|for FY 2018 2017||8.55%|
Interest is Added to Previous Month’s Balance:
At the end of each month, the employee gets interest on the balance in his EPF account. The interest rate is determined by the government and declared at the end of the financial year. Interest is calculated as per the declared rate of interest on deposits made during the previous financial year.
These are the general pf deduction rules for private companies in 2023. It is advisable to consult EPFO or concerned authorities for specific details regarding your employment and PF account.
PF Deduction is Mandatory for 20 Employees
For any private company or organization present in India, in which 20 or more employees work, it is mandatory to get registered with EPFO. It is also mandatory for them to deduct the PF of all their employees and deposit them in the EPF account of the employees.
Even if the number of employees is less than 20, the company or institution can subscribe to EPFO. After this, you can deduct the PF of your employees and deposit it. However, there are very few such institutions. Once registered with EPFO, even if the number of employees is less than 20, all the rules and regulations of EPFO will continue to be applicable as before.
It is mandatory for organizations like cinema theaters to get registered with EPFO even if they have only 5 employees. It is also mandatory to deposit money in the PF account.