The EPF system is very beneficial to workers in many different industries. They can put money down for retirement and have a cushion for unexpected expenses. The Provident Fund (PF) serves as a vital financial safety net for employees. However, it is important to understand the PF withdrawal limit as well as the maximum limit of PF contribution by employee to make informed financial decisions when needed.
Regarding EPF contributions, this article will cover all you need about the PF Limit. Everything from the amount you can invest to why this plan is crucial to your financial future will be covered in the article. Read on to find out all about the PF limit and more.
What is EPF?
In India, workers can access a savings scheme called the Employees’ Provident Fund (EPF). The contributions to the plan of both the employer and the employees must be made monthly. Workers who retire know that their EPF funds will be there for them.
This scheme additionally gives match savings withdrawals for specific reasons like a home down payment, medical expenses, or college tuition. The Ministry of Employment and Provident Funds, EPFO, a government agency, manages the Provident Fund to ensure employees’ financial stability.
Eligibility Criteria
The Employees Provident Fund (EPF) scheme in India provides a number of benefits to employees. To be eligible to participate in the EPF plan, you must meet the following criteria:
- Since it encompasses the entire country, the EPF system is accessible to workers in any of India’s states.
- The government mandates that all employees with salaries up to Rs.15,000 can have an EPF account.
- To open an EPF account, workers whose annual salary is more than Rs.15,000 need the approval of the Assistant PF Commissioner.
- Any business employing 20 or more people must enrol in the EPF program.
- For companies with less than twenty employees, the EPF plan offers voluntary participation.
How does PF Work?
Companies with 20 or more employees are legally obligated to provide PF benefits to their workers. To participate in the EPF plan, your monthly income must be less than Rs. 15,000. You can still join the PF system without restrictions if your income is more than Rs. 15,000.
Even though the base contribution cap is 12%, you can increase your voluntary payments to a maximum of 12%. Yet, the company will not match this increased amount.
The EPF offers its members a range of pension and insurance benefits through the Employees’ Pension Scheme and the Employees’ Deposit Linked Insurance Scheme.
Since EPF is an exempt-exempt program (EEE tax category), your maturity amount will not be subject to taxes if you maintain the same job for five consecutive years. Your PF funds are accessible to your designated beneficiary during your untimely demise.
Benefits of the EPF Scheme
There are a lot of benefits to investing in the EPF scheme. Some of these are mentioned below. You must read and understand carefully to make informed decisions:
Plans for Retirement
Pensions are guaranteed to retirees of EPS to assist them in their twilight years. Workers’ pensions are a fixed benefit that increases proportionately to an employee’s salary and years of service.
Path to Financial Independence
No longer will retirees have to rely solely on savings or family support to meet their living expenses; the pension they receive from EPS allows them to maintain their financial independence.
Death Compensation
The EPS system ensures that in the unfortunate event of the employee’s death, the spouse and dependent children will receive pension payments, providing them with financial security.
Administration of Nominations
By allowing participants to designate their spouse, children, or dependent parents as pension beneficiaries, the EPS system ensures a smooth transfer of benefits in the event of the employee’s death.
Transferability
It is possible to transfer EPS benefits to a new employer when an employee changes jobs. Their service years and continuity can be preserved in this way.
New Revision in Employees Provident Fund (EPF) Limit
Employers contribute 8.33% of workers’ monthly income to the Employees’ Pension Scheme (EPS) and 12% to the Employees’ Provident Fund (EPF). The EPS Scheme, however, caps this payment at Rs 1,250 per month, or 8.33% of Rs 15,000.
Employers must contribute 0.5% of their employees’ total income, up to a maximum of Rs. 15,000 per month wage, to the Employees’ Deposit Linked Insurance (EDLI) Scheme.
The maximum amount employers can contribute to the Employees’ Deposit Linked Insurance Scheme (EDLI) each year is 0.5% of Rs. 15,000 in pay. Employers and employees alike are required to put money into the EPF.
Not long after the Ministry of Finance unveiled a new plan, the EPF rates increased from 8.10% in 2021–22 to 8.15% in 2023–24. There is a PF limit of 5 lakh rupees (Rs. 5 lakh) for government employees and 2.5 lakh rupees for non-government employees in the fiscal year 2023–24.
An official order issued on July 24, 2023, directed the field offices of the Employees’ Provident Fund Organisation (EPFO) to deposit 8.15 per cent interest on the Employees’ Provident Fund (EPF) into the members’ accounts for the fiscal year 2023–2024. Once the EPFO field offices have verified the subscribers’ identities, they can credit their accounts with the interest.
Documentation Required
The kind of entity applying will determine which types of documents are typically required for PF registration. Some examples of these documents are:
For proprietorships
- Name of the applicant.
- Pan card of the proprietor
- ID evidence of the owner, such as a driver’s license, passport, or election card
- Address evidence of the owner.
- Address proof
- Complete facts about the application, including their residence address and phone number.
For Partnership Firms/LLP/Companies
- Name of the partnership firm, LLP, or company.
- Certificate of Registration for Partnership Firms
- Certificate of Incorporation for a Limited Liability Partnership or a company.
- Partnership agreement in the case of partnership businesses or LLP.
- Partners’ identification – PAN card, election card, passport, or driver’s license
A list of all partners, including their phone numbers and addresses, should be provided for a partnership firm or LLP — list of all Directors, including contact information in case of a company.
Society/Trust
In the case of a society, trust, etc., the organisation must be registered with the appropriate government.
- Certificate of incorporation for society/trust.
- ID evidence for all members of society.
- Complete information on all members, including their full addresses and phone numbers.
- Pan card
Common Documents Required for All Entities.
- Sales bill
- Bill of raw materials and equipment
- GST Registration Certificate, if you are registered for GST.
- Bankers’ names
- Salary and pay records, including all vouchers and balance sheets.
- Employees’ joining date, father’s name, and birth date.
- Salary and PF Statements.
- The cheque has been cross-cancelled.
FAQ’s:-
The PF limit applies to all employees covered under the EPF Act whose basic salary and dearness allowance do not exceed Rs. 15,000 per month.
You can claim up to 1.5 lakh rupees in PF contributions as a tax deduction.
Without a doubt, it is a top scheme when it comes to tax benefits. Using it can get you a tax break of up to 1.5 lakh.
Anyone who receives a paycheck can put money into the EPF. Joining the EPF is legally mandated for anybody earning less than Rs.15,000. However, employees with incomes over Rs.15,000 are given the choice to continue their participation in the EPF program voluntarily.
Yes, the PF limit is uniform across all states in India. It is a nationwide standard set by the EPFO.
For employees with a salary exceeding the PF limit, contributions are calculated only on the capped amount. Any amount above the limit is not considered for PF contributions.
Employers must contribute the capped amount (Rs. 15,000 per month) even if the employee’s salary exceeds this limit.
The PF limit may be revised periodically by the EPFO. The EPFO communicates any changes to the limit through official notifications.