Salaried employees working in eligible organisations are entitled to the benefits offered by the Employees’ Provident Fund (EPF) scheme. If you belong to this category of employees, you may have seen the details of your EPF payments mentioned in your salary slip.
What is an EPF payment and who is liable to deposit these dues? Find out the answers to these questions and more in this article.
What is the Employees’ Provident Fund (EPF)?
The Employees’ Provident Fund (EPF) is a retirement savings scheme introduced by the Indian government to facilitate effective retirement planning for salaried employees. It is managed by the Employees' Provident Fund Organisation (EPFO), a statutory organisation that is under the authority of the Ministry of Labour and Employment.
Under this scheme, both the employer and the employee are required to make EPF payments to the latter’s EPF account. These contributions are typically made throughout the employment tenure, so the employee can benefit from the deposits and the accumulated interest when they retire.
Organisations with 20 or more employees must enrol in the EPF scheme and make the EPF deposits online or offline, as per the prevailing laws. Furthermore, employees earning up to ₹15,000 are mandatorily required to enrol in the scheme. Employers may also register employees earning a higher salary in this retirement savings plan.
What is EPF Payment?
An EPF payment is the amount deposited in the employee’s EPF account each month. This payment typically consists of the following amounts:
-
Employee’s Contribution
12% of an employee’s basic salary plus dearness allowance (DA) should be used to make the EPF payment each month. The entire amount goes into the employee’s EPF account.
-
Employer’s Contribution
The employer must match the employee’s contribution. So, they will also have to make EPF deposits online amounting to 12% of the employee’s salary (basic + DA). This includes:
- 3.67% to the employee’s EPF account
- 8.33% to the Employee Pension Scheme (EPS) account
In addition to this, the employer also has to pay 0.5% towards the Employees’ Deposit Link Insurance Scheme (EDLIS), 1.1% towards EPF administration charges and 0.01% towards EDLIS administrative charges.
Banks Offering EPF Online Payment Services
While EPF payments were made offline earlier, it is now possible to make EPF deposits online. Many leading banks in India have now collaborated with the EPFO to facilitate seamless digital EPF challan payments. These banks include the following:
- YES Bank
- Vijaya Bank
- United Bank of India
- Union Bank of India
- UCO Bank
- TNSC Bank
- Tamilnad Mercantile Bank
- Syndicate Bank
- State Bank of Travancore
- State Bank of Patiala
- State Bank of Mysore
- State Bank of India
- State Bank of Hyderabad
- State Bank of Bikaner and Jaipur
- Standard Chartered Bank
- South Indian Bank Ltd
- Shamrao Vithal Co-op. Bank
- Saraswat Bank
- RBS (The Royal Bank of Scotland)
- Ratnakar Bank
- Punjab National Bank
- Punjab and Sind Bank
- Punjab & Maharashtra Coop. Bank
- Oriental Bank of Commerce
- Lakshmi Vilas Bank
- Kotak bank
- Karur Vysya Bank
- Karnataka Bank
- Janta Sahkari Bank
- Jammu and Kashmir Bank
- ING Vysya Bank
- IndusInd bank
- Indian Overseas Bank
- Indian Bank
- IDBI Bank
- ICICI Bank Limited
- HDFC Bank Limited
- Federal Bank
- Dhanlaxmi Bank
- Development Credit Bank
- Deutsche Bank
- Dena Bank
- Cosmos Bank
- Corporation Bank
- City Union Bank
- Central Bank of India
- Catholic Syrian Bank
- Canara Bank
- BNP Paribas
- Bank of Maharashtra
- Bank of India
- Bank of Baroda
- Bank of Bahrain and Kuwait
- Axis Bank
- Andhra Bank
- Allahabad Bank
How to Pay EPF Online?
Making the EPF deposit online is quite easy nowadays, thanks to the advantage of internet banking and digital payments. To complete the EPF challan payment online, employers should typically follow these steps:
-
Step 1: Account Login
The first step is to log into the EPFO account using the Electronic Challan cum Return (ECR) credentials.
-
Step 2: Confirmation of Establishment Details
The next step is to verify the establishment details including the establishment’s name, ID, address, and its status of exemption, if any.
-
Step 3: ECR Upload Option
Employers must then follow this path on the EPFO portal’s dropdown menu: Payment > ECR Return Filing > ECR Upload.
-
Step 4: Preparation of ECR Details
Next, the details of the month, salary disbursal rate and contribution rate must be filled in before uploading the ECR text file.
-
Step 5: ECR File Validation
After this, the ECR file shall be validated. Upon successful validation, the employer will receive a message intimating the same. However, if the validation is not successful, the portal will display an error. The ECR file must then be uploaded again correctly.
-
Step 6: Generation of TRNN
Once the ECR file is successfully validated, a Temporary Return Reference Number (TRRN) is created on the portal.
-
Step 7: Generation of ECR Summary
Then, by selecting the ‘Prepare Challan’ option, the employer can generate the ECR summary sheet. After this, they must submit the details of the admin charges and select the ‘Generate Challan’ option.
-
Step 8: EPF Payment
The next step is to complete the EPF payment online by choosing the relevant bank and using their internet banking facility. Once the payment is complete, a transaction ID will be generated and an e-payment slip will be created.
-
Step 9: Confirmation of Transaction
The EPF challan payment transaction will then be confirmed and updated on the EPFO portal.
Penalty for Late EPF Payments
If the employer delays making the Employees' Provident Fund payment, it will result in additional interest as well as a penalty under the Employees' Provident Funds and Miscellaneous Provisions Act. The details of these charges are as follows:
-
Interest on Late Payment Under Section 7Q
If the employer does not make the EPF deposit online or otherwise by the due date, which is the 15th of every month, interest will be levied on the unpaid amount at the annual rate of 12%.
-
Penalty for Late Payment Under Section 14B
In addition to the interest levied, the employer will also have to pay a penalty, depending on the duration by which EPF challan payment is delayed. The rates of this penalty are as follows:
- If the payment is delayed by up to 2 months, 5% per annum
- If the payment is delayed by 2 to 4 months, 10% per annum
- If the payment is delayed by 4 to 6 months, 15% per annum
- If the payment is delayed by more than 6 months, 25% per annum
Note: The penalty should not be greater than the unpaid EPF dues.
Advantages of Making EPF Payments
Making EPF challan payments on time has many benefits — both for the employer and the employee. The primary advantages of timely Employees' Provident Fund payments include the following:
-
Pension Benefits
When you contribute to your EPF account for a minimum of 10 years, you become eligible for a lifetime of pension benefits. This advantage is one of the key reasons to ensure that your EPF payments are prompt and regular.
-
Insurance Benefits
EPF contributions by the employer also include payments to the EDLI scheme. This gives employees insurance coverage that can protect their families in the event of any unforeseen circumstances.
-
Tax Benefits
EPF payments are also eligible for tax benefits to the employee. Under the old tax regime, both the employee’s and the employer’s contributions are tax-deductible u/s 80C. Under the new tax regime, only the employer’s contributions offer tax benefits.
-
Premature and Partial Withdrawal
The EPF scheme also allows employees to carry out premature and partial withdrawals for specific purposes like paying for their (or their children’s) education or wedding. Conditional withdrawals are also permitted in the case of unemployment or medical emergencies.
-
No Penalty or Interest
By making timely payments to the EPF scheme, employers can avoid incurring any interest or penalty. This ensures that they do not have to be burdened with any unnecessary costs because of delayed contributions.
Conclusion
This sums up all the important details that you must know about EPF payments. If you are a salaried employee working in an organisation that is required to enrol in the EPF scheme, ensure that you are aware of the EPF payment breakup. You can also check the status of your EPF payments online to ensure that your employer is paying the dues as required. Additionally, by knowing the amount of EPF contributions made and the corpus you will have in your account at the time of withdrawal, you can manage your future financial goals effectively.