The Employee Provident Fund Organization (EPFO) runs the Employee Provident Fund (EPF) scheme. The scheme aims to provide retirement benefits and social security. But, making contributions to the scheme is not always mandatory for employees.

EPF Eligibility Criteria

1. All employees who draw a salary can register for EPF.

1. If you are a salaried individual, earning less than INR 15,000 (basic + dearness allowance), it is compulsory for you to register for EPF.

1. If you earn more than INR  15,000 per month, you are a non-eligible employee. You don’t need to register for EPF. However, you can voluntarily register after obtaining your employer’s consent and the Assistant PF Commissioner’s approval.

1. It is compulsory for any company that has more than 20 employees to register with the EPFO.

1. Companies that employ less than 20 employees can voluntarily register for the EPF scheme.

You can opt out of EPF if you are without a PF account number

You can choose not to make EPF contributions if you have never contributed to the scheme.  For this, your salary (basic + dearness allowance) has to be more than INR 15,000. You need to be in your first job and without a PF account number. If you choose this option, the salary you get in hand will be without deductions towards the provident. Fund. There is another scenario where you can choose not to make EPF contributions. If you move to a foreign country or pursue a new job, you need not make EPF contributions in India.

Procedure to opt-out of EPF

If an employee wishes to opt-out of EPF, they need to fill out Form 11 when they join their first job. They need to furnish a letter addressing their employer in which they state that they wish to opt out of the scheme. But, if the employee makes even a single EPF contribution, this option ceases to exist.

EPF Contribution

The employer’s contribution is 12% of the sum of basic wages, dearness allowance, and retaining allowance. The employee needs to make an equal contribution. If the company has less than 20 employees, the contribution rate is 10% for both the employer and the employee. Within the employer’s contribution of 12%, 8.33% goes to the Employees’ Pension Scheme (EPS), and 3.67% goes to the EPF. The entire employee’s contribution goes to the EPF. Along with these contributions, the employer needs to make an additional contribution of 0.5% to the Employees’ Deposit-Linked Insurance Scheme (EDLI).

EPF Eligibility Criteria For Employers

As mentioned earlier, an employer does not need to register for EPF if they have less than 20 employees in their organization. They can also opt out of the scheme if most of their employees give their consent for exemption. But, in this case, they need to go through many formalities.

Created & Posted by Pooja

Income Tax Expert at TAXAJ

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