How EPF Employees’ Provident Fund Works & How Its Construct

Here salary does not include your HRA, conveyance allowance, special allowance, or any other benefit given in your salary slip. Generally, companies in the private sector don’t have a dearness allowance component so it’s only the ‘Basic Salary’ that becomes the base for EPF calculation. Under the accrual method, transactions are recorded when they are incurred rather than awaiting payment. This means a purchase order is recorded as revenue even though the funds are not received immediately. The same goes for expenses in that they are recorded even though no payment has been made.

• This content is presented “as is,” and is not intended to provide tax, legal or financial advice.
• From the menu select PF and then List of Payments to check any payment related transactions has been made or not.
• UAN is important as the entire process related to the EPF services are now operated online.
• It is a fixed amount of money that’s contributed by employees from their salary till retirement.

EPF balance is updated in your passbook after 24 hours of making the contribution. Thus, you must wait for at least 24 hours of contribution to check the EPF account. However, if your EPF balance is not updated after two days of contribution, you should contact your HR department or file a complaint at the EPFO helpdesk.

What Are Accounting Methods? Definition, Types, and Example

If you are unable to do this, you can take the help of your employer. The Employees’ Provident Fund (EPF) acts as a saving tool. The employee and the employer contribute an equal amount towards savings that can be availed upon retirement or after switching jobs. By clicking next, you will go through the further steps to input the necessary data related to PF income and the employee selected to get the PF income. List shows all the accounts and their categories (i.e. Asset, Liabilities, Equities, Expense).

They’ll be able to identify ways to increase your revenue and profit, reduce expenses, and take advantage of new investment opportunities. Alternatively, there are bookkeeping firms (like Bench) that can work directly with your CPA, meaning you can outsource both aspects of the accounting process. In larger organizations, accounting often breaks down into three different arms. At the end of the financial year, accounting pulls together a variety of reports, such as your profit and loss statement (P&L). And though understanding certain financial concepts (like the difference between revenue and profit) might be fairly straightforward, others are less so.

How can I check my PF history?

This continuity and a generous interest rate make EPF an excellent retirement tool. On top of it, EPF taxation comes under the exempt-exempt-exempt (EEE) category which means the maturity amount will not attract any capital gains. Let’s say the salary i.e. basic plus DA is Rs. 50,000 a month. FP&A, on the other hand, should be a hire (if you don’t already have that expertise on your leadership team). FP&A is the department that’s going to dig deep into the financial statements your accountant prepares, and provide valuable answers to the burning questions you have.

It offers higher interest rates between 8-9 per cent. And the best thing about EPF is that the amount that the employee pays is matched by the employer as well, and a major part of the sum is handed out at the time of retirement. EPF matures only on retirement, and the amount received is tax-free as long as the employee has been working with the company for more than 5 years. To check EPF balance, make sure that the employer has activated your Universal Account Number (UAN). UAN is a unique identification number provided for all employees enrolled under the EPF scheme.

Adding Employee

It is a lump sum amount of money that employees can avail once they retire. It can come in handy during the volatile period of retirement when a significant sum of money is needed at once. But the concept of provident funds confuses many people. On that note, we bring you this detailed guide on the provident fund, its benefits and types. Employees of exempted establishments or private trusts cannot view the EPF balance. In the case of an exempted establishment or private trust, the EPF contribution is transferred to the trusts managed by the company and not the EPF.

You automatically avail this insurance once you register for the EPF scheme. For example, let us assume you pay Rs. 5,000 per month as a part of your salary towards the EPF scheme. Your employer will match it with another Rs. 5,000 per month. You will get 8.15% receptionists (current rate of interest in EPF scheme) every year on this amount deposited with EPFO. This interest rate may change as EPFO decides on it once every financial year. If you are an employee, you pay a certain part of your salary towards the EPF scheme.

What are the benefits of a provident fund?

Members must complete a one-time registration using their UAN-registered cellphone number to access the app. Calculation of EPF Contribution made by the employee equals 12% of his/her Basic Pay plus Dearness Allowance (DA). When the Basic Pay + DA is less than or equal to Rs 15000, the employee contribution is 12% of Basic Pay + DA, whereas the employer contribution is 3.67% of the Basic Pay + DA. This is because switching between methods would potentially allow a company to manipulate revenue to minimize their tax burdens.

• The provident fund provides good investment opportunities to individuals upon retirement.
• At this stage, it is very important to note that it is not suggested to delete an active PF schedule if you have made any errors in the PF calculation process.
• This way, you can push more contributions towards EPF which can reduce your tax outgo and create a good retirement nest for you in an instrument that gives tax-free returns.
• Employee Provident Fund, also known as a Recognized Provident Fund, is the most popular type of PF in India.

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PF Accounting Management

Cash accounting is an accounting method that is relatively simple and is commonly used by small businesses. In cash accounting, transactions are only recorded when cash is spent or received. There are various types of provident funds; some are exclusive to government employees while others are meant for private employees. However, the government regulates provident funds and in India, the authority lies with the Employees’ Provident Fund Organisation (EPFO).