Understanding EPF, EPS, and Pension Funds: Can You Help Clarify My Questions?

Dear all, I have been working on EPF for the last 3 months and I have some general queries regarding what EPF, EPS, and the pension fund are. Help me out, please.

Thanks in advance.

Understanding EPF and Pension Fund

Both the EPF and Pension Fund operate under respective schemes, namely the P.F. Scheme 1952 and the Pension Scheme 1995, within the framework of the P.F. and Miscellaneous Provisions Act 1952. Both funds are meant to provide financial support to the employee when they cease to be in service. It means it is savings for a rainy day in the life of an employee. Both the Provident Fund and Pension Fund are constituted by contributions from the employer and the employee at rates stipulated under the Act and the Scheme. However, in the case of a pension, it is constituted only by a portion of the employer's contribution. While the P.F. is available in a lump sum, a pension is granted in installments every month, calculated by a prescribed formula.

This is only an introduction to set the ball rolling for someone who is working on P.F. I suggest you go through the provisions, as it is necessary for any HR dealing with statutory compliances to understand them in-depth by themselves so that they will be in a better position to comply with requirements and serve the employees.

Regards,
B. Saikumar

Understanding EPF Contributions

There are two major benefits designed by the Government through the EPFO to provide financial security to the contributor. Hence, there are two funds: one is the Provident Fund and the other is the Pension Fund. The amount you are contributing and the employer contributing for you is going to both funds as mentioned below:

- Employees' Contribution, i.e., 12% of Basic Salary, totally goes to the Provident Fund.
- Employer Contribution for you (except Admin. Charges), i.e., 12% of Basic Salary, divided as 3.67% and 8.33%.
- 3.67% goes to the Provident Fund, and 8.33% goes to the Pension Fund.

It means every month a total of 24% of your earned basic salary is deposited in your PF Account.

Thank you.

Accounts - PF

There are five accounts:

1. **AC 1 (PF)**
- (BA+DA) 12% ➔ Employee share
- (BA+DA) 3.67% ➔ Employer share

2. **AC 10 (Pension)**
- (BA+DA) 8.33% ➔ Employer share

3. **AC 2 (Administration Charges)**
- (BA+DA) 1.1% ➔ Employer share

4. **AC 21 (EDLI - Employees Deposit Linked Insurance)**
- (BA+DA) 0.5% ➔ Employer share

5. **AC 22 (EDLI Administration Charges)**
- (BA+DA) 0.01% ➔ Employer share

Note

If the BA+DA is more than 6500, then the calculation for AC 1 (employer share only) and AC 10 is as follows:
- 6500 * 3.67% = 239
- 6500 * 8.33% = 541

This is common for all salaries above 6500.

Regards,
Rajeshkumar.B

If the basic salary exceeds 6500, then the person will be excluded from the PF Act, meaning the employee can choose whether they want to invest in PF or not. However, if the basic salary is less than 6500, PF contributions are mandatory from day one of their service.

Regards,
Jyoti