Provident Fund (PF)

Provident fund is a welfare scheme for the benefit of the employees. Under this scheme, a certain sum is detected by the employer from the employee's salary as his contribution to the Provident Fund every month. The employer also contributes a certain percentage of the salary of the employee to the provident fund. The interest earned on these investments is also credited to the Provident Fund account of the employees. At the time of retirement, the accumulated amount is given to the employee, if certain conditions are satisfied.

Types of Provident Funds

Statutory Provident Fund (SPF)
Public Provident Fund (PPF)
Recognised Provident Fund (RPF)
Unrecognised Provident Fund (URPF)

Statutory Provident Fund (SPF)

Statutory Provident Fund is set up under the Provident Fund Act, 1925. They are also known as Government Provident Funds. So employees who work for these institutions would be qualified to give to them.

Public Provident Fund (PPF)

Public Provident Fund is a scheme, which is covered under Public Provident Fund Act, 1968. Any member of the public, whether in employment or not, may contribute to this fund. Therefore, even self-employed persons may contribute to this fund. The minimum contribution to this Fund is Rs.500 and maximum Rs.1,50,000 per year. The contributions made to the scheme along with the interests are repayable after 15 years unless extended. The rate of interest, at present, under the scheme is 8% per annum.

Recognised Provident Fund (RPF)

Recognised Provident Fund scheme is a scheme to which the Employee's Provident Funds and Miscellaneous Provisions Act, 1952 applies. According to this Act, any person who employs 20 or more employees, is under an obligation to register himself under the PF Act, 1952 and start a Provident Fund scheme for the employees in his organization. However, there is no restriction if the employer and the employees of such establishment wish to start a scheme even if the number of employees is less than 20. The establishment has a choice between the following two alternatives,

They may join the government scheme set up by the Provident Fund Commissioner under the Provident Fund Act, 1952.
They may start a PF scheme in their own organization and get the approval of the Provident Fund Commissioner.

The Government scheme is already recognized by the Commissioner of Income Tax but for the second scheme started by the employer and the employees themselves, they have to create a trust for running such scheme and besides taking the approval from the Commissioner of Income-Tax. In these case, the funds of the trust and required to be invested in a particular manner and the income of the Trust is to be claimed as exempt from income-tax. If the CIT grants the approval, it is called a recognized Provident Fund scheme.

Unrecognised Provident Fund (URPF)

A scheme started by the employer and the employees in an establishment, whether approved by the commissioner of Income Tax is called an unrecognized Provident Fund. Know more about

Types of Provident Fund.

Who should register for Provident Fund?

An establishment should register for Provident Fund (PF) with the Employees' Provident Fund Organization (EPFO) if it has

20 or more employees, particularly if it falls under specified establishment types as per the regulations. Once an establishment crosses this eligibility threshold, it is legally required to register for PF. However, establishments that do not meet this threshold are not statutorily mandated to register but can choose to do so voluntarily. Registering for PF helps provide social security benefits to employees, ensuring a secure retirement fund.

PF Contribution Rate

PF contribution paid by the employer and employee is 12% of (basic salary + dearness allowance + retaining allowance). Equal contribution is payable by the employee and employer. In case of establishments which employs less than 20 employees or meet certain other conditions, as per the EPFO rules, the contribution rate for both employee and the employer is restricted to 10%. For most employees working in the private sector, it’s the basic salary on which the contribution is calculated. It is necessary that employees’ drawing less than Rs 15,000 per month, to become members of the EPF. As per the guidelines in EPF, employee, whose ‘basic pay’ is more than Rs. 15,000 per month, at the time of joining, is not required to make PF contributions. However, an employee who is drawing a pay of more than Rs 15,000 can still become a member and make PF contributions, with the consent of the Employer and Assistant PF Commissioner.

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Frequently Asked Questions

Common questions about Provident Fund Registration.

A Provident Fund (PF) is a welfare scheme that provides retirement benefits to employees. Both the employer and employee contribute a certain percentage of the employee's salary to the fund each month. The accumulated contributions, along with the interest earned, are paid to the employee upon retirement, subject to certain conditions.

The four main types of Provident Funds are: Statutory Provident Fund (SPF), Public Provident Fund (PPF), Recognized Provident Fund (RPF), and Unrecognized Provident Fund (URPF). SPF is set up under the Provident Fund Act, 1925, and is mandatory for government employees. PPF is a voluntary scheme open to all individuals. RPF and URPF are schemes established by private organizations, with RPF being approved by tax authorities.

An establishment with 20 or more employees is legally required to register for a Provident Fund with the Employees' Provident Fund Organization (EPFO). However, establishments with fewer than 20 employees can also voluntarily register for PF to provide social security benefits to their employees.

The PF contribution rate for both the employer and employee is typically 12% of the employee's basic salary, dearness allowance, and retaining allowance. In some cases, the contribution rate may be reduced to 10% for both parties, as per EPFO rules.

It is mandatory for employees earning less than Rs. 15,000 per month to become members of the Employees' Provident Fund (EPF). Employees earning more than Rs. 15,000 per month can still opt to become members with the consent of their employer and the Assistant PF Commissioner.

The minimum contribution to a Public Provident Fund (PPF) is Rs. 500 per year, while the maximum contribution is Rs. 1,50,000 per year. The contributions, along with the interest earned, are repayable after 15 years, unless the account holder extends the tenure.

A Recognized Provident Fund (RPF) is a scheme established by an employer and approved by the Commissioner of Income Tax. The funds in an RPF are invested in a specific manner, and the income generated is exempt from income tax, providing tax benefits to the employees.

An establishment can register for a Provident Fund by either joining the government scheme set up by the Provident Fund Commissioner under the Provident Fund Act, 1952, or by starting its own PF scheme and obtaining approval from the Commissioner of Income Tax.

Registering for a Provident Fund provides social security benefits to employees, ensuring a secure retirement fund. It also offers tax benefits and helps employers comply with legal requirements related to employee welfare and retirement provisions.

Yes, self-employed individuals can contribute to the Public Provident Fund (PPF) scheme, which is open to all members of the public, regardless of their employment status. However, they cannot contribute to other types of Provident Funds, such as the Statutory Provident Fund (SPF) or Recognized Provident Fund (RPF), which are specific to employed individuals.