What is EPF and ESI?
Employee Provident Fund (EPF)
EPF stands for Employee Provident Fund. It is a retirement benefit plan where both employer and employee contribute a certain percentage of their salary. In this process, an amount is deducted from the employee’s monthly salary. The amount is collected in the EPF account and is provided to the employees after they retire. This process is monitored by the Employee Provident Fund Organization (EPFO) of India which is managed by the Ministry of Labour and Employment. Any firm that has more than 20 employees must register with the EPFO.
EPF scheme was introduced under the Employees Provident Fund and Miscellaneous Act in 1952. According to this an employee whose pay is more than 15,000 rupees a month at the time of joining is not eligible for the scheme. Employees earning less than 15,000 rupees per month have to mandatorily become members of the EPF. Employees earning a pay greater than this limit can become a member with permission of Assistant PF commissioner, if he and his employer agree.
12 % of the salary goes to the EPF account along with 3.67 % from the company. The remaining 8.33 % of the 12 % is end to the Employee Pension Scheme. If the salary is above 6500, the company can only contribute 8.33 % of that amount to the Employee Pension Scheme. The remaining balance is credited to the EPF account. It is possible to withdraw the whole amount from the account after retirement of leaving the organization.
Employees State Insurance (ESI)
ESI stands for Employees State Insurance. This scheme is introduced to the Indian workers for their self-financing social security and health insurance. This is managed by the Employees State Insurance Corporation (ESIC) which is monitored by the Ministry of Labour and Employment, Government of India. The employees registered under the scheme are provided with a wide variety of medical, monetary and other benefits from the employer. Any firm that has more than 10 employees (in some states it is 20 employees) who have a maximum salary of 15,000 rupees must register itself with the ESIC.
For employees earning 21,000 rupees or less per month as wages, the employer contributes 3.25 % and the employee contributes 0.75 % and thus contributing a total share of 4 % towards the fund. The fund is then regulated according to the rules and regulations of the ESI Act, 1948. This include the provision of medical and cash benefits to the employees and their family.
What is the difference between EPF and ESI?
The main difference between EPF and ESI is that, EPF schemes are significant to any company and establishments where 20 or more workers are employed whereas ESI is applicable to any company in which 10 or more workers are employed. EPF is a saving scheme to help employees to save a certain part of their income for future whereas ESI deals with health care.
Types of provident fund in India?
There are four different types of provident funds in India.
- Statutory Provident Fund (SPF)
- Recognized Provident Fund (RPF)
- Unrecognized Provident Fund (UPF)
- Public Provident Fund (PPF)
Statutory Provident Fund (SPF)
Statutory Provident Fund is set up under the provisions of the Provident Funds act, 1925. It is only for the workers employed in a government or semi-government employees like the Railways, educational institutions, local authorities, universities and government run institutions.
Tax is exempted on employer’s contribution towards this provident fund but deducted on employee’s contribution. Tax is exempted for the interest credited to the provident fund and the retirement payment.
Recognized Provident Fund (RPF)
An establishment which is recognized by the Commissioner of Income Tax is called as Recognized Provident Fund. For this recognition, an organization of 20 or more members shall invest funds as per the guidelines of PF Act, 1952 an can get an approval from the Commissioner of income tax.
- If the employer rendered a continuous service of five or more years.
- If the employee has been terminated due to certain reasons such as health issues, discontinuation of business by the employer, etc.
- If the employee resigns and then later rejoins in another organization.
- If the entire balance standing to the credit of the employee is transferred to his or her account under a pension scheme in section 80CCD.
Unrecognized Provident Fund
Unrecognized Provident Fund is the PF scheme that is not recognized by the Commissioner of Income Tax.
The contribution of the employer towards provident fund is tax exempt. The retirement payment is taxable under the given circumstances.
- Payment received in respect of employer’s contribution and interest is taxable under the head salaries.
- The payment received in respect of interest on employee’s contribution is taxable under the head income from other sources.
- Payment received in respect of employee’s contribution is not chargeable to tax.
Public Provident Fund (PPF)
Anyone who is a salaried employee or a business employed person can participate in the Public Provident Fund by opening a PF account at the State Bank of India or other nationalized banks. Any amount subjected to a minimum of 500 rupees and maximum of 1,50,000 per annum may be deposited under this account. A certain sum of interest is credited on this every year which could be repayable after 15 years.
The contribution of employer towards provident fund is taxable. The interest credited to the provident fund and the retirement payment are tax free.
What are the forms required for EPF and ESI registration?
Forms required for ESI:
- Form 31: It is also known as PF Advance Form. It can be used for obtaining withdrawal, loans, and advances from the EPF account.
- Form 10D: This form is used for availing a monthly pension.
- Form 10C: This form is used to claim benefits under the EPF scheme. It is used to withdraw the funds that the employer contributes towards EPS.
- Form 13: This is used to transfer the PF amount from the previous job to the current one. This helps in keeping all the PF money under one account.
- Form 20: This form is used by the family members to withdraw the PF amount in case the account holder passes away.
- Form 51F: This form can be used by a nominee in order to claim the benefits of the Employee’s Deposit Linked Insurance.
Forms required for ESI:
- Form 72: This form is used to request for a duplicate ESIC smart card request.
- Form 23: This form is a life certificate form that is required to avail the permanent disablement benefit.
- Form 24: This form is a declaration and certificate for availing disablement benefit.
- Form 22: This form is used for making a claim for funeral expenses.
- Form 20: This form can be used for availing maternity benefits after the death of the insured person.
- Form 19: In order to claim maternity benefits and notice of work, this form has to be submitted.
- Form 16: For making claims for periodical payment of disablement benefit, this form can be used.
- Form 15: This is a form used for making claims for availing dependent benefits.
- Form 14: This is a claim form for permanent disability benefit.
- Form 12: This is an accident report form from the employer.
- Form 11: Accident book.
- Form 9: This form is used making claims for sickness, temporary disablement benefit and maternity benefit.
- Form 6: This is a register of the employees.
- Form 5A: If any beneficiary wishes to make an advance payment for his or her contribution, this form is required.
- Form 5: This form is used to return contributions made by the employee.
- Form 3: This is a form for return of declaration.
- Form 2: To make changes in the declaration form, this form is issued.
- Form 1: This is a declaration form.
- Form 01: Employer’s registration form.
- Form 1A: Family declaration form.
- Form 142: This form is used for making claims for compensation for loss of earnings and conveyance allowance.
- Form 105: Certificate of entitlement.
- Form 86: Certificate of employment.
- Form 63: Declaration form with regards to payment to the legal heir.
- Form 53: Application form for change in particulars of insured person.
- Form 37: Certificate of re-employment or continuous employment.
- Form 32: Wage contributory record for disablement benefit
What are the documents required for EPF and ESI registration?
Documents required for EPF registration:
- Digital signature of proprietor or partner or director.
- Aadhar card of proprietor or partner or director.
- PAN card of proprietor or partner or director.
- Cancelled cheque or bank statement of entity.
- PAN card of entity.
- Electricity bill of the registered office. (Not older than 2 months)
- Shop and establishment certificate or GST certificate or license issued by the government for factory.
Documents required ESI registration:
- A registration certificate obtained either under the Factories Act or Shops and Establishment Act.
- Certificate of registration in case of company and partnership deed in case of a partnership.
- Memorandum of Association and Articles of Association of the company.
- A list of all the employees working in the establishment.
- PAN card of the nosiness entity as well as the employees working under the entity.
- The compensation details of all the employees.
- A cancelled cheque of the bank account of the company.
- List of directors of the company.
- List of the shareholders of the company.
- Register containing the attendance of the employees.
What is the procedure for applying for EPF and ESI registration?
Procedure for EPF registration:
- Register the organization in the EPFO portal. It will appear as Establishment registration.
- Read the Instruction Manual as provided for a user before starting towards the registration process.
- Employer is needed to obtain DSC (Digital Signature Certificate) for registration. After getting DSC, a fresh application to be filed for the EPF registration.
- Then, UAN (Universal Account Number) is generated.
- Fill the employer details after clicking on the register button.
- Fill first name, employer PAN number, user name, mobile PIN and activate email link for EPF registration
Procedure for ESI registration:
- Login to ESIC portal.
- Fill the details on the sign up page.
- Receive username and password details.
- Enter login details on the ESCI portal.
- Select new employer registration and select unit type.
- Fill details in employer registration – Form 01.
- Pay initial contribution.
- Receiving registration letter C-11.
What if you violate the law?
EPFO law violation:
- Whoever with the motive of avoiding any payment to be made by himself under the act or compelling any other person to avoid such payment knowingly makes or causes to be made any false statement or false representation shall be liable to a punishment of imprisonment for a term which may extend to one year or with fine of 5000 rupees or both.
- An employer who violates or makes default in complying with the conditions of section 6 or clause (a) of sub section (3) of section 17 in so far as it relates to the payment of inspection charges, or para 38 of the scheme in so far as it relates to the payment of administrative charges, shall be punishable with imprisonment for a term which may extend to three years.
- An employer who violates or makes default in complying with, the conditions of section 6C or clause (a) of sub section (3A) of section 17 in so far as it relates to payment of inspection charges shall be liable to a punishment of imprisonment for a term which may extend to one year but which shall not be less than 6 months and shall also be liable to fine which may extend to 5000 rupees.
- According to the pension scheme any person who contravenes or makes default in complying with any of the provisions thereof shall be punishable with imprisonment for a term which may extend to one year or with fine which may extend to 4000 rupees or with both.
- Whoever violates or not complying with any provision of this act or any condition subject to which exemption was granted under section 17 shall, if no other penalty is elsewhere provided by or under this act for such contravention or non-compliance be punishable with imprisonment which may extended to six months but which shall not be less than one month, and shall also be liable to fine which may extend to 5000 rupees.
ESIC law violation:
- Section 84 – Penalty for false statements: This prohibits employees from making false or wrong statements for availing benefits under the Act. Any person who illegally avails benefits not meant for him using false information is liable to a penalty for imprisonment up to six months or fine up to rupees 2000.
- Section 85 – Penalty for non-compliance with provisions: Any person who is not in compliance with the provisions of the act will be liable to a punishment in the form of either imprisonment or fine or both.
- Section 85(a) – Penalty for failure to pay a contribution: Employers who do not periodically pay money to the ESIC for the benefit of employees are liable to a maximum imprisonment of 3 years and the minimum is 6 months with rupees 5000 as fine.
- Section 85(b) to (g) – Penalty for non-compliance with other requirements: Other than the payment for their contribution, there are other compliances under section 85 that employers have to follow. Non-compliance with them can attract maximum imprisonment up to 1 year or fine up to rupees 4000.
- Section 85A – Punishment for repeating an offense: If an employer convicted under the Act commits the same offense again, he is liable to a punishment of imprisonment up to 2 years along with a fine of rupees 5000.
- Section 85B – The power of ESIC to recover contributions: The Corporation recovers money from the employers if the employer either pays contribution late or fails to pay it all together. The corporation recovers such amounts by levying a penalty.
Being an employer or employee on has to register with EPFO and ESIC to avail its benefits. It is required for them to strictly follow the rules and regulations by EPFO and ESIC. Failing to comply with these will lead to punishable offenses under the act.