EPF Return: Make Provident Fund payment online

Employee’s Provident Fund (EPF) is a scheme introduced by EPFO through which the employees and their employer contribute a part of their salaries towards the PF fund in order to build a corpus for retirement.

In order to contribute towards the EPF Scheme, an establishment first needs to get itself registered on the EPFO Portal which in maintained by Ministry of Labour & Employment, Government of India.

The EPFO Portal allows the establishment to make the PF payment online.

Steps to file monthly PF return online

In order to make the PF payment online through the EPFO Portal, the following procedure is to be followed:

  1. Login to EPFO Portal

    Login to the EPFO portal using the credentials sent on your email Id upon successful sign up with Unified Shram Suvidha Portal.

  2. Download the ECR File

    Navigate to Payment and click on ‘ECR/Return Filing’. Next, click on ‘ECR Upload’, go to ‘Download ECR File’, select the wage month for which you want to file PF return, select the file type as ‘ECR’ and click on ‘ECR File Download’. An ECR file containing the list of employees against their UAN will be downloaded.

  3. Enter wage details

    Fill in the details regarding:
    a) Gross wages: Gross wages are the
    b) EPF wages: Basic Wages + Dearness Allowance
    c) EPS wages: Basic Wages + Dearness Allowance
    d) EDLI wages: Same as EPS wages
    e) EPF Contribution remitted: 12% of EPF wages (or as decided by organization)
    f) EPS Contribution remitted: 8.33% of EPS wages
    g) EPF EPS difference remitted: Difference between (e) and (f)
    h) NCP Days: Non-Contributing Period i.e. Absent days
    i) Refund of Advances

  4. Save as Text Document

    Next, save the excel file as a CSV file. Make sure to delete the first column with the particulars. Now, open the CSV file and remove all the extra commas, if any. Next, replace all the commas (,) between two fields with #~# and save the file as a text document.

  5. Upload the ECR file

    Now, login to the EPFO Portal, got to Payments> ECR Filing> ECR Upload. Select the Wage Month for which you are filing the return and other required details and upload the Text file.

  6. Generate TRRN and make payment

    Next, verify the ECR uploaded and a Temporary Return Reference Number (TRRN) will be generated. Further, click on “Prepare Challan” and fill in the EPF and EDLI charges as applicable. Also, enter the number of employees, excluded number of employees and their salary. Now, click on “Generate Challan”> “Finalize” and make the payment by clicking on “Pay”.

Due date of PF payment and return

PF Payment: The due date for PF Payment, i.e. the date by which employees’ PF shall be deducted is on or before 15th of the next month.

PF Return: The due date of filing PF return on the EPFO portal is on or before the 15th of every month.

Penalty for late filing of return

When there is a delay in filing of PF return, the following interest/ penalty is levied:

  • Interest under Section 7Q: An interest of 12% per annum, for every single day is levied on the employer if there is a delay in filing PF return.
  • Penalties under Section 14B in case there is a delay in making the challan payment:
    • 5% interest per annum for a delay upto 2 months
    • 10% interest per annum for a delay of 2-4 months
    • 15% interest per annum for a delay of 4-6 months
    • 25% interest per annum for a delay of more than 6 months
Can an employee contribute more than 12%?

Yes, an employee can contribute more than 12% towards PF contribution

Can an establishment go for voluntary PF registration?

Yes, an establishment can opt for voluntary PF registration even if they are not employing more than 20 employees.

PF and ESI registration for employers: Guide

The Ministry of Labour & Employment, Government of India, has come up with a common PF and ESI registration. Employers can make the registration online through the Unified Shram Suvidha Portal.

PF-ESI Registration Process

  1. Sign up on the Shram Suvidha Portal

    Firstly, sign-up on the Unified Shram Suvidha Portal and a verification link will be sent to your email-id. After verifying, you will be re-directed to a new page for creating your User Id and Password. 
    (Note: Username and Password are case sensitive)

  2. Login to your account

    Next, login to your account by using the credentials used for signing up.

  3. Navigate to “Register for EPFO-ESIC”

    After logging in, go to “Register for EPFO-ESIC” and click on “Apply for New Registration”

  4. List of Acts

    Next, you will be shown the following List of Acts:

    a. Employees’ State Insurance Act, 1948
    b. Employees’ Provident Fund and Miscellaneous Provision Act, 1952

    Select the Act for which you are seeking registration. Select the Act applicable to you. If only one of the Acts are applicable, choose that Act.

  5. Establishment Details

    Further, enter your:

    a. Establishment Name as per PAN
    b. Address of Establishment
    c. Establishment Setup Details
    d. Factory License Details, if any
    e. Start-Up registration number, if any
    f. MSME registration number, if any
    g. Lastly, enter ownership details

    Save draft and click on “Next”.

  6. eContacts

    Next, enter the email address and mobile number of the authorised person.

  7. Contact Persons

    Next, you are required to enter:

    a. Primary Manager details (if any)
    b. Primary Owner details

    Similarly, you can add more owners.

  8. Identifiers

    Now, select any identifier from the dropdown list and fill in the details

    For instance, if you select “Goods and Service Tax Identification”-

    a. Enter GSTIN in “Identifier Value”
    b. Further, enter the name as on the GST Registration Certificate in “Name of Identifier”
    c. Thereafter, enter the date on which the GST Registration Certificate was issued in “Date of Issue”,
    d. Next, enter the name of the issuing authority in “Issued by (Authority) ”, which in case of GSTIN would be Goods and Service Tax Department
    e. Lastly, enter the place where the document was issued in “Issued at (Place)”

  9. Employment Details

    Further, you are required to enter:

    a. Employee details covered under EPF Act (Note, these details are only required for EPFO registration)
    b. Total number of employees employed for wages directly and through immediate employers on the date of application (Note, these details are only required for EPFO registration)
    c. Other common details

  10. Branch/ Division

    After that, enter branch/ division details, if any.

  11. Activities

    Further, select the primary business activity, nature and category of work from the dropdown.

  12. Attachments

    Lastly, upload the documents from the dropdown for proof of address, date of setup proof, license proof.

    Also, upload the specimen signature (Sample format is available on the website).

    Finally, upon filling all the necessary details, you will be required to attach DSC and submit the form. Then, an email will be sent on the registered email address. Moreover, you will also receive the login id and password using which you can login to EPFO and ESIC.

FAQs

Can I register only for EPFO or ESIC?

Yes, you can register either for both or any one of them. Select the Act applicable to you from the options provided before starting registration process.

Do I have to submit any physical documents?


All documents are to be uploaded online, no physical documents are required to be provided.

Online EPF Registration for Employers : Step by Step Procedure

Employees Provident Fund is a scheme launched by the Government of India in order to make sure that the salaried employees have an appropriate sum of money to support themselves during their retirement. EPF is monitored and regulated by the Employees Provident Fund Organisation.  Equal distribution of the contribution takes place between the employer and the employee. Both the employer and employee individually contribute 12% of the basic salary of the employee to the scheme every month. This article will guide you through the step by step EPF Registration Procedure.

What is the Eligibility Criteria for EPF Registration?

It is mandatory for all businesses to register for EPF if:

  • The factory is employing 20 or more than 20 people
  • Any other establishment employing 20 or more than 20 people

It is also important to note that the organisation will have to register themselves within 1 month from the time they reach the strength, penalties will be charged provided that the registration is not done within the given one-month timeline. If there is an organisation where EPF is not compulsorily applicable, they can also register their organisation and apply to the Central PF Commissioner if the employer and majority of the employees agree to have an EPF registration.

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EPF Registration Procedure Details

In order to make the entire process of registration smooth and hassle free, EPFO has started providing online facilities for registration, making contribution and for filing return. The following details are mandatory in order to register for EPF:

  • Name and address of the establishment
  • Details of head office and all branches
  • Date of Incorporation of the establishment
  • Details of your employees-total employee strength
  • Define the legal status of the company i.e., private or a public company or partnership
  • Business activities involved in i.e. service, production or manufacturing etc.
  • Address and designation of the directors, partners or owners
  • Bank details of the partners
  • PAN details
  • Total salary component of the employees
  • Employees’ basic details like name, date of joining, salary etc.

EPF Registration Procedure

Follow the below-mentioned steps for EPF registration procedure:

  1. Open EPFO’s Website

    Go to the website of Employees’ Provident Fund Organisation and click on ‘Establishment Registration’

  2. Click on ‘Download Menu’

    You will now be taken to the home page of Shram Suvidha, click on ‘Download Manual’ and go through the manual before proceeding any further

  3. Click on ‘Sign Up’

    Now as you are registering for the first time click on ‘Sign Up’

  4. Enter the required details

    You will now be required to fill out details such as name, birth date, email address and mobile number. After filling out the details click on ‘sign up’ to open an account

  5. Click on ‘Registration for EPFO ESIC’

    Now click on ‘Registration for EPFO ESIC’ and go to ‘Apply for New Registration’

  6. Enter Employers Details

    You will now be directed to a page where you are required to add in the details related such as information about the owner of the establishment (name, address, email id etc.) and PAN card details of the employer

  7. Click on ‘Submit’

    Review the details once again and Click on ‘Submit’

  8. DSC Registration

    The Digital Signature Certificate registration is compulsory for first-time registrations so, the next step is employers DSC registration in order to authenticate the details submitted earlier

  9. Add Username

    Once DSC registration is done. You have to select a username

  10. Mobile Verification

    You will now receive an OTP on your registered mobile number for verification, enter the OTP and select the ‘I agree’ checkbox

  11. Email Verification

    Lastly, verification on the registered email address will be sent to you and after confirmation of that the employer’s login will be activated

Documents for EPF Registration

Below is the list of all the documents that we require for establishments for PF reregistration online:

Company/LLP Partnership Firm Society/Trust Properiteryship Firm Employees
Incorporation Certificate Certificate of Registration Firms Certificate of Incorporation Applicant’s Name

Name, Father’s Name, Date of joining

ID proof of Directors Partnership deed MOA and Bye-Laws PAN Card Number Date of Birth, Mobile Number, Postal Address
DSC of Director Id proof of partners – Driving license/Passport/Voter Card PAN Card Number Id proof – Driving license/Passport/Voter Card Name of Nominee, Grade, Salary
List of all directors with Address and ID Proof List of all partners with Address and ID Proof President & Members Address and ID Proof Address proof for the premises Designation, ID proof (Aadhaar Card/ PAN Card), Bank A/c number with IFSC code
MOA and AOA     Residential Address proof and Telephone number Voluntary Application, Employee details, Signature, Date of Agreement

Apart from the above-mentioned documents, all the establishments must also have the following documents. 

  • First sale invoice
  • GST Certificate, if registered under GST 
  • Invoice of first inventory and machinery purchase
  • Name and address of the partner bank
  • Monthly employee strength record
  • Salary and wages register, all vouchers, balance sheets from day one to the date of applying for registration
  • Date of joining of the employees, along with their date of birth and father’s name
  • Cancelled cheque 
  • Salary and EPF statement
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FAQ’s

Is it mandatory for an employer to registration all the multiple establishments with EPFO?

Yes, the employer has to register with EPFO for every establishment.

I forgot the User ID/ Password for login into the portal?What should I do?

An employer can click on ‘Forgot Passward’ and reset it using the establishment ID, primary email ID and mobile number.

While registering the establishment, which PAN number should be added? Owner’s PAN or Establishmnet’s PAN?

While registering the establishment the PAN which is in the establishment’s name has to be entered.

If an establishment has less than 20 employees can it be registered under EPF?

Yes, establishments that are employing less than 20 employees can voluntarily register under EPF. The rate of contribution for these type of organisations is 10% compared to the normal 12% contribution made by establishments with 20 or more employees.

What is UAN?

UAN is short for Universal Account Number which is allotted by Employees Fund Organisation (EPFO). It can be issued to the individuals who have a valid PF number. UAN acts as an umbrella which links multiple Member Identification Numbers issued to a single member under single Universal Account Number. When members switch organisations, they are allotted different IDs. Through UAN, a member will be able to view details of all his IDs linked to it.

If a member is already allotted Universal Account Number (UAN) then he / she is required to provide the same upon joining a new establishment. This will enable the employer to mark the new allotted Member Identification Number (Member Id) to the already allotted Universal Identification Number (UAN).

Is it possible to modify certain detials post registration?

Yes, an employer can modify details post the registration process in either of the following ways:

Via Email Address: Log in to the Employer Portal. Under the ‘Profile’ section, click on ‘Confirm primary email’. The employer needs to enter a new email id replacing the id that appears and then click on the ‘Send Verification Link’. An email message will go to the registered email id. The employer must go to the email account and click the link in the message received. The verified email id will be recorded in the system and in the future, all emails will be received on the new id.

Via Mobile Number: The employer must log in to the Employer Portal. Under the ‘Profile’ section, click on “Edit primary mobile number” link. The employer must enter the new mobile number and then the employer may receive an SMS with a PIN on the new mobile number. Enter the PIN and then press ‘Change Primary Mobile.’ Confirmation  SMS will be sent to the latest mobile phone number, which is also the primary number.

What should be done if ‘Your Establishment is already registered’ message pops up?

If ‘your establishment is already registered’ appears, the employer needs to check the extension number, code number and make sure that the EPFO Office added is correct.  If the details are correct, the employer must send an email to ecrhelpdesk@epfindia.gov.in and with subject as ‘Rest Registration’.

TDS on EPF Withdrawal u/s 192A

What is Section 192A?

A new section 192A was inserted by the Finance Act, 2015 regarding TDS on payment of accumulated provident fund balance. The Rate of TDS on EPF withdrawal is 10%. There are two components of the Employee Provident Fund:

  • Employee’s Contribution: Gets Income deduction u/s 80C
  • Employer’s Contribution: Exempt up to 12% of Salary.
  • Interest on EPF: Exempt upto 9.5% p.a

TDS on EPF withdrawal shall be deductible only if the following conditions are satisfied:

  • The amount from EPF has been withdrawn before completion of continuous 5 years of service, and
  • The amount withdrawn is more than INR 50,000.
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%
Tip
As per section 206AA if the deductee fails to provide the PAN to deductor then he would suffer deduction at higher of the rates of deduction as: At the rate specified in the relevant provision of the Act, or, At the rate or rates in force, i.e., the rate prescribed in the Finance Act (Finance Act 2019 for FY 2019-20), or At the rate of 20%

Rate of TDS

The Deductor is required to deduct TDS @ 10% on withdrawal of EPF. However, if the employee fails to furnish his Permanent Account Number (PAN), then, the Deductor would deduct TDS at the maximum marginal rate.
The Deductor shall deduct TDS at the time of payment of the Accumulated EPF balance due to the employee.

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TDS on EPF withdrawal not deductible

TDS shall not deducted by the trustees of the Employees’ Provident Fund or any person authorized under the scheme under the following circumstances –

  • If the employee has submitted Form 15G/ Form 15H along with the PAN.
  • If there is a termination of employment due to employee’s ill health, completion of the project for which employee was employer, discontinuation of the employer’s business, or any other reason which is beyond the control of the employee.
  • The aggregate amount of EPF withdrawal is less than INR 50,000.
  • The withdrawal has been done after a continuous service of 5 years.
  • In case of a job change, the PF amount is transferred from one account PF account to another.

TDS Return

The Deductor shall deposit TDS with the Government within 7 days from end of the month in which TDS is deducted. However, in the case of TDS deducted for the month of March, the same shall be deposited on or before 30th April. In case of TDS deduction u/s 192A deductor shall file quarterly return in Form 26Q on TRACES within following due dates :

Quarter Due Date for Filing Form 26Q
April-June 31st July
July-September 31st October
October-December 31st January
January-March 31st May
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FAQs

At what rate will the payer deduct TDS if I do not furnish my PAN to him?

As per section 206AA​, if you do not furnish your Permanent Account Number to the payer (i.e., deductor), then the deductor shall deduct tax at the higher of the following :
1. The Specified rate in the relevant provision of the Act.
2. Rate or rates in force, i.e., the rate prescribed in the Finance Act.
3. At the rate of 20%.​

Where can I show 192A income in ITR?

Employee’s contribution gets an income deduction under section 80C. However, if you have withdrawn money from your EPF account, then you are required to report the same by under ‘Section 10(12) Recognised Provident Fund’ from the drop-down menu. Furthermore, withdrawal from PF account will be tax-exempt only if you have completed 5 years of service.

VPF ( Voluntary Provident Fund ) – Interest Rate, Features and Tax Benefits

What is a VPF?

A VPF is a contribution that one makes towards their provident fund account over and above their Employee Provident Fund contribution. This is a scheme made specifically for salaried employees who wish to add to their provident fund. It is also known as the Voluntary Retirement Fund Scheme and is basically an extension of the Employee Provident Fund.

This contribution is made over and above 12% of the contribution made by an employee towards their EPS. The employee can contribute up to 100% of their basic salary as well as their Dearness Allowance (DA). The interest earned on the VPF is credited to their EPF account and the interest offered is as per the EPF scheme.

Once a plan for VPF has been chosen, it cannot be terminated or discontinued before the completion of the base tenure of 5 years. The employers are under no obligation to contribute to the VPF of their employees.

Features of VPF Scheme

  1. Employees can contribute 100% of their salary to the VPF account.
  2. This scheme is specifically for salaried employees who are working in an organization that is recognized by the EPFO. (Employee Provident Fund Organisation of India)
  3. The employees are not obligated to enroll themselves in this scheme and can do so only if they wish to.
  4. They can enroll themselves in the VPF accounts at any time during the Financial Year.
  5. The minimum time period or maturity term for this scheme is of 5 years and the investments cannot be withdrawn before the tenure is completed.
  6. The interest rates are regulated by the government of India and are announced in the annual budget of every financial year.
  7. The individual could withdraw the entire amount from their account before the end of the tenure but would be subjected to tax implications. Moreover, partial withdrawals such as loans are allowed in VPF accounts.
  8. The employee is entitled to the final maturity amount at the time of resignation or retirement from employment.
  9. In a situation of an untimely death of the employee, the payout could be done to the nominee or legal heir in the VPF account.

How does Voluntary Provident Fund work?

Investments in the VPF are usually made with long-term financial goals in mind. The focus of such plans is mainly towards retirement. This scheme also lets you earn interest while making such savings. Given below are the steps required and a few other important points to remember while opting for such a scheme: 

  1. The employee has to ask their employer for further deduction in their salary. This has to be done in written and submitted to their respective HR or accounting team. 
  2. A VPF form is to be filled which would require personal details of the employee and has to be submitted to the employer. 
  3. The form would require details such as the details of the amount which is to be contributed monthly from Basic Salary and DA.
  4. The interest rate on the VPF is 8.65%. Any interest rate offered above this amount would be taxable. 
  5. If the money is withdrawn prior to the maturity date of the scheme, the interest earned becomes taxable. 
  6. This scheme can only be availed by salaried professionals. 
  7. The interest rate offered on the PF or the VPF changes every financial year. 

Tax Benefits available under VPF

Voluntary Provident Fund is considered one of the best investment instruments that an individual can consider investing in. With respect to the tax benefits, under section 80C the employees can claim deductions up to INR 1,50,000. In addition to this, the interest that is generated from these contributions is also exempt from taxes provided that the interest rate is not more than 9.05% per annum.

Documents Required to Open a VPF Account

Below mentioned are the documents that are required to open a VPF account:

  • An employee needs to submit the company registration certificate with the Ministery of Finance (MoF)
  • Form 49 and Form 24 needs to be filled and submitted
  • Registration Certificate of the company must be submitted
  • In detail company profile must be given
  • If the organisation is an ‘Sdn Bhd’, then the article and memorandum of association must also be submitted

VPF Withdrawal Process

The investors can withdraw the money completely or partially at any point in time. However, any funds that are withdrawn before the minimum period of 5 years will be subject to taxation. No tax will be applicable if the funds are withdrawn after 5 years.

Form 31 needs to be filled out in order to withdraw the amount from the account and this can be done by using the help of the HR/accounting team in the company or can be done online. Document such as bank details, cancelled cheque, PF number and postal address needs to be submitted. One can do so by logging in using their UAN (Universal Account Number). The funds will then be directly transferred to their accounts.

One can withdraw from their VPF account in unforeseen circumstances like financial crisis, medical emergencies, for the higher education of children or even for new house property/land.

The maturity amount will be paid to the employee at the time of resignation or retirement. Moreover, in case of the sudden death of the account holder, the nominee gets the possession of the accumulated amount of the VPF holder. The amount from VPF can also be partially withdrawn pre-maturely as loans.

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Benefits of Voluntary Provident Fund

The three major tax benefits of this scheme are that it is exempted from:

  1. Contribution
  2. The principal
  3. Interest

Along with the above mentioned 3 tax benefits, there are other benefits that are mentioned below:

  1. An employee can contribute up to 100% of their total basic salary and dearness allowance.
  2. This investment is done via the pre-tax income of the taxpayer.
  3. The income earned on the interest is non-taxable given the interest rate is not above 8.65%.
  4. The return on such an investment is also tax-free given the funds are not pre-maturely withdrawn.
  5. The process to avail yourself of such a scheme is hassle-free as the only requirement in terms of paperwork is the VPF account registration form.
  6. The funds can be withdrawn at the time of resignation or retirement from the current employer.
  7. VPF accounts are easily transferrable which is very helpful in case there is a change in job.
  8. In the case of an untimely death of the account holder, the investment will be paid to the nominee or the legal heir.

Comparison between VPF, PPF and EPF

Parameters VPF PPF EPF
Eligibility Criteria Employed Indian  Any Indian citizen Employed Indian
Contribution  Up to 100% Minimum contribution INR 500 and the maximum amount is INR 1.5 Lakh 12%
Taxability on Maturity None None None
Maturity Period Retire/Resign 15 Years Retire/Resign
Tax Benefits Up to INR 1 Lakh a year Up to INR 1.5 Lakh a year Up to INR 1 Lakh a year
Interest Applicable 8.5% P.A. 7.1% P.A. 8.5% P.A.

FAQs

How much can I contribute to VPF?

An Individual can contribute his/her 100% of the salary to VPF.

Can I stop my VPF contribution?

You can stop your contributions at any time. However, bear in mind that amount withdrawal prior to the completion of 5 years will be taxed.

Can the contribution to VPF be changed?

Yes, the contribution to a VPF can be changed. To change your VPF contribution you would have to ask your HR team, or accounting team to raise a request for the addition of a VPF account.

How much amount can I withdraw as loan from a VPF account?

An account holder can make a full or partial withdrawal from the accumulated amount in the VPF account. One has to note that if such withdrawal has been made before the completion of 5 years of existence then the accumulated funds are subject to taxation.

Will there be an effect on my VPF account if I change jobs?

As the VPF account is linked with the Aadhar Card it is quite easy to transfer the VPF account from one employer to the other.

How can one convert an EPF account to VPF account?

The process to convert an EPF account to VPF account is very simple. All one needs to do is inform the employer regarding opening a VPF account and mention the amount that he/she will be contributing to the account.

Section 80C : Deductions for Tax Saving Investments

Section 80C allows individuals and HUFs to claim deductions for certain investments and expenses which are specifically mentioned under the Income Tax Act. The maximum limit for deduction under section 80C is INR 1,50,000.

Deduction under section 80C is not allowed for Financial Year 2020-21 if the taxpayer opts for the new tax regime
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Deduction under section 80C is not allowed for Financial Year 2020-21 if the taxpayer opts for the new tax regime

Investments Eligible for Section 80C Deduction

Contribution to ELSS: When you invest in Equity Linked Saving Scheme or a tax saving mutual fund then you are allowed a deduction under section 80C. Investment in ELSS funds comes with a lock-in period of 3 years.

Investment in Public Provident Fund: It is backed by Government and carries a fixed interest rate (8.0% p.a. subject to change). You can invest a minimum INR 500 and maximum INR 1,50,000 in a financial year. Any investment in Public Provident Fund (PPF) is allowed as a deduction under this section. PPF deposits fall under the EEE (Exempt, Exempt, Exempt) tax category. Of which all three things including deposit, interest, and withdrawal amount are eligible for tax exemption.

Contribution to Employees Provident Fund: Employees contribution to Provident fund is also eligible for deduction under section 80C. This contribution amounts to 12% of the salary. At present, the interest rate in EPF contribution is 8.8%

Investment in Pension Fund by UTI: Any amount invested by an individual in a pension fund set up by a mutual fund or UTI is allowed as a deduction under section 80C up to INR 1,50,000.

Investment in National Savings Certificate (NSC): NSC is a scheme run by Indian Post and carries an interest rate of 8.1%. Although there is no upper limit for investment in NSC, the deduction will be allowed only up to INR 1,50,000 under section 80C

Investment in Tax Saving Fixed Deposit: Different banks and financial institutions offer term deposits which are created for tax saving under section 80C. The lock-in period of such tax saving deposits is 5 years and you can not withdraw money before its maturity.

Investment in Sukankya Samridhhi Savings Scheme: The scheme was launched for the betterment of girl children in India. Deposits in this scheme will earn interest at 8.6% per annum and will be eligible for deduction under this section. The maturity period of the deposit will be 21 years from the date of opening the account.

Investment in Unit Linked Insurance Plan (ULIP): It is a mix of insurance and investment. Since the investment portion is dependent on market performance, there are no fixed returns. Any investment made under this is allowed as deduction u/s 80C

Senior Citizen Savings Scheme (SCSS): Any person who has aged more than 60 years or a person over 55 who has opted for retirement, can invest in a senior citizen savings scheme. Savings under the SCSS scheme will earn interest at 8.6% per annum. This deposit has a lock-in period of 5 years and is eligible for deduction under section 80C.

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Payments Eligible for Section 80C Deduction

Life insurance Premium: Any amount paid as life insurance premium for self, spouse or children is allowed as deduction under section 80C. The premium amount has to be lower than 10% of the sum assured.

Home loan repayment: Repayment of principal amount towards a home loan taken for construction or purchase of residential house property, is allowed as deduction under section 80C. Even stamp duty expenses, registration expenses and transfer expenses are also allowed as deduction.

Children’s tuition fees: Tuition fees paid for up to two children is allowed as a deduction under section 80C. The fees could be paid to any school, college, university, or educational institution in India. The fees have to be for a full-time course.

For FY 2019-20, due to COVID-19 the due date for filing ITR has been extended to 30th November 2020 for all taxpayer.
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For FY 2019-20, due to COVID-19 the due date for filing ITR has been extended to 30th November 2020 for all taxpayer.

ITR Form Applicable for Section 80C

The taxpayer can claim deductions u/s 80C while filing ITR if all the above-mentioned conditions are full-filled. Individuals/HUFs can claim 80C in any of the ITR forms, i.e, ITR 1ITR 2ITR 3, and ITR 4 depending upon their income sources. The due date for filing ITR is 31st July of the next FY if the tax audit is not applicable.

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Supporting Documents

Along with the common documents such as Form 16, you will need to provide these documents:

  • Life Insurance Premium receipts
  • Deferred Annuity receipts
  • NSC Accrued Interest receipts
  • Provident Fund contrition receipts
  • Receipt of Term Deposit for 5 years or more with a scheduled bank
  • Receipt of Public Provident Fund contribution
  • Receipt of Senior citizen saving scheme deposit
  • Receipt of Contribution made to a superannuation fund
  • Receipt of Tuition fees
  • Receipt of Investment in Debentures / Shares of Companies as approved by CBDT, etc.

FAQs

How to claim deductions in ITR?

You have to claim section-wise deductions while filing your income tax return. In every ITR, there is a separate section for Chapter VI-A Deductions where you can enter all your deductions against respective sections. for eg. life insurance premium, ELSS, PPF, etc will go to section 80C where medical insurance premium will go under section 80D.

Who can claim section 80C deductions?

As per income tax act, any Individual or HUF can claim deduction under section 80C. This deduction is not available to corporate assessees

Can I claim the 80C deductions at the time of filing return in case I have not submitted proof to my employer?

Proof of investments is submitted to the employer before the end of a Financial Year (FY) so that the employer considers these investments while determining your taxable income and the tax deduction that needs to be made. However, if you miss submitting these proofs to your employer, the claim for such investments made can be done at the time of filing your return of income as long as these investments have been made before the end of the relevant FY.

What is Gross Salary & How to Calculate Gross Salary

What is Gross Salary

In simple words, gross salary is the monthly or yearly salary an employee receives before any deductions are made from it. The gross salary an employee receives is never equal to the CTC or the Cost to Company.

Gross Salary = Basic Salary + All Allowances + All Benefits
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Gross Salary = Basic Salary + All Allowances + All Benefits

Components of Gross Salary

The gross salary can also be the gratuity and EPF subtracted from the CTC. Following are the components of the gross salary:

Understanding Components of Gross Salary in Detail

  • Basic Salary: Basic salary is the amount paid to an employee before any deductions are made or extra components are added to the salary. The basic salary is always lower than the gross salary or the take-home salary.
  • Perquisites: These are considerable amount of benefits received by an employee as a result of their position in an organization and are payable in addition to the salary received by them.
  • Salary Arrears: Most of us are well versed with the term arrears. To define, arrears refers to an amount that is paid as a result of a hike or increment in your salary.
  • House rent allowance: A House Rent Allowance is also one of the major salary components paid by the employer to their employees for accommodation expenses. Also, the HRA is applicable to both salaried and self-employed individuals.
Net Salary = Gross Salary - Mandatory Deductions (Professional Tax+Employee Provident Fund+TDS)
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Net Salary = Gross Salary - Mandatory Deductions (Professional Tax+Employee Provident Fund+TDS)

Difference Between Gross Salary and Net Salary

Gross Salary Net Salary
It is the amount of salary after adding all benefits and allowances but before deducting any tax It is the amount that an employee takes home
An individual’s gross salary includes allowances like medical allowance, conveyance allowance, etc Net Salary = Gross Salary – All deductions like income tax, pension, professional tax, etc. It is also known as take home salary
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Calculate PF on Gross Salary

The calculation of gross salary for the purpose of PF calculation is different than that used in the context of the payroll. Let us consider PF Gross to denote the salary to be considered for PF calculation.

PF Gross includes basic, Dearness Allowance, Conveyance, Other Allowance, etc. It excludes House Rent Allowance, Bonus, etc. as per the provisions of the PF Act.

Gross Salary under Section 17(1)

Section 17(1) includes the following amounts alongwith their salary:

  • Wages
  • Any advance of salary
  • Any fees, commission, perquisites, or profits in lieu of or in addition to any salary or wages
  • The contribution made by the Central Government or any other employer in the previous year, to the account of an employee under a pension scheme, referred to in Section 8OCCD.
  • Any payment received by an employee in respect of any period of leave not availed of by him; (Leave encasement or salary in lieu of leave).
  • The aggregate of all sums that are comprised in the transferred balance as referred to in sub-rule (2) of Rule 1] of Part A of the Fourth Schedule, of an employee participating in a recognized provident fund, to the extent to which it is chargeable to tax, under sub-rule (4) there, i.e., the taxable portion of transferred balance from an unrecognized provident fund to the recognized provident fund.
  • The annual accretion to the balance at the credit of an employee participating in a recognized provident fund, to the extent to which it is chargeable to tax under Rule 6 of part A of the Fourth Schedule.

FAQs

Where can I find my Gross Salary and Net Salary?

You will be able to find both either in Salary Slip or Form 16. Employer provides salary slip or Form 16 to each employee.

How can I increase my Net Salary/Take Home Salary?

You can increase your Net Salary/Take Home Salary by planning your tax-saving investments u/s 80C and other Chapter VI-A deductions. This will reduce your taxable income and TDS on Salary. But it is only possible if you provide your investment declaration to your employer correctly in Form 12BB.

Understanding Salary Slip and its Format

It is important to understand the Salary Slip format to do better tax planning.

What is Salary Slip?

A salary slip is laymen’s terms is a document issued to employees by their employers. This document contains components like HRA, LTA, Bonus paid and deductions usually a month.

Salary Slips are generally given to the employees via email or is delievered on paper.

Benefits of Understanding Salary Slip and its Format

  • Plan your investments so that you can optimally utilize the deductions and reduce the tax liability. This will reduce the TDS deducted from your salary every month.
  • Understand how much of your total salary goes into forced savings like Employees’ State Insurance (ESI), Employees Provident Fund (EPF), etc. The employer determines these components. And are not under your control.
  • Evaluate different job offers in order to determine which one is more beneficial in terms of salary structure.

Importance of Salary Slip

Salary Slip is an important employment certificate. It helps the employees seek loans, future employment, income tax planning, availing government subsidies, and acts as a legal document of employment.

  • Proof of Employment
    • A salary slip serves as legal proof of employment. While applying for travel visas or universities and colleges, applicants must submit a copy of salary slip as legal proof of the last drawn salary and designation. The document holds as legal proof against the salary claim
  • Income Tax Planning
    • It contains the monthly break-up of earnings and deductions. It also has components that include tax deductions. It also includes the break-up of earnings. TDS helps an employee plan his/her tax liability in advance. The tax is calculated on the take-home salary based on income tax slabs
    • Thus, it helps in availing maximum benefits of tax deductions, rebates, allowances, and concessions within the accepted bounds under the Income Tax Act of 1961. Salary slips also assist in calculating the TDS returns and income tax refund. Therefore, it is essential to keep track of the salary break-up to keep up with Income Tax
  • Acquiring Loans
    • A salary slip has all the details of the salary and designation. It serves as legal proof of the credit-paying ability of an employee. Further, availing of loans, credit cards, mortgages, and other borrowing is based on the salary slip. The salary slip helps in setting a credit limit. Also, it acts as an eligibility criterion to avail of a loan or credit card. With this, the salary slip determines your taxes in the financial year as well
  • Access to Government Subsidies
    • The salary slip can be used to avail of certain free services. Such services include medical care, food grains, etc.

Sample Salary Slip Format

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Components of Salary Slip

Earnings contain the components which you earn. Deductions contain the amount deducted from what you earn.

Salary Format and its Taxability

Serial No. Component Definition Taxability
1 Basic salary This is the main component of your salary. It is also the basis for other components of Salary.  It is 100% taxable. And a part of your take-home salary.
2 Dearness Allowance (DA)  Only Government employees get DA. DA is paid to counter the inflation impact. It is calculated as a percentage of the Basic Salary.   It is 100% taxable. And a part of your take-home salary.
3 Conveyance Allowance


This allowance is granted to cover the cost of traveling between home and work. The lower of the following will be exempt from tax:
1. Rs. 1600 per month or
2. Conveyance actually received

4
HRA 
HRA is paid to cover the house rent expense. This may consist of 40% – 50% of your basic salary.

The lower of the following will be exempt from tax:
1. 40% of your Basic Salary
2. Actual rent paid minus 10% of the Basic Salary
3. HRA actually received from the employer

In the case of No Rent is paid then HRA will be 100% taxable.

5 Medical Allowance This allowance is given to employees to cover the medical expenditures incurred during the employment period. These are usually in the form of reimbursement so the employee has to submit the proof of expenditure incurred.


Maximum Rs. 15,000 is exempt per annum subject to the submission of proof of medical bills. Discontinued from FY 2018-19. 

6
Special Allowance and performance bonus


These allowances are over and above your Basic Salary. A performance bonus is usually linked to your past performance and is usually paid once or twice a year. 
It is 100% taxable. And a part of your take-home salary.


7 LTA It allows an employee to take on a trip within India. The allowance is based on actual expenditure incurred An employee can take two trips in a block period of four years. 
The exemption is allowed for the actual expenditure incurred for the trip subject to certain limits. Any expenditure incurred during the trip for the purpose other than travel will not be exempt LTA.

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Deductions Component and its Taxability

Serial No. Component Definition Taxability
1 Professional Tax It is a tax on employment. This tax is deducted from your salary by the employer and deposited to the state government. Professional Tax is allowed as a deduction from your salary income.
2 Employee’s Provident Fund (EPF)  Usually, 12% of your basic salary goes towards the Employee’s provident fund. This amount is matched by the employer subject to certain limits which may vary as per company policies. This is a forced investment since every company with over 20 employees, has to contribute towards PF. It is allowed as a deduction from total income.
3 Tax Deducted at Source (TDS)  Based on your total taxable income, your tax is calculated as per the applicable slab rate. This tax is deducted from your salary by your employer and deposited to the Government on your behalf. You can find your TDS from form 16, part A which is generated by TRACES and provided to you by your employer. This amount represents the tax deducted from your salary and deposited to the government by your employer. This can be lowered by utilizing the deduction limits optimally.

FAQs

Is family pension taxed as salary income?

No, it is taxable under the head income from other sources while filing Income Tax Return on Income Tax Portal

My employer reimburses to me all my expenses on grocery and children’s education. Would these be considered as my income?

Yes, these are in the nature of perquisites. Hence, they are taxable as per the rules prescribed in this behalf.​​

Can I ask my employer to consider this loss against my salary income while computing the TDS on my salary? My income from let out house property is negative.

Yes but only to the extent of Rs. 2 lakh, however, losses other than losses under the head ‘Income from house property’ cannot be set-off while determining the TDS from salary.​​

Withdraw EPF balance – Rules, TDS Applicability, Updates and Process

EPF (Employee Provident Fund) is a retirement benefits scheme for salaried individuals. Employee’s contribution to EPF was eligible for deduction under section 80C. However, as per the recent announcement in Budget 2021, interest earned on annual PF contribution exceeding INR 2.5 lacs from April 2021 will now be taxable. Employers also contribute towards EPF and their share is tax-free in the hands of the employees.

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EPF withdrawals have always been a topic of discussion. Frequent changes in EPF withdrawal rules keep employees on the edge. The major concern for them is whether the EPF withdrawal amount is taxable or not.

So let’s take a look at the EPF withdrawal rules to understand this better:

EPF Withdrawal Rules

Withdrawal of the EPF account by a salaried employee between switching jobs is illegal. As per EPF withdrawal rules, a salaried employee can withdraw from a provident fund account on two counts;

  • If a person has no job and
  • If two months have elapsed since last employment (not attached to any organization or unemployed for 2 months).

Members whose service has been terminated due to ill health, contraction or discontinuance of business of the employer or other cause beyond the control of the member shall not be required to submit PAN, Form No. 15G/15H along with Form No. 19. In such cases, no income tax (TDS) shall be deducted as per Rule 8 of the Fourth Schedule to the Income Tax Act, 1961.

Conditions to Withdraw EPF Balance for Salaried Employees

Salaried employees can withdraw money from EPF accounts for various purposes, subject to the following conditions.

  1. A salaried employee can withdraw up to either six times of his monthly salary or total amount towards medical treatment of self, spouse, children and parents.
  2. One can withdraw for the purpose of marriage of him/herself, siblings and children provided that one has completed a minimum of seven years of service to withdraw 50% of the contribution. (3 times in the entire career)
  3. A salaried person can withdraw from EPF account for the purpose of house renovation or alteration if a person has completed a minimum of five years of service and the house should be registered in his name, his spouse’s name or be held jointly.
  4. An individual can withdraw from EPF account for the purpose of home loan repayment provided he has completed 10 years of services and the house should be registered in his name, spouse or be held jointly. Then an individual can withdraw up to 36 times of his salary.
  5. An individual can withdraw from EPF account for the purpose of Higher education of children.
  6. If a salaried person wishes to withdraw from EPF account for the purpose of either construction of house or purchase of a plot, the property must be registered in his name, spouse or jointly held. A minimum of five years of service is required to withdraw an amount which is 24 times the salary of an account holder. For the construction of a house, 36 times of the salary of an account holder can be withdrawn. This withdrawal can be done only ONCE during the service of an account holder.
  7. An individual can choose to withdraw from their EPF account for various reasons such as settling down in a foreign country or premature retirement as a result of any physical or mental disability.
  8. An individual must be 57 years old to withdraw up to 90% of the amount of his PF account( Earlier the age limit was 54 years).
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TDS on EPF Withdrawal

Before Budget 2015, TDS was not applicable on withdrawal from EPF account. But now, TDS is applicable on EPF withdrawals where balance is more than 50,000 and the employee has worked less than 5 years from 1st April 2016 onwards( Earlier the threshold limit was Rs.30,000).

TDS is not applicable in the following cases:

  • When an employee terminates his services due to ill-health and withdraws his accumulation.
  • On Transfer of PF from one account to another PF account.
  • When PF withdrawal is less than Rs 50,000/-. (Before 1st April 2016 it is 30,000/-)
  • On discontinuation of Business by the Employer or any cause beyond the control of EPF Scheme member (Employee).
  • If withdrawal amount more than or equal to Rs. 50,000/- & service period is less than 5 years then TDS will not be applicable if an employee submits Form 15G /15H along with his / her PAN. Form 15G & 15H cannot be accepted if the amount of withdrawal is more than Rs. 2,50,000/- and Rs. 3,00,000/- respectively.

TDS is applicable in the following scenarios:

If an employee withdraws amount more than or equal to Rs. 50,000/-, with service for less than 5 years, then:

  • TDS will be deducted @ 10% if Form-15G/15H is not submitted provided PAN is submitted.
  • TDS will be deducted @ maximum marginal rate (i.e., 35.535%) if an employee fails to submit PAN.

Members who have rendered continuous service of 5 years or more, including service with a former employer, shall not be required to submit PAN and Form No. 15G/15H along with Form 19.

If TDS is not applicable then it does not mean that the EPF withdrawals are not taxable. If you withdraw your EPF balance before the expiry of five years of continuous service, then it is taxable in the year of withdrawal. In addition to this, your employer’s contributions along with the accumulated interest amount will be taxed as “profits in lieu of salary”. Interest accumulated on your (employee’s) contributions will be taxed under the head “Income from other sources”.

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Recent Updates in EPF Withdrawal Rules

  • Retirement Age has been increased from 55 years to 58 years

    Earlier the age of retirement for EPF was 55 years. But now it has been increased to 58 years. At present retirement age is 58 years across all organization and now the same will be applicable for EPF.

  • You can not withdraw an Employer’s contribution to EPF before 58 years

    An individual can not withdraw the EPF contribution by the employer before the retirement age of 58 years. The withdrawals from the EPF within 5 years of joining are still taxable.

  • You can withdraw 90% of EPF balance once you reach the age of 57 years

    Earlier, a withdrawal was allowed up to 90% of the EPF balance, one year prior to retirement i.e. at the age of 54 years. But now account holder will have to wait till attaining the age of 57 years to withdraw 90% of the accumulated balance

  • EPF membership does not end with leaving the job

    An Individual cannot withdraw the EPF contribution by the employer before the retirement age. The employer’s portion can be withdrawn only after attaining the retirement age (58 years). Therefore, until you withdraw 100% of the PF balance, your EPF account is will not be closed.

How to withdraw EPF Balance?

Employee PF can be withdrawn in following different ways:

  1. EPF withdrawal via UAN (Online claim submission)

    If you know your Universal Account Number (UAN), then you can directly apply for pf withdrawal without the need for employer attestation.
    a. Link your Aadhaar to UAN
    b. Submit an application to withdraw EPF online

  2. EPF withdrawal using Form 19.

    Form-19 can be downloaded from the EPFI website. Once filled the application can be submitted to the regional EPF Office to claim the EPF balance.
    a. EPF withdrawal form attested by one of the following:
    i. Bank Manager
    ii. A Gazetted Office
    iii. Magistrate/Post Master/Sarpanch/Notary Public
    b. A letter stating a reason for the direct application:
    i. Non-cooperation from an employer is a valid reason

You can check your withdrawal claim status from the Employee’s Provident Fund Organization.

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FAQs

How can I avoid TDS on PF withdrawal?

If your PF amount is between Rs. 50,000 – 250,000 and you have provided your PAN then TDS will not be deducted. However, if you don’t submit your PAN you will be charged tax on the highest rate of tax slab.

Is KYC mandatory for PF withdrawal?

No, it is not mandatory to update KYC details online. However, updating KYC will keep your data up to date. It will also help in reducing the time required for transfer of EPF money from one account to another and for EPF withdrawal amount.

Does EPF membership end with termination of employmnet?

An Individual cannot withdraw the EPF contribution by the employer before the retirement age. The employer’s portion can be withdrawn only after attaining the retirement age (58 years). Therefore, until you withdraw 100% of the PF balance, your EPF account is will not be closed.

Transfer EPF Balance: Step-by-Step Process

Any company with more than 20 employees is required by law to register with the Employee’s Provident Fund Organisation (EPFO). A mandatory contribution is made to an employee’s PF account, every month. When an employee changes a job, he/she can transfer this balance from an old account to the new one. In order to transfer EPF balance, one must have an active UAN account. Also, Aadhaar and bank details must be seeded against their UAN account.

Employee’s contribution to EPF was deductible from income tax under section 80C. However, as per the recent announcement in Budget 2021, interest earned on annual PF contribution exceeding INR 2.5 lacs from April 2021 will now be taxable.

Steps to transfer EPF balance online: 

  1. Go to EPFO Member’s portal

    Click on Login from the Home Page

  2. Login to your account

    Use your UAN and Password

  3. Next Go to Online Services

    Click on One Member one EPF Account (Transfer Request)

  4. Verify personal information and PF account for the present employment

    If you dont do this step your claim will not be processed: 

  5. Click ‘Get Details’

    This will help obtain PF account details of the previous employment

  6. Select the employer for attestation of a claim.

    It could be a previous employer or current employer based on the availability of authorised signatory holding DSC.

  7. Click on ‘Get OTP’ to receive OTP to UAN registered mobile number

    Enter the OTP and submit the transfer request. 

The employer will approve EPF Request digitally by accessing the employer interface of EPFO. Submit the self-attested copy of your online PF transfer request in pdf format to your selected employer within 10 days of submitting the request online.

FAQs:

What is UAN? 

UAN is short for Universal Account Number which is allotted by Employees Fund Organisation (EPFO). It can be issued only to the individuals who have a valid PF number. UAN acts as an umbrella which links multiple Member Identification Numbers issued to a single member under single Universal Account Number. When members switch organisations, they are allotted different IDs. Through UAN, a member will be able to view details of all his IDs linked to it.
If a member is already allotted Universal Account Number (UAN) then he / she is required to provide the same upon joining a new establishment. This will enable the employer to mark the new allotted Member Identification Number (Member Id) to the already allotted Universal Identification Number (UAN).

How to check the status of a claim? 

Employees can check the status of their EPF balance transfer/withdrawal claims through various modes. They can check the claim status through EPFO member portal, by SMS or by using the EPFO mobile app. Here are steps to check status of claim on EPFO member portal:
1. Go to EPFO Portal
2. Go to Our Services > For Employees
3. Click on ‘Know Your Claim Status’
4. Enter your UAN, Captcha and click on Search
5. Enter the State of your PF office, your establishment code, PF account number and click on submit.

Do all companies need to register for EPFO?

No, only companies with more than 20 employees are required to register for EPFO. For companies with lesser employees, it is optional.