pf accounting

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.

pf accounting

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 accept all payment types 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.

How FP&A Works in Startups

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 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.

The above window will appear after selecting the new account:

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).

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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).

What Is an Accounting Method?

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources.

  • Now, the deduction towards EPF has to be 12% of your basic salary as per the laws.
  • If you have not linked your UAN with your bank account, Aadhaar and PAN, you must complete the eKYC with UAN to check your balance via SMS.
  • However, do note, for the purposes of EPF, salary means only two things – your basic and your dearness allowance (DA).
  • Thus, you can select the respective member ID of your previous account to check your balance.
  • Accrual accounting is based on the matching principle, which is intended to match the timing of revenue and expense recognition.

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.

SOI Tax Stats – Private Foundations Study Terms and Concepts

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% (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.