Introduction
THE EMPLOYEES’ PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT, 1952
This act is an important piece of Labour Welfare legislation enacted by the Parliament to provide social security benefits to the workers. At present, the Act and the Schemes framed there under provide for three types of benefits –
– Contributory Provident Fund,
– Pensionary benefits to the employees / family members and
– Insurance cover to the members of the Provident Fund.
The object of the Act in 1952 was the institution of the compulsory contributory Provident Fund to the employees to which both the employee and the employer would contribute. The Employees’ Provident Fund Scheme was accordingly framed under the Act and it came into effect from 1-11-1952. Initially the title of the Act was, “The Provident Fund Act 1952”.
The provisions of the act extend to whole of India except the State of Jammu & Kashmir and also the State of Sikkim where it has not been notified so far after its annexation with the Union of India.
Applicability
All the establishments employing 20 or more persons (5 or more incase of Cinema Theatres) are brought under the purview of the Act from the very date of set up subject to fulfillment of other conditions. The provisions of the Act apply on its own force independently.
Those establishments which do not have the prescribed number of employees but willing to register themselves to provide the benefits of Provident Fund to their employees can register voluntarily with the Regional Provident Fund Office.
Definition of Wages
In this act, Wages means and includes Basic + Dearness Allowances, Cash value of food concession and Retaining allowances, if any.
Eligibility
– An employee at the time of joining the employment and getting wages up to Rs. 6,500/- is required to become a member.
– He / she is eligible for membership of fund from the very first date of joining a covered establishment.
Provident Fund Contribution
The provident fund contributions consist of contribution both by Employee and by Employer.
Employee Contribution
Provident fund contribution is recovered @ 12% of wages from employees who earn up to a maximum wage of Rs.6,500/- p.m. However, employees can contribute more than this statutory maximum which will be considered as Voluntary Contribution.
Voluntary Contribution
– An employee can contribute voluntarily over and above the stipulated rate of PF contribution by opting for Voluntary PF scheme at any rate as he / she desires i.e up to 100% of Wages.
– However, the contribution to VPF should be a certain % of wages and not a fixed amount.
– But the employer is not bound to contribute at the enhanced rate.
– It is suggested that the enhancement can be done at the beginning of the financial year for comfort level of calculation.
Employer Contribution
– Employer is also required to contribute towards provident fund; the deduction rate is same as employee’s contribution i.e. 12% of the wages.
– Of this 12%, 3.67% goes to Provident Fund and the balance of 8.33% goes to Pension Fund.
Pension Fund
To avail pension benefit, the member
– should have completed 10 years of continuous service or
– he / she should have attained the age of 50 years or more.
– he / she doesn’t receive any other EPF pension
The member will receive the Pension amount on a monthly basis after attaining the age of 58.
If the employee does not fall in the above criteria, he can apply for withdrawal of Pension monies.
Employees Deposit-linked Insurance Scheme (EDLI):
– Apart from contributing to provident fund and pension fund, employer is also required to contribute towards Employee Deposit Linked Insurance Scheme.
– The rate of contribution is 0.5% of the wages.
– The employees need not contribute any thing towards this scheme.
– In case of death of a member, his / her nominee will get a maximum of Rs.60,000 from this scheme.
Administrative Charges
– The employer is also required to pay administrative charges at 1.10% of emoluments towards provident fund charges and 0.01% towards EDLI Scheme 1976.
– Employees need not contribute any thing towards these charges.
Remittance of Contribution
The employer is required to pay the contribution recovered from employees into the provident fund account on or before 15th of the following month, for example, if the contribution is deducted for the month of October 2008, it should be remitted on or before 15th of November 2008.
Monthly Returns
The monthly returns, as listed below, should be submitted on or before 25th of the following month (i.e. October 2008 monthly returns should be submitted on or before 25th of November 2008).
– Form 12A along with Triplicate copy challan,
– Form 5 & Form 10 containing employees additions and deletions and
– Form 2 (Revised)
Annual Returns
Every year annual returns should be submitted on or before 30th April. The period for the annual return is March to Feb. Annual returns consist of Form 3A and Form 6A.
Form 3A – Member’s Annual Contribution Card:
Form showing month wise recoveries towards E.P.F and Pension Fund in respect of a member the concerned financial year to be furnished by the employer before 30th April of the following year.
Form 6A – Consolidated Annual Contribution Statement:
This form provides annual contributions of each member of the establishment. A vital form for compiling the annual Provident Fund statement of a subscriber. To be submitted by 30th April.
Annual Account Statement
After the close of each period of contribution (March to Feb), annual statements of accounts will be sent by PF Department to each member through the factory or other establishment where the member was last employed.
The statement of accounts in the fund will show
– opening balance of contribution with interest of both employer and employee
– amount contributed during the year by both employer and employee,
– interest earned on the contributions made during the current year
– total of contributions by both employer and employee
Members should satisfy themselves as to the correctness of the annual statement of accounts and any error should be brought through the employer to the notice of the Provident Fund Office within 6 months of the receipt of the statement.
Withdrawal of Provident Fund and Pension Fund
A member is eligible to apply for withdrawing his provident fund and pension fund only after 2 months from the date of resignation, provided that he / she is not employed during the said 2 months.
The member should submit Form 19 to withdraw his provident fund dues on leaving service/retirement/termination.
To claim pension, the member is required to submit Form 10 C.
The member needs to fill in Forms 19 and 10c and get it signed from the previous employer and submit it to the provident fund office (in many cases, the employer will themselves help by submitting the forms).
Normally, it takes about 40 days to have the monies credited to the bank account of the member after submission of the relevant forms.
Taxability: The withdrawals are exempt from tax if the concerned employee has rendered continuous service of more than 5 years. Otherwise, it would be taxable at the applicable slab rates.
Transfer of Provident Fund monies from previous employer to current employer
A resigned employee who joins another company is left with an option of transferring the PF monies from his previous PF account to the current PF account, by filling the Form 13.
Form 13
– When an employee joins new company and he wishes to transfer his previous company provident fund amount, he should inform the HR department or Accounts department of the new company.
– The employer will issue Form 13, in which the member has to fill the details of previous company like – name, address, provident fund account number and address of the provident fund office where the account was held.
– On form 13, the signature of the previous employer is not required.
– Once he fills the required details and submit it to the current employer, the current employer will forward it to the provident fund office for transferring process.
– The time taken for transferring the fund from one account to other account normally takes about 40 days from date of submission.
Problems Faced in withdrawing / transferring Provident Fund monies and the remedies:
On many occasions, members face problems in withdrawing the provident fund monies. Some of the normal reasons for the problems and the solutions to overcome these are quoted here below:
Mismatch of Signature of the employer
Employer should inform the PF office through a formal letter authorizing the signature of the concerned authority. If the PF officer is still not convinced with this letter, a fresh application has to be submitted again.
Mismatch of Signature of the member
If the signature mismatches or they have changed their signature, they need to inform the provident fund office through their employer. If the PF officer is still not convinced with this letter, a fresh application has to be submitted again.
Mismatch of Provident Fund Account number of the member
If the PF Account number has been mentioned wrongly by the member, then the application will be returned back to the employer. The employee has to correct the details and get it counter-signed by the employer.
If the PF Account number has been reported wrongly by the employer in their annual return, then it needs be corrected through a formal letter to the PF department explaining the problem and correcting the same.
Incorrect bank account details furnished by the member
The correct details with regard to account number, name of the bank, branch address, MICR code of the bank (MICR is a 9 digit number printed on the cheque leaf, next to the cheque number) have to be filled in again and re-submission required.
Incorrect address given by member
The correct details have to be filled in again and re-submission required.
Mismatch of date of joining / resignation
If the date of joining / resignation has been mentioned wrongly by the member, then the application will be returned back to the employer. The employee has to correct the details and get it counter-signed by the employer.
If the date of joining / resignation has been mentioned wrongly by the employer in their annual return, then it needs be corrected through a formal letter to the PF department explaining the problem and correcting the same.
Communication from PF department while processing the request would not have reached the employer
The employer / employee needs to check with the PF office and find out the reason for not receiving the communication. If not traceable, then a request has to be made to the PF office for re-sending the communication.
Failure of employer to remit the PF amount recovered from members to PF Account
It is the duty of the employer to remit the PF monies (which are recovered from employees) to the authorised banks for the credit of PF department. It is a statutory violation if the recovered monies are not remitted on time.
If the employee comes to know that the employer has not remitted the PF monies that are recovered from him, then he can lodge a complaint to the PF office against the employer insisting for the recovery.
Member might have changed his / her official name and the same has not been informed to the provident fund office
If the employee has changed his / her name and the same has not been informed to the PF office, then the application will be rejected when the PF office compares the data with the returns being filed by the company. In such a situation, the concerned employee has to request through a formal letter informing about the change in name and also, attach the notification copy of the Gazette publication.
Change in Authorised Signatory of the employer when the application is in process
Sometimes, the authorized signatory would have been changed when the application is in process and it would lead to rejection of the application. In such a situation, the employer has to get the application re-signed by the concerned authorized signatory who is active at the appropriate period of time.
Problem during Transfer of Monies
In the case of transfer and when the previous employer is an exempt establishment (which means, having own PF trust), the procedures is that the current employer should forward the transfer form (Form 13) to the previous employer who will process a cheque (after validation) in favour of PF office of the current employer and it will be sent to the current employer. It becomes the responsibility of the current employer to submit the cheque along with a request letter to the PF office for transferring the monies. Here, the normal problems that might occur are:
– previous employer might have changed their address
– Documents lost in transit / do not reach the concerned department
– delay in processing the application for reasons like tedious internal processing procedures, processing person is on vacation / busy on some other assignments, signatory not available etc
Note: In all the above situations, the employee is required to be in contact with his employer regularly and chase them constantly which will speed up the process.
Advances from PF Account
The members are eligible to withdraw monies as advances from their PF Account for purposes like marriage, education, medical treatment etc, subject to the prescribed conditions as mentioned here below. Note that the said advance is totally tax-free and interest-free.
Marriage
– only for self, son, daughter, brother & sister
– the member should have completed at least 7 years of service (not necessarily with the same employer, but should have transferred the PF monies from previous employers for consecutive period of 7 years)
– maximum of 3 times in the entire service
– maximum amount is 50% of employee’s share at the time of tendering application.
– the member should apply in Form 31 through employer
– marriage Invitation card should be submitted along with form as proof for marriage through employer.
Education
– only for self, son & daughter
– the member should have completed at least 7 years of service (not necessarily with the same employer, but should have transferred the PF monies from previous employers for consecutive period of 7 years)
– maximum of 3 times in the entire service
– maximum amount is 50% of employee share at the time of tendering application
– the member should apply in Form 31 through employer
– Bonafide certificate duly indicating the fees payable from the educational institution.
For Medical Treatment
– only for self, spouse, son, daughter, dependent father & mother
– applicable for major surgical operation in a hospital and 1 month or more hospitalization for the operation or suffering from TB, leprosy, paralysis, cancer, mental derangement or heart ailment.
– For this purpose, no minimum service is required.
– The members should obtain certificate from ESI or from employer that E.S.I. facility are not available for the member.
– A doctor (or registered medical practitioner) of the hospital certifies that a surgical operation or hospitalization for 1 month or more is/was necessary.
– Incase of TB or leprosy etc, a specialist doctor should certify
– Maximum amount given is 6 times of wages or full employee share, whichever is less.
– A certified proof for the said decease has to be submitted along with the application in Form 31 through employer.
For Purchase of Site and Construction there on
– Should have completed 5 years of services
– members contribution with interest should not be less than 1,000
– Site should be free from encumbrances
– Site should be in the name of the member or spouse of the member or in the joint names of the member and the spouse
– The maximum amount given is least of Basic+DA for 24 months or total contribution & Interest or total cost of site.
Purchase of Flat/House (from agency/promoter)
– Should have completed 5 years of services
– members contribution with interest should not be less than 1,000
– House/Flat should be free from encumbrances
– Flat/house should be in the name of the member or spouse of the member or in the joint names of member & spouse.
– The Agreement with the Flat promoter should be registered under the Indian Registration Act.
– The maximum amount given is least of Basic+DA for 36 months or total contribution & Interest or total cost of site.
Alteration / Modification of House
– Should have completed 5 years of services
– only after 5 years of completion of construction of dwelling house
– the maximum amount given is 12 months Basic+DA or member share of contribution with interest, whichever is less.
Repayment of outstanding principal / Int. of a loan obtained from State Govt, Regd Co-operative Society, State Housing Board, Nationalized Bank and Public Financial Institution.
– Should have completed 10 years of services
– Member contribution with interest should be more than 1,000
– The amount will be paid directly to the agency and not to the member
– The maximum amount paid is 36 Months Basic + Members accumulation with interest or Outstanding Principal plus interest which is sought to be repaid, whichever is less.
For any queries with regard to Provident Fund, pls contact us at bala@cogzidel.com and we will be glad to assist you.
