Nandhakumar & Sundaran
Chartered Accountants
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EPF

Provident Fund Act

Applicability of PF Act

PF Act applies to factories and other notified establishments employing 20 or more persons. Once an establishment is covered, its departments and branches, wherever they are, are covered. Once establishment is covered, it continues to get covered even if employment goes below 20.

Schemes under PF Act

Employees Provident Fund, Employees’ Pension Scheme and Employees’ Deposit-Linked Insurance Scheme [EDLI] are the three schemes covered.

Partial or full exemption

Exemption can be granted to certain establishments or employees

Contribution to Provident Fund

Contributions to Fund are made by employers and employees. The fund is administered by Central Board of Trustees

Contribution equal to 125/10% of pay by employer as well as employee

Both employer and employee contribute @ 12% of ‘pay’ to Provident Fund (in some establishments like any establishment employing less than 20 persons, sick units, Jute industry, Beedi industry, Brick industry, Coir industry other than the spinning sector, Guar gum factories., contribution is 10%).

The contributions are payable on maximum wage ceiling of Rs 15000/- by employee and employer.

Part of Employer’s contribution to FPF

8.33% contribution of employer goes to Family Pension Fund. Balance is credited to Employee’s PF account. Entire contribution of employee is credited to his PF account. Interest is paid on this amount. Since last 4 years, interest is 8.5%.

Employees required to join the Fund

Employee whose pay is less than Rs 6,500 per month is covered under the Act. ‘Pay’ includes basic wages, dearness allowance, retaining allowance and cash value of food concession.

Contribution limited to salary of Rs 6,500 p.m, but higher contribution permissible.

If an employee is member, he continues to be a member even if his ‘pay’ becomes more than Rs 6,500. Employer is liable to pay contribution only on salary of Rs 6,500, though employer can voluntarily contribute more (as extra employee benefit). Employee can voluntarily pay contribution on pay above Rs 6,500

Employee to become member immediately on joining

An employee becomes member of PF immediately after joining an establishment to which PF Act applies. However, he should be ‘employee’. Mere casual engagement is not ‘employment’.

Person employed through contractor covered but not apprentice

Persons employed through contractor are also covered, but apprentices under Apprentices Act are not covered

Administration charges for PF

In addition to PF contribution, the employer also has to pay administration charges at prescribed rates. Presently, it is 0.50% effective 01.06.2018 [w.e.f.01.01.2015 (0.85%) w.e.f. 01.04.2017 (0.65%) ] of wages [Min Rs.500/-]. In case of exempted establishments, the employer has to pay 0.18% of wages / salary as inspection charges [Min Rs.75/-].

Contribution to be paid within 15 days

Contribution and administration charges are to be paid within 15 days from close of month. If employer delays payment, damages (interest) can be recovered from him.

Submission of details of employees joining and leaving

When a new employee joins, Employee’s details are to be submitted in form No. 5 to PF Commissioner within 15 days from close of the month in which the employee joins, along with declaration in form 2 given by employee. If an employee leaves, form No. 10 is to be filed.

Monthly return of contribution

Employer has to file a monthly contribution statement (abstract) in form 12A, within 25 days of close of month, along with copy of receipted challans regarding payment of contribution. Employer has submit only abstract every month in the prescribed form.

Annual Contribution Statement of PF

Employer has to submit consolidated Annual Contribution Statement of PF in form 6A for March paid in April to February paid in March of current year, along with contribution card of each employee for same period in form 3A by 30th April.

Withdrawal of Provident Fund by Employee

A member of provident fund gets the fund with interest at the time of retirement. Early withdrawal for housing, marriage, illness etc. is permissible

Pension under EPF scheme

Member is entitled to get pension after retirement after completion of 58 years of age. The pension depends on service of number of years and his average salary of last 12 months. No pension is available for less than ten years service. Only contribution is returned with slightly reduced interest.

EDLI

Employees Deposit Linked Insurance Scheme is to provide life insurance benefits to employees who are already covered under PF. Employer is required to pay contribution of 0.5% Min Rs.200/-. Employer is also required to pay administration charges @ 0.1% of total wages Min Rs.25/-.

PF for international workers

There is PF and EPF scheme for international workers.

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