???Page ??? (???)03/03/2016, 15:01:14Page / EPF ACT 1952

INTRODUCTION

The Employees Provident Funds & Miscellaneous Provisions Act, 1952 enacted by Parliament came into force w.e.f. 14.3.1952 and presently the following three Schemes are in operation under the Act:-The Employees Provident Fund Scheme, 1952

Employees Pension Scheme, 1995 and

Employees Deposit Linked Insurance Scheme, 1976.

IMPORTANT SECTIONS OF THE ACT

SECTION 1 APPLICABILITY OF THE ACT

SECTION 6 RATE OF CONTRIBUTIONS

SECTION 7A DECIDING APPLICABILITY AND ASSESSMENT OF DUES

SECTION 7Q IMPOSING OF INTEREST

SECTION 8 RECOVERY OF DUES FROM EMPLOYERS AND CONTRACTORS

SECTION 11 PRIORITY OF PAYMENT OF EPF CONTRIBUTIONS OVER OTHER DEBTS

SECTION 14 PENALTIES FOR DEFAULTERS

SECTION 14B LEVYING OF DAMAGES ON BELATED PAYMENTS

SECTION 16 EXCLUSION FROM THE ACT

SECTION 17 EXEMPTION

SECTION 1 APPLICABILITY OF THE ACTto any establishment in which twenty or more persons are employed

Provided that the Central Government may, after giving not less than two months notice of its intention so to do, by notification in the Official Gazette, apply the provisions of this Act to any establishment employing such number of persons less than twenty as may be specified in the notification.

An establishment to which this Act applies shall continue to be governed by this Act notwithstanding that the number of persons employed therein at any time falls below twenty.

SECTION 6 RATE OF CONTRIBUTIONS 12% of the Basic wages, DA, RA if, by both employer and employee

Employee can make his contribution more than 12%, but not compulsory to employee

* Rate of contribution is 10% in respect of following establishments :-less than 20 persons are employed.

sick unit declared by the BIFR.

Accumulated losses equal to or exceeding its entire network.

Any establishment in the (a) Jute, (b) Beedi, (c) Brick, (d) Coir and (e) Gaurgum industry or factories

Administrative Charges / Inspection Charges are applicable @ 1.10% and 0.18% respectively.

SchemesEmployersEmployees*Central Govt.Total

Provident Fund3.67%12%0%15.67%

Insurance Fund (EDLI)0.5%0%0%0.5%

Pension Fund8.33%0%1.16%9.49%

Total12.5%12%1.16%25.66%

7C. Determination of escaped amount

Empowers the P.F. Authority to re-open a case within five years of passing an order under Sec.7-A or 7-B(after reviewing order passed under Sec.7-A), if he finds latter(after passing orders under sec.7A or 7B) that some amount has escaped from his notice (whilch also falls due )while passing orders under Sec.7-A or 7-B irrespective whether such escape from his notice is either due to non production of records bfore him by the employer or not.

while proceeding to redetermine the amount due after reopening the case, he should give hearing to the employer.

section 7 C gives the authorities right to reassess the amount determined as per section 7A or section 7B if the PF authorities have reasons to believe that the there are some more amounts escaped from the original assessment or review assessment. Therefore, section 7C is a right conferred on PF organisation to reassess the amounts determined under 7A enquiry or 7B review. .

SECTION 7A DECIDING APPLICABILITY AND ASSESSMENT OF DUES

determine the amount due from any employer under any provision of this Act,as the case may be,

for any of the aforesaid purposes may conduct such inquiry as he may deem necessary

No order shall be made under sub-section 1, unless the employer concerned is given a reasonable opportunity of representing his case.

Where the employer, employee or any other person required to attend the inquiry under sub-section 1 fails to attend such inquiry without assigning any valid reason or fails to produce any document or to file any report or return when called upon to do so, the officer conducting the inquiry may decide the applicability of the Act or determine the amount due from any employer, as the case may be, on the basis of the evidence adduced during such inquiry and other documents available on record.

Where an order under sub-section 1 is passed against an employer ex-parte, he may, within three months from the date of communication of such order, apply to the officer for setting aside such order and if he satisfies the officer that the show cause notice was not duly served or that he was prevented by any sufficient cause from appearing when the inquiry was held, the officer shall make

an order setting aside his earlier order and shall appoint a date for proceeding with the inquiry:

Section 7A empowers the PF authorities to call for records to determine the PF dues of an employer. Accordingly an order will be passed and the employer will be asked to pay the amount so determined.As per section 7B the employer can call for a review of the amount assessed by the authorities. Accordingly a fresh demand notice will be sent to employer

SECTION 7O DEPOSIT OF AMOUNT DUE, ON FILLING APPEALNo appeal by the employer shall be entertained by a Tribunal unless he hasdeposited with it seventy-five per cent of the amount due from him as determined by an officer referred to in section 7A:

SECTION 7Q IMPOSING OF INTEREST The employer shall be liable to pay simple interest at the rate of 12% per annum or at such higher rate as may be specified in the Scheme on any amount due from him under this Act from the date on which the amount has become so due till the date of its actual payment:# No.of days delayed in making payment x 12% p.a

SECTION 8 RECOVERY OF DUES FROM EMPLOYERS AND CONTRACTORSSECTION 11 PRIORITY OF PAYMENT OF EPF CONTRIBUTIONS OVER OTHER DEBTSSECTION 14 PENALTIES FOR DEFAULTERSSECTION14B Power to recover damagesWhere an employer makes default in the payment of any contribution to the FundCentral Provident Fund Commissioner in this behalf may recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as may be specified in the Scheme. Provided that before levying and recovering such damages, the employer shall be given a reasonable opportunity of being heard.# No.of days delayed in making payment x 5% p.a (Less than 2 months)

# No.of days delayed in making payment x 10% p.a (2 months and above but less than 4 months)

# No.of days delayed in making payment x 15% p.a (4 months and above but less than 6 months)

# No.of days delayed in making payment x 25% p.a (6 months and above)

SECTION 16 EXCLUSION FROM THE ACT

to any establishment registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State relating to co-operative societies employing less than fifty persons and working without the aid of power; or

to any other establishment belonging to or under the control of the Central Government or a State Government

SECTION 17 EXEMPTION

COLLECTION / RECEIPT OF CONTRIBUTIONS

The Provident Fund (PF) contribution is 12% of PF Wages from both employee and employer. For the calculation, the maximum limit of Basic is Rs 6500/-. It means even if the employees PF Wages is above Rs 6500/-, the employer is liable to contribute only on Rs 6500/-, that is Rs 780/-. However if an employee so desires he may voluntarily contribute more than 12%. Apart from it an employer also has to pay some administration charges. The various accounts of PF Challan are as mentioned below.

DUTIES OF THE EMPLOYERS

Enrol all categories of employees including the employees engaged by or through contractors and also piece rated, hourly rated employees.

Remit the contributions and administrative charges before the 15th of the following month.

File the initial returns of Form 9, Form 3(P.S.), form 5A.

File the monthly returns in Form 12A, Form 5, Form 10 and Challans for remitting the dues.Maintain the contribution card in respect of each employee in Form 3A and submit the annual returns in Form 3A and 6A after reconciliation with Challans and form 12A.

The employer has to ensure that statutory dues in respect of contractors employees are remitted and returns filed.

Employer should attest the form No.2 and the claims forms submitted by the member/ legal heirs/ nominees.

Make available all relevant records for inspection of visiting officials with due authorisation.

Common Questions

1) Which establishment or company eligible for this scheme?This scheme applies to all companies or establishment, which employs 20 or more than that. Do remember that once the employees strength reaches to 20 or more then irrespective of employee strength (whether fall or rise) the company must continue with this scheme. However, suppose company or establishment stopped its operation or continue without any employee then in that case this scheme not applicable. In addition, employee if considered as trainee or apprentice will not be covered under this act.2) Which employees are excluded from this scheme?An employee who was a member of this scheme and withdrawn all amounts of his contribution based on either retirement from service after attaining age of 55 years or who migrating abroad for permanent settlement.An employee whose salary (BASIC+DA) at the time of entry into scheme more than Rs.15, 000.If a member is considered as an apprentice then he will not come under EPF3) What do you mean by salary for this purpose?Salary for this purpose is only BASIC+DA. Also remember that if your salary at the time of entry is Rs.15, 000 or less than that, but after a few years or a month if your salary revised then raised to more than Rs.15, 000, then in that case too member must continue with this scheme. So for example, this month your salary is Rs.14, 000 and you are a member of this scheme. But in March 2015 your salary revised and crossed the limit of Rs.15, 000 then too you need to continue with this scheme.Only employees who are eligible to stay away from this scheme are those whose salary are more than Rs.15, 000 at the entry of employment.

5) Whether one can mention nomination?

Yes, one needs to nominate for EPF. This helps to get the money in case of sudden demise of member. Usually if the member is married, then he should nominate to spouse or kids. If he is unmarried then he can nominate his parents. Brothers or sisters are not allowed for nomination. However, one can mention multiple nominations and must disclose the percentage of sharing. In addition, if member doesnt have any family members then he can nominate anyone of his choice. Do remember that once the member acquire a family, then such nomination will become void.6) What about arrears if one receives due to salary revision?

Salary revision is considered a normal hike. Therefore, any such arrears payable to the employee are subject to EPF deduction.

7) Whether an employee contributes more than 12% of his salary?

Yes, you have the option to contribute more. But the employer has no such obligation to match your contribution. Such contribution is called Voluntary Provident Fund (VPF). Interest benefit will be same as that of EPF.

8) Who is responsible to deposit to EPF Scheme?

Your employer has whole responsibility to deposit all amounts, which is deducted from the employee as well as an employer contribution.

9) My employer deducting his contribution from my salary, whether it is legal?

According to EPF rules, an employer cant deduct it from employee salary. It is illegal. I found that after revising rules from 1st Sept 2014, few employers started to deduct their contribution from the employee. This is illegal.

10) Whether my employer can split salary components after 1st Sept 2014 to reduce his contribution towards EPF?

This was happening since the latest changes and many of the readers of my post mentioned this. But such activity is also considered as illegal. Please read below lines of rules, which by Fund Commissioner. I found this information HERE.

Any agreement entered into between the employer and its employees for splitting of the amount payable by the employer to its employees for the service rendered by them, cannot take away the power of the Commissioner under Section 7A of the Act to look into the nature of the contract entered into between the employer and its employees and decide that splitting up of the pay payable to the employees under several heads is only subterfuge to avoid payment of contribution by the employer to the provident fund. It was open to the Commissioner to lift the veil and read between the lines to find out the pay structure fixed by the employer to its employees and to decide the question whether the splitting up of the pay has been made only as a subterfuge to avoid its contribution to the provident fund.

11) Whether I am eligible for withdrawal of EPF? What will be tax treatment on the same?

Both the questions are already answered in my earlier posts and links will be below.

All about EPF (Employee Provident Fund) advance withdrawal
Taxation of Employee Provident Fund (EPF)
12) Whether EPFO comes under RTI?

Yes. This being Govt. Organization, it will come under RTI Act.

13) Is it legal to withdraw EPF during job?

It is illegal if you withdraw your EPF during typical job change. One can withdraw EPF only if one has no job for 2 months. Otherwise withdrawing for any new job change is actually illegal. Rules allows only to transfer in case of job change.

14) How you can receive EPF withdrawals?
Currently any EPF withdrawal will be credited to beneficiary bank account directly. So no need to worry.

15) How is interest calculated on EPF Account?

Before proceeding, let us first understand how and in what way EPF contribution will be considered for interest rate calculation. We all know that if BASIC+DA is less than Rs.15,000 (Effective from 1st September 2014) then both employer and employee contribution will be same. If it is more than Rs.15,000 then you have option either to have this investment or opt out of this investment. Below table will give you how your as well as employer contribution will be distributed if your salary is less than or equal to Rs.15,000. Salary for this purpose means Basic+DA.

But if it is more than Rs.15,000 then it depends on the employer decision like how much your employer is also contributing. Below are a few options which usually followed. But do remember that whatever below option your employer may choose but EPS contribution is fixed as 8.33% and other contributions may change according to consideration.

Option 1-Employer may contribute equal to your contribution.

Option 2-Employer may restrict its share to Rs.15,000 only but your share as 12% of salary.

Option 3-Employer may restrict your as well as its contribution to Rs.15,000 only.

Coming back to the interest calculation method on EPF, lot of EPF members not aware that for EPF accounting year starts from March and ends on February but interest will be credited on April every year. EPF interest is yearly compounding but use the method of Average Monthly Balance calculation method. Let us take an example that Mr. Ajay joins the company on 1st June of 2012 with a salary (Basic+DA) as Rs.6,500 with no prior EPF balance in this account. I considered the current EPF interest rate of 8.50% for 2012-13. Below is the table which illustrates the calculation method.

The above balance at year end of Rs.9,431 will be considered as a balance for beginning of account year i.e. for March 1st.

A few points to be noted

Contributions will be shown by your employer based on the salary due. For example, September month salary will be payable on October. So the September month contribution will be shown as a contribution against October but not in September. Whether the payment will be in October month or not.Interest will be rounded off to a nearest rupee.In case of death claims, interest should be restricted to the month preceding the month in which death occurred.

4) What is the contribution percentage of employer and employee?

Please note that Salary for this purpose means Basic along with DA.

Let us discuss the above four changes in detail.

1) EPF is now mandatory for all those whose salary is less than Rs.15, 000Previously the limit was Rs.6, 500. However, this now rises to Rs.15, 000. Therefore, whoever falls below Rs.15, 000 of salary per month will have to contribute compulsorily to EPF Scheme.2) The minimum monthly pension will be Rs.1, 000 per month. Under the new rules, widow of a member will get a minimum monthly pension of Rs.1, 000. For children it fixed at Rs.250 and the orphans it is Rs.750 per month. In addition, to arrive at pension, salary will be average of 60 months last drawn salary instead of earlier rule of last 12 months average salary.3) Insurance coverage to member increased to Rs.3, 00,000Earlier each member who is part of the EPF scheme had an insurance coverage of Rs.1, 56,000. This insurance coverage has now risen to Rs.3, 00,000.4) EPS contribution from employer raisedEarlier whether your salary was Rs.6, 500 or at a higher level, employers used to contribute fix EPS contribution of Rs.541 i.e. 8.33% of Rs.6, 500. This is increased now to Rs.1, 250 i.e. 8.33% of Rs.15, 000.

The overall effect on you will be lesser take home salary. Because earlier, whoever earning more than Rs.6, 500 might contributed 12% of Rs.6, 500. Now onward it will be 12% of your salary if you fall under Rs.15, 000 and if more than Rs.15, 000 then also 12% of Rs.15, 000. So compared to earlier, you will see higher outgo to EPF and lesser take home salary. However, do remember that you are indirectly investing rather than spending. So be happy :)

EPF Universal Account Number (UAN)-What it is?
EPFO launched providing Universal Account Number (UAN) to its members. This will be one of the major steps EPFO provided. With this facility one can download online passbook, update their profile, transfer account or view previous details

Universal Account Number or UAN act as a unique number to each member under which you have multiple IDs allotted by your employer will be tracked. Suppose if you join a new company then you just need to submit a UAN number to your employer. You can now get this UAN number from your employer. Because allotting of UAN already started.

The main purpose of this unique number is to provide access to employees to have a view of his/her profile and access the services like viewing profile, changing profile, download online passbook, or request for transfer. To avail such facilities you need to create a login by visiting UAN Homepage.

APPLICATION OF THE ACT

All establishments / factories included in the list of notified industries and class of establishments as in Schedule I and employing 20 or more persons.

Any other establishment employing 20 or more persons or class of establishments which the Central Government may notify.

The Act will come into force in an establishment from the very date of set up or commencement of business except certain class of establishments as excluded under Section 16 of the Act

Departments or branches of an establishment, situated in the same place or different places shall be treated as parts of the same establishment for coverage under the Act.

The Act once applied will continue to apply to the establishment even if the number of employees fall less than 20 after coverage.

The Act is applicable to cinema theatres employing 5 or more workers

VOLUNTARY COVERAGE

With the consent of the employer and majority of employees, an establishment otherwise not coverable can be covered under Section 1(4) of the Act..

MEMBERSHIP

Persons / employees including regular, casual, piece rated, part time, temporary and contract employees.

Coverage from the date of joining the establishment / factory.

All employees getting the wages upto Rs. 6500/- per month.

In case of wages more than Rs. 6500/- p.m. on joint request by employee and employer

ROLE OF COMPLIANCE

Coverage of all coverable establishments .

Extending membership to all eligible employees in covered establishments .

Ensuring proper implementation of Act & Scheme provisions

REGISTRATION

A registration number otherwise known as Code Number issued to every establishment / factory to which the Act is applied.

Issued by RPFC under whose jurisdiction the establishment is located.

In case of factory, code number is allotted by RPFC under whose jurisdiction factory is located.

A contractor employing 20 persons and engaged in the work of different establishments may obtain a separate Code Number. Normally Code Number is issued within 3 days on submission of requisite documents like proof of date of set up, Demand Draft towards PF dues for one month etc.

All members be assigned with separate PF Account Number.

The provisions of the Act applies to the establishment suo-moto, on fulfilling the conditions for the coverage

Payment of accumulation plus interest on retirement, resignation, death.

Partial withdrawals permitted for specific purposes:

Financing life insurance policies

acquiring house or site

Addition and substantial alterations of the dwelling house

marriage of self and dependents

education of children

treatment of illness etc.

Purchase of equipment by physically handicapped employees.

Financial assistance on dismissal, discharge, closure / lock out.

(i) Benefits under EPF Scheme

OTHERS

Redressal of grievances at field office and Head Office levels.

Disposal of grievances in Bhavishya Nidhi Adalats.

Know Status of your Claim from EPFO Website.

Lodging the grievances on the Website under CPGRAM.

Status of claims settlement from Information Kiosks.

DIFFICULTIES IN IMPLEMENTATION OF PROVISIONS OF THE ACT

No voluntary compliance by employers.

Lack of awareness among establishments regarding compliance and submission of returns.

Lack of awareness among the employees regarding social security benefits.

Wage ceiling at Rs. 6500/-.

Existence of Schedule Head.

Non-issue of statement of members account due to non-submission of returns by the employer.

Outsourcing and employees engaged on contract.\Engaging the contract / part time employee in the Government Departments.

Not fully computerization in EPFO.

Numerous returns submitted by the employers.

Delay in settlement of claims / grievances due to heavy workload.

Delay in issue of PF statements due to non-submission of returns.

Illiteracy among members for maintaining their Date of Birth records.

Employers reluctant to submit the claim forms in time.

THANK YOU.

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