Paper 5:

Applicability of PF to Consultants 1) Rebound Labs, a pharmaceutical company based in Shirdi,

Maharashtra has hired a Consultant Mr. Kairav to handle an assignment and would pay a lump sum
amount on a monthly basis as compensation, called Consolidated Pay, for his work.

The question here is – Is Statutory Deduction under EPF & MP Act applicable to such consultants?
(Consultants refers to lawyers, chartered accountants and others engaged by establishments)

An establishment makes payments to Consultants when,

1. The consultants submit their bills for a month (or quarter or any similar time periods) and

2. Bills are raised as per the agreement made between the establishment and the consultants and

3. TDS has been deducted by the establishment as per Income Tax Act.

In the case of an employee, the establishment pays salary at the end of the month and no such bills
are required to be submitted to the employer by the employees. Submission of bills is not required
for releasing salaries as there exists an employer-employee relationship between the establishment
and its staff.

There is no employer – employee relationship when a consultant is hired. In other words, a

consultant is not considered as an employee of the establishment. Formalities and procedures that
are related to regular employees are not applicable to Consultants, therefore consultants are not
covered under the provisions of Employees’ Provident fund and Miscellaneous Provisions Act, 1952.
This means no deductions are to be made towards Provident Fund from payments released to
consultants.

Since EPF & MP Act, 1952 is not applicable to Consultants; hence no deduction towards Provident
fund should be made by Rebound Labs from the amount released to their consultant Mr. Kairav.

Take always:

1. No employer-employee relationship exists between the Consultants and establishments.

2. Payments are made to Consultants against their bills after deduction of TDS as per Income Tax Act,
1961.

3. Deduction towards Provident fund is not applicable on payments released as EPF & MP Act, 1952
is not applicable to Consultants. Provident Fund The course explains the relevant concepts in PF law,
practical aspects in PF calculation.