PROVIDENT FUND

&
MISC. PROVISIONS ACT,
1952
 What is Provident Fund?
 Provident fund is a scheme by the Government of India by
which:
• A fixed percentage is deducted from employees salary and
• A fixed percentage added by the company
 This amount is kept in an account, which accumulates and is
then received back after retirement.
 Provident fund is basically a retirement benefit scheme.
 In case of death of the employee the accumulated balance is
paid to his legal heirs.
• The Employees' Provident Fund & MP Act,1952 is an
important piece of Labour Welfare legislation enacted by the
Parliament to provide social security benefits to the workers.

• The objective was the institution of the compulsory

contributory Provident Fund to the employees.

• Both the employee and the employer would contribute to

the fund at the rate of 12% of the basic wages, dearness
allowance and retaining allowance, if any, payable to
employees per month.
 Membership
• At the inception of the scheme an employee who was to
receive pay up to Rs.300/- p.m. , and who worked for one
year was eligible for membership of the fund.
• As a result of amendments made from time to time , the
conditions of eligibility for membership of the fund have been
liberalised in favour of employee.
• Presently an employee at the time of joining the
employment and getting wages up to Rs.6500/- is required to
become a member.
• In case of wages more than Rs. 6500/- p.m. on joint request
by employee and employer.
• Now an employee is eligible for membership of fund from
the very first date of joining any establishment.
 Applicability
 The Employees Provident Funds and Miscellaneous Provisions
Act 1952 applies to:
• Every establishment which is a factory engaged in any
industry in which 20 or more persons are employed.
• Establishments notified by Central Government which
employs 20 or more persons.
• The act is also applicable to the NGO’S.
• The Act applies to the whole of India except the State of
Jammu and Kashmir.
 Exemptions of the Act
• Any establishment registered under the Co-operative
Societies Act 1912 or under any other law for the time being
in force in any State relating to co-operative societies,
employing less than 50 persons and working without the aid
of power.
• Any establishment belonging to or under the control of the
Central or State Government and whose employees are
entitled to the benefit of contributory provident fund or old
age pension in accordance with any scheme framed by such
government.
• It has been decided by the courts that trainees are not
employees and are not covered by the EPF Act.
Presently under the Employees’ Provident Funds &
Miscellaneous Provisions Act, 1952,the following three
schemes are in operation:

1. The Employees’ Provident Fund Scheme, 1952

2. Employees’ Pension Scheme, 1995 and
3. Employees’ Deposit Linked Insurance Scheme, 1976
 Employee provident fund scheme
• Employees' Provident Fund Scheme takes care of following
needs of the members:
(i) Retirement
(ii) Medical Care
(iii) Housing
(iv) Family obligation
(v) Education of Children
(vi) Financing of Insurance Polices
• The employees provident fund interest rate is fixed by the
Central Government in consultation with the Central Board of
trustees, Employees' Provident Fund, every year during
March/April.
• Provident Fund Organisation will enjoy an interest rate of 9.5
per cent on their Provident Fund deposits in 2010-11.
 Employees Pension Scheme
 CONTRIBUTION
• The contribution envisaged under sec 6 is 8.33% of the basic
wages, dearness allowance and retaining allowance (if any)
from the employer’s contribution.
• Central Government shall contribute 1.16% of the pay of the
members of the Employees Pension Scheme to the Fund.

 RETENTION OF MEMBERSHIP
• An employee shall cease to be a member of the pension
fund on attaining the age of 58 years.

 MONTHLY PENSION
• This is based on a formula = (Pensionable Salary x
Pensionable Service) / 70.
 Employee Deposit Linked Insurance
Scheme
• The Central Government with the motive of providing
additional Social Security in the form of Life Insurance to
the family of the deceased member of the Provident
Fund, introduced the Employees Deposit Linked
Insurance Scheme.
 Applicability: The Scheme applies to all the
establishments to which the Employees' Provident Fund
Scheme applies.
 Contribution : the employer pays an amount equal to
0.5% of the total wages paid to the members as
contribution.
 (Cont..)
 Assurance benefit : The benefit provided under the
Employees' Deposit Linked Insurance Scheme is called
Assurance Benefit.
 On the death of the member while in service, the nominee or
any other person entitled to receive the Provident Fund
benefits will, in addition to the Provident Fund, receive the
Assurance Benefit .
• The amount of Assurance Benefit payable is an amount equal
to the average balance in the amount of deceased in the Fund
during the preceding 12 months except where the average
balance exceeds Rs. 60,000/- amount payable shall be Rs.
60,000/- plus 25% of the amount in excess of Rs.60,000/- .
 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
 Benefits to members of EPF Act
o Income Tax deduction
o Full refund of P.F. with interest on retirement, resignation,
retrenchment or death.
o Partial withdrawal for the purposes of:
• Housing
• Marriage / Higher Education
• Temporary Unemployment
• Medical Treatment
• Natural Calamity
• Purchasing equipments for physically handicapped.
o Monthly pension under the Employees Pension Scheme 1995,
on superannuation, retirement, permanent / total disablement,
for widow / widower, for children, for orphan.
o An important aspect is that there is a regular saving for the
employee and a certain social security.
 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 member’s account due to non-
submission of returns by the employer.