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MEGHA JOSHI
MBA
DELHI BUSINESS SCHOOL
SALIENT FEATURES

The Employees¶ Provident Fund was instituted by an Act of

Parliament in 1952 for providing the social security benefits to the
work force engaged in non-government sector.

The Employees Provident Funds Scheme, 1952 was introduced in

November 1952 to provide old-age and post service financial
support to the workers in general employed in Industrial &
Commercial Sector establishments. The scheme provided for
provident fund system on contributory basis by the Employers and
the Employees at equal rate. It made available to the employee
concerned the accretions in the Provident Fund a/c with interest in
lump sum on retirement or leaving the job.
ËHAT IS PROVIDENT FUND?
Provident fund is a scheme by the Government of India by
which:

A fixed percentage is deducted from your 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. Under this scheme
a stipulated sum is deducted from the salary of the
employee as his contribution towards the fund. The
accumulated sum along with the interest is paid to the
employee at the time of his retirement or resignation. In
case of death of the employee the accumulated balance is
paid to his legal heirs.
TYPES OF PROVIDENT FUND

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Statutory Provident Fund is maintained by the Government and Semi-
Government departments like Railways, Reserve Bank of India, Colleges,
Universities, Local bodies, Insurance companies etc., The employer¶s
contribution to the employee¶s SPF and the amount of interest on the
accumulated balance to the employee¶s credit balance are not to be
included in the income of the employee and so it is ignored.


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It is a fund to which the Commissioner of Income-tax has given the
recognition as required under the Income-tax Act.


 
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It is the Provident Fund, which is not recognized by the Commissioner of
Income-tax. The employee and employer both contribute towards this fund.
The employee¶s contribution to URPF will not be allowed any tax rebate.

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Self-employed people (doctors, lawyers, accountants, actors, traders,
pensioners) can also enjoy the benefit of tax rebate under section 88 by
contribution to PPF.
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As per Amendment dated 22/9/1997, in the Act, both the employees and the
employer contribute to the fund at the rate 12% of the basic salary,
dearness allowance and retaining allowance if any, payable to employees
per month. i.e. 12% (Basic + D.A. + R.A).
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A member of the PF can withdraw the full amount on retirement from

service after attaining the age of 55. The full amount can also be
withdrawn if:

A member who has not attained the age of 55 at the time of termination
of service.

Member is retired on account of permanent and total disablement due to

bodily or mental infirmity.

On migration from India for permanent settlement or employment abroad.

In case of mass or individual retrenchment.


 

    

A member can withdraw up to 90% of the amount of PF after attaining the

age of 54 years or within one year before actual retirement, whichever, is
later.

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A member of provident fund can avail non-refundable advance for the

following purposes:

For acquiring immovable property.

Advances in special cases such as lock out in factory/establishment.

For treatment of illness.

For marriages or post matriculation education of children.

Financing of member's life insurance policy.

Criteria: Advances/loans for building a house or marriage purposes requires

a minimum completion of 5 years of membership of the fund. In other cases
a minimum membership of 7 years is required.
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