Provident Fund under The Employees' Provident Funds Act ,1952

The Employees' Provident Funds and Miscellaneous Provisions Act, provides for compulsory contributory fund for the future of an employee after his retirement or for his dependents in case of his early death.
It extends to the whole of India except the State of Jammu and Kashmir and is applicable to:
  1. every factory engaged in any industry specified in Schedule 1 in which 20 or more persons are employed;
  2. every other establishment employing 20 or more persons or class of such establishments which the Central Govt. may notify;
  3. any other establishment so notified by the Central Government even if employing less than 20 persons.

Employees Entitled

Every employee, including the one employed through a contractor (but excluding an apprentice engaged under the Apprentices Act or under the standing orders of the establishment and casual laborers), who is in receipt of wages upto Rs. 6,500 p.m., shall be eligible for becoming a member of the funds.
The condition of three months' continuous service or 60 days of actual work, for membership of the scheme, has been done away with, w.e.f. 1.11.1990. Workers are now eligible for joining the scheme from the date of joining the service.

Employees Pension Scheme

The Government has framed the Employees' Pension Scheme, 1995, w.e.f. 16.11.1995. The existing Employees' Family Pension Scheme has been merged under the new scheme.
The new scheme envisages providing monthly pension to employees on superannuation, pensioning to widows on death after superannuation, monthly pension for children of the subscribers, monthly pension to members on account of permanent total disablement during service, etc.
The new scheme shall be compulsory for all the existing members of the Family Pension Scheme and those who become members of the Employees' Provident Fund Scheme on or after 16.11.1995. Besides, the following employees shall have an option to join the new Scheme:
  1. Employees who ceased to be members of the Pension Fund between 1.4.1993 to 15.11.1995.
  2. Employees who are members of the Provident Fund as on 16.11.1995 and not members of the Pension Fund.
Members who have died between 1.4.1993 to 15.11.1995 shall be deemed to have exercised the option of joining the scheme on the date of the death.
Members referred in clause (a) shall exercise the option to become members of the scheme by returning the amount of withdrawal benefit received, if any, together with interest @ 8.5% p.a.
Employees referred in clause (b) shall be deemed to have joined the scheme w.e.f. 1.3.1971 on remittance of past period contribution with interest thereon.
Every member of the Employees' Pension Fund Scheme shall continue to remain the member till the earliest happening of any of the following events:
  1. he attains the age of 58 years; or
  2. he avails the withdrawal benefit to which he is entitled vide para 14 of the scheme; or
  3. he dies; or
  4. the pension is vested in him. 
Every employer shall send to the Commissioner, within three months of the commencement of the scheme, a consolidated return of the employees entitled to become members of the new scheme.

Employer's Contribution

The employer is required to contribute the following amounts towards Employees' Provident Fund and Pension Fund
  1. In case of establishments, employing less than 20 persons or a sick industrial (BIFR) company or 'sick establishments' or any establishment in the jute, beedi, brick, coir or gaur gum industry. -10% of the basic wages, dearness allowance and retaining allowance, if any.
  2. In case of all other establishments, employing 20 or more person-12% of the wages, D.A., etc.
A part of the contribution is remitted to the Pension Fund and the remaining balance continues to remain in Provident Fund account.
Where, the pay of an employee exceeds RS. 6500 p.m., the contribution payable to Pension Fund shall be limited to the amount payable on his pay of RS. 6500 only, however, the employees may voluntarily opt for the employer's share of contributions on wages beyond the limit of RS. 6500 to be credited to the Pension Fund.

Voluntory Application For The Act

The employer and majority of employees of an establishment may agree for the voluntary application of the provisions of the Act in relation to that establishment. For this purpose, an application to the Central Provident Fund Commissioner, has to be made, who may, by notification, extend the provisions of the Act to that establishment, w.e.f. the date of such agreement or any subsequent date specified in such agreement.
The employer is required to contribute the following amounts towards Employees' Provident Fund and Pension Fund
  1. Where the parties voluntarily get themselves covered by the Act, they are completely and fully governed by the Act. But their liability to make contribution is, in case of establishments' employing less than 20 persons or a sick industrial (BIFR) company or 'sick establishments' or any establishment in the jute, beedi, brick, coir or gaur gum industry. -10% of the basic wages, dearness allowance and retaining allowance, if any.
  2. In case of all other establishments' employing 20 or more person-12% of the wages, D.A., etc.

Penalty For Default in Payment

If the employer defaults in making payment of any contribution, arrears, accumulations, administrative charges, to the Fund, he shall be liable to pay, by way of penalty, damages at the following rates:   
Period of Default  
  Rate of  Damages
        (% p.a.) 
(i) Less than 2 months               17      
(ii) 2 months and above but less than 4 months             22
(iii) 4 months and above but less than 6 months              27
(iv) 6 months and above             37

Dispute, Determination and Recovery

In case, where a dispute arises regarding applicability of the Act, the Central Provident Fund Commissioner or any other officer (to whom the powers of determination have been delegated), may decide the dispute and determine the amount due from an employer, under the Act or the schemes framed thereunder. Before making any order the officer shall conduct such inquiry as he may deem necessary and shall allow a reasonable opportunity to the employer for representing his case.
Further, where an officer has reason to believe that an amount due from the employer has escaped determination, he may re-open the case within five years and re-determine the amount due from the employer.
The employer shall be liable to pay simple interest @ 12% p.a. on any amount due from him under the Act, from the date on which it becomes due till the date of its actual payment.
Any amount of contribution, damages, accumulations required to be transferred, or administrative charges, due from an employer, may be recovered from him in any of the following modes-
  1. attachment and sale of the movable or immovable property of the establishment/employer;
  2. arrest of the employer and his detention in prison;
  3. appointing a receiver for the management of the movable or immovable properties of the establishment/employer.
The Recovery Officer pursuant to a recovery certificate issued by the authorised officer specifying shall make the recovery the amount of arrears.
The authorised officer may grant time for the payment of the amount, and thereupon the Recovery Officer shall stay the proceedings until the expiry of the time so granted.
Besides, the modes aforesaid, the authorised officer may recover the amount by any of the following modes:
  1. Recovery from any person of amount due from him to employee who is in arrears.
  2. Application for release of money, to the Court in whose custody there is money belonging to the employer.
  3. Recovery by distraint and sale of movable property.


Any person aggrieved by an order of determination or re-determination may prefer an appeal to the PF Appellate Tribunal. He shall however, deposit 75% of the amount determined in the order being appealed against, before filing an appeal.
The Appellate Tribunal may waive or reduce the amount to be deposited for admitting an appeal, after recording reasons for the same.

Clubbing of Establishments

The Act does not have any provision for clubbing of establishments. Despite this the Provident Fund authorities tend to club establishments.
If in their true relation the establishments constitute one integrated whole, the establishment is said to be one. This relation is judged having regard to unity of ownership, management, control, employment, functional integrality, finance and geographical proximity.
Two units will be treated as different and distinct unless an interconnection between the two units is established of mutual dependence of one over the other, so that one cannot function altogether or substantially without the other. The mere fact that one concern exclusively purchases the products of the other cannot mean there is functional integrity. Similarly, merely because there is is one common proprietor for two units will not justify to treat them as one establishment.
The factors, such as, situation of the office of the firms in one premise, user of a common telephone number and post-box number and employing the services of the same person to write the accounts, is not relevant for clubbing them.
Before passing an order clubbing two or more establishments as one concern, the Commissioner must afford a reasonable opportunity to the affected establishments.
Issue of show cause notices containing the conclusion without giving documents of evidence, on the basis of which the conclusion is arrived, would not amount to giving reasonable opportunity.

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