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Provident Fund scheme is a retirement benefit scheme, where the benefits are paid in lump-sum after retirement. It is made mandatory for all organizations employing more than 20 employees. Under this scheme, a stipulated amount (12%) is deducted from the employee’s salary and contributed towards the fund. The accumulated amount with interest is returned to Employee on the retirement.

Employees Provident Fund scheme is introduced in 1952 to provide the employees some financial benefits post retirement and old age. This scheme supports the employees financially post service by keeping a portion (contribution) from the employee’s monthly salary (From the date of joining in an establishment to till the date of retirement). The contributions from employer and employee will get accumulated and paid after the retirement as pension or otherwise.

However there are some rules, regulations, rates of contribution & exceptions present in this scheme which are explained in the next sections.

As per Para 26(2) of the Employees’ Provident Fund Scheme, 1952, every employee employed in or in connection with the work of a factory or establishment other than an excluded employee shall entitled and required to become a member of the Fund from the date of joining the factory or establishment

Applicability:

“Employee” means

• Employed by or through the contractor in or in connection with the work of the establishment.
• Engaged as an apprentice, not being an apprentice under the Apprentices Act, 1961.

Excluded Employee

• An employee of the company to whom both the following two conditions apply at the time of joining the services of the company.
• His/Her Pay is more than Rs. 15000/- per month.
• Does not have any current PF/EPS Balance under EPF & MP Act, 1952.

Voluntary Coverage – With the consent of majority of the employees, the establishment may opt for voluntary coverage.

Contribution – Minimum contribution towards PF should be 12% of the Pay.
‘Pay’ includes basic wages with dearness allowance, retaining allowance, (if any) and cash value of food concessions admissible thereon.

Minimum PF Contribution – 12% of the Pay
Maximum PF Contribution – 100% of the Pay

Basic Wages – “Basic Wages” means all emoluments which are earned by employee while on duty or on leave or holiday with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash, but does not include,

• The cash value of any food concession;
• Any dearness allowance, house rent allowance, overtime allowance, bonus, commission or any other allowance payable to the employee in respect of employment or of work done in such employment.
• Any present made by the employer.

Voluntary Contribution – Member shall be at liberty to make voluntary contribution.

Employer’s Contribution – Equal to 12% of the Pay of employee.

Pension Fund (EPS) – 8.33% of Pensionable Salary
Pensionable Salary = Rs. 15000/- or Pay (whichever is less).

Provident Fund -12% of the Pay minus EPS
In the 12% contribution from Employer, 8.33% contribution is kept in Pension fund and the rest is kept in Provident fund, where as employee’s 12% contribution is for only provident fund.

In addition to the contribution amount, employer has to pay the admin charges for PF Office. Amounts payable to Regional PF Commissioner’s office are as follows:

• A/c No. 1 – 12% of the Pay, Employees Provident Fund Contribution.
• A/c No. 1 – Voluntary Provident Fund Contribution.
• A/c No. 1 – 12% of the Pay minus EPS, Employer Provident Fund.
• A/c No. 10 – 8.33% of the Pensionable Salary (EPS).

Admin Charges and others:

• A/c No. 2 – 10% of the Pay, PF Admin. Charges-Minimum Rs. 5/-pm.
• A/c No. 21 – 0.50% of Pensionable Salary for EDLI contribution.
• A/c No. 22 – 0.01% of Pensionable Salary for EDLI Admin. Charges – Minimum Rs. 2/-pm.

Interest on PF Accumulation – The interest on accumulated amount is credited to the members account on monthly running balance with effect from the last day in each year. The Rate of interest is fixed by Central Government in consultation with the Board of trustees, Employees’ Provident Fund. As of now, with effect from the date 01/04/2013 the current rate of interest is 8.75%. The interest on PF accumulations are exempted from income tax.

Withdrawal from the fund – Withdrawals are usually made at the time of retirement or otherwise. Member is entitled to withdraw full amount in the following cases:

• On retirement from service.
• On retirement on account of permanent and total incapacity for work due to bodily or mental infirmity. 
• Immediately before migration from India for permanent settlement abroad or for taking employment abroad.
• On termination of service in the case of mass or individual retrenchment.
• On termination of service under a voluntary scheme of retirement.
• After two months of resignation. In case of no employment.

Note: A member of the Fund shall continue to be a member until he withdraws under aforesaid conditions.

Types of advance from PF Accumulation – Employees are allowed to get a loan (partial amount) on PF accumulations in certain cases. Types of advances can be obtained are as follows:

• Purchase dwelling site.
• Construction of a dwelling house.
• Completing construction of the house.
• Buy a dwelling house /Flat from Agency.
• Purchasing a newly constructed/old dwelling house or flat from an individual.
• Purchasing house/flat from a promoter.
• Additional Loan -alterations/improvements.
• Further housing withdrawal.
• Repayment housing loan.
• Withdrawal on 54 Years or within 1 year before actual retirement.
• Closure or lockout/non-receipt of wages for a continuous period of 2 months etc.,
• Further advance in case of closure or lock-out of establishment/ factory for more than 6 months.
• Advance for illness of member and his family.
• For marriage, or post   matriculation education.
• Property damaged by a nature calamity.
• If Members affected by cut in the supply of electricity.
• Member physically handicapped.

Nomination – The member of Provident Fund should nominate a person, conferring right to receive the amount that may stand to the credit in the fund, in his/her absence (Death). The member may furnish the particulars concerning himself and his family.

• An employee may be allowed to make a nomination conferring on one or more persons the right to receive the provident fund amount.
• If an employee nominates more than one person, he shall, in his nomination specify the amount or share payable to each of the nominees.
• Where an employee has a family at the time of making a nomination, the nomination shall be in favor of one or more persons belonging to his family.
• Any nomination made by an employee in favor of a person not belonging to his family shall be invalid.
• If at the time of making a nomination the employee has no family, the nomination may be in favor of any person or persons.
• A nomination made by an employee may, at any time, be modified by filing Form no. 2
• Where the nomination is wholly or partly in favor of a minor, the Member may, appoint a major person of his Family to be the guardian of the minor nominee Provided that where there is no major person in the Family, the Member may, at his discretion, appoint any other person to be a guardian of the minor nominee

Family for Provident Fund (PF) includes, in case of a male member, his wife, his children (whether married or unmarried), his dependent parents and his deceased son’s widow and children.

Family includes, in case of a female member, her husband, her children (whether married or unmarried), her dependent parents, her husband’s, dependent parents, her deceased son’s widow and children.

Family for Pension Fund (EPS) – Wife in case of male member of the Employees’ Pension Fund;
Husband in the case of a female member of the Employees’ Pension fund; and sons and daughters includes child legally adopted by the member below 25 years of age.

Employee Provident Fund Scheme – Employees’ Provident Fund Scheme takes care of following needs of the members:

• Retirement
• Medical Care
• Housing
• Family obligations
• Education of Children
• Financing of Insurance Polices

How the Employees’ Provident Fund Scheme works:

As per the act, both the employer and employee have to contribute the fund at a rate of 12% of Basic wages, DA and other allowances. However in the following cases, contribution rate varies with the general rules.  The rate of contribution is 10% in the case of following establishments.

• Any covered establishment with less than 20 employees, for establishments cover prior to 22.9.97.
• Any sick industrial company as defined in clause (O) of Sub-Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act, 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction,
• Any establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and
• Any establishment engaged in manufacturing of (a) jute (b) Breed (d) coir and (e) Guar gum Industries/Factories. The contribution under the Employees’ Provident Fund Scheme by the employee and employer will be as under with effect from 22.9.1997.    

Withdrawal before retirement:

After attaining the age of 54 years, a member can withdraw up to 90% of the amount of provident fund at credit Claim application in form 19 has to be submitted to the concerned Provident Fund Office.

Accumulations of a deceased member:

In case of a member’s death, the amount of PF at the credit of deceased member has to be paid to the nominees / legal heirs. Claim application in form 20 has to be submitted to the concerned Provident Fund Office.

Transfer of Provident Fund account:

The amount in the PF account can be transferred from one place to other in case the member changes his/her job. Transfer Application in form 13 has to be submitted to the concerned Provident Fund Office for transferring the amount.

Instructions for a member while sending application to Employees’ Provident Fund:

General:

• Use appropriate forms for claiming Provident Fund Pension, withdrawal benefit / scheme certificate, Employees’ Deposit Linked Insurance benefit, etc. as given below.
  • Form-19 – To claim final settlement of Provident Fund by a member.
  • Form-20 – To claim Provident Fund by nominee/legal heir on death of the member.
  • Form-10 D – To claim pension. (In duplicate if it is within the state, in triplicate, if it is outside the state.)
  • Form-10 C – To claim withdrawal benefit/scheme certificate under Employees’ Pension Scheme ’95.
  • Form-5IF – To claim assurance benefit under Employees’ Deposit Linked Insurance ’76 by nominee/legal heir of a member.
  • Form-31 – To claim temporary withdrawal/advance under Employees’ Provident Fund scheme ’52.
  • Form-13 – To effect transfer of Provident Fund/Pension from one A/C to another.

• Ensure that all columns of the application are filled completely. 
• Information in the application form relating to name, a/c no., should agree with the details available with Employees’ Provident Fund Organization; which were furnished by the employer at the time of enrolling to Provident Fund. 
• Application should be signed by the member/claimant. 
• It should be attested by the former employer. In case attestation by the former employer is not possible, it should get attested by any other authorized official specified with application form.
• Application for final settlement can be sent by a member on completion of 2 months from the date of leaving service, if the reason for leaving service is other than superannuation, medical ground, retrenchment and V.R.S./ Female members getting married etc. 
• Desired mode of payment can be given legibly, if the amount involved is more than Rs. 2000/-. The amount will sent by deposit in payees’ bank a/c. To facilitate this, Bank a/c no., name and address of the bank should be furnished. An advance stamped receipt should also accompany this application. 
• Application may be supported by the return Form-10, showing the details of leaving service and details of contribution for the year in
• Form-3A, if not sent earlier by the employer.

Specific additional requirements:

A) Death cases:

• Nominee/legal heir should apply in Form-20 /Form-10-D /Form-5IF. 
• If the member has not executed any nomination, application should be supported by certificate of family members issued by employer/revenue official/sworn in an affidavit by the family/ member/legal certificate from a court of law. 
• Death certificate of the member. 
• Certificate of the employer stating whether the death was while in service of the member or not. 

B) Pension cases:

• Joint photograph of member/spouse or the claimant should accompany the application. 
• Option for return of capital/commutation should be specified clearly. 
• Details of non-contributory period during the service, wages/salary for last 12 months should also accompany, if not already sent. 
• Details of the branch of the specified bank may be given legibly.
• Date of birth certificates of children.
• In case of death away from service, an undertaking by the claimant to the effect that the member was not working / had not worked in any other covered establishment after exit from the establishment on the basis of which pension is being claimed.

Employees’ Deposit Linked Insurance Scheme, 1976 (EDLI)

This scheme under the Employee Provident Fund Act provides the insurance benefits to the employees up on death of a member while in service. It is linked to the average balance in the provident fund account of deceased member. 

Membership   – All members of Provident Fund

Contribution – Employer is required to contribute @ 0.50% of Pensionable Salary.

Benefits: The employer contributes 0.5% of basic pay of an employee as insurance premium to the EDLI scheme every month. The benefit under the scheme is given on the basis of the provident fund balance in the subscribers account. For EDLI scheme, the insurance cover is variable and it is based on the subscriber’s average balance in his PF account over a period of last 12 months.

The insurance cover amount is higher of the two: 20 times the average basic pay of the past 12 months (up to Rs. 6,500 per month), i.e. Rs. 1.3 lakh [Rs. 6,500 X 20] or the full amount in your PF account up to Rs. 50,000 and 40% of the balance amount = Rs. 70,000 [Rs. 50000 + (Rs. 50,000 X 40%)]. Under EDLI, an EPFO (Employees’ provident Fund Organisation) subscriber gets insurance cover and gets benefit of up to Rs. 1.3 lakh in case he /he dies before superannuation.

Employees’ Pension Scheme, 1995(EPS)

Introduction – Employees’ Pension Scheme is a survivor, old age and disability pension scheme. (In force from 16.11.1995 retrospectively with effect from 1.4.1993)

Contribution – 8.3 % of Employer’s contribution towards PF is diverted to Pension Fund.

Type of Pension – Members are given different types of pensions.

• Monthly member’s pension will be given after attaining the age of 58 years.
• In case of permanent and total disablement during the course of employment, Invalidity pension is given.
• Widow pension for life or until remarriage is given in case of member’s death while in service or after retirement.
• Two children of deceased member will get Children pension up to the age of 25 years.
• If the deceased member has no family, the person who had been nominated by deceased member will get the Nominee pension.

Pension benefits to member are as follows:

For the service rendered below 10 yrs

• Less than 6 months – NIL

Return of contribution on exit from employment. The rate gets varied in an increased proportion with the service rendered in no. of years. i.e., for 1 year of service rendered, it may be 1.02 and for 2 years of service rendered, it may be 2.05 etc.

For the service rendered above 10 years but below 20 years

• A person after attaining the age of 58 years is entitled for pension provided he/she has completed a minimum of 10 years service.
• Six months or more shall be treated as one year and the service of less than six months shall be ignored.

Pension will be calculated by applying the formula;

Pensionable salary * Pensionable service / 70

For the service rendered over 20

Full pension according to the formula stated above;

• On rendering 20 years of Pensionable service or more, member’s Pensionable service shall in all cases be increased by 2 years.

Commutation of pension

• Option is available for commutation of pension.
• Commutation is permissible up to 1/3rd of pension amount.
• Commuted value will be hundred times of pension amount so commuted.
• Up on commutation, the balance amount of pension payable shall be monthly pension.

Payment of pension through bank

The pension is disbursed through nationalized bank of the respective state.

Scheme certificate

The member can get a Scheme certificate when ever needed. Usually the members may ask for a Scheme certificate when he/she is leaving the employment or moving from a covered establishment to an uncovered one etc.  It indicates the Pensionable salary and the amount of pension due on the date of exit from employment. When the employee subsequently employed in a covered establishment, the Pensionable service in the certificate will be considered for calculating full Pensionable service.