provident fund faq

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Essentials

Provident Fund

Overview

Employees Provident Funds and Miscellaneous Act, 1952 is a welfare legislation enacted for the purpose of instituting provident funds, Pension fund and deposit linked

insurance funds for the employees working in factories and other establishments. The act aims at providing social security and timely monetary assistance to industrial

employs and their families when they are in distress and/or unable to meet family and social obligations and to protect them in old age, disablements, early death of the

bread winner and in some other contingencies.

Presently, the following three schemes are the operation under the act through Employees provident fund organization (EPFO):

Employees’ provident fund, 1952

Employees’ deposit linked insurance schemes, 1976

Employees’ pension schemes, 1995

Coverage

Presently, the act is applicable 186 specified industries/classes of establishments as specified in schedule I of the act or any activity notified by the centre government in

the official Gazette employing twenty or more persons. Apart from the provisions for compulsory coverage, provisions also exist under the section 1(4) of the act for the

voluntary coverage. As on 31.3.2010, there were 615902 establishments and factories covered under the act with membership of 587.95 under EPF scheme, both the

exempted and un-exempted sectors. With the effect of 1.6.2001, an employee joining the employment in a covered establishments and getting wages up to RS 6500/ is

required to become a member of the fund.


Employees’ Provident Funds’ Arrears

The arrears under all the schemes as on 31.3.2010 were of the order RS.2923.14 core. Out of this 81.19% pertains to not immediately realizable category being the amount locked in the courts and were stay has granted by the courts. In order to recovery the arrears the EPF organization takes the various actions under the provisions of section 8 Employees Provident Funds and Miscellaneous Act, 1952. It takes step to get the stay orders vacated to recovery arrears under the non-realizable category. It also lunches persecution against the defaulting employers under the section 14 of the act and prosecuted the employers under the section 406/409 Indian penal code in case they deduct employees’ share of contributions but do not remit the same to the fund. During 2009-10, arrears amounting to RS.1208.31 crore were realized out

of a total workload of 1431.45 crore under both unexempted and exempted sector of establishments.

Service to members

A member of the employees Provident Fund Schemes is entitled to withdraw the amount lying in his account together with interest on quitting service. During the year

2009-10, 36.60 lakh EPF claims were settled. The scheme also provides for partial withdrawals from the Provident Fund Account to meet contingencies like illness,

invalidation and also to provide financial assistance to discharge their social responsibilities like marriage of self, children or higher education of children and

construction of dwelling house. At the end of a financial year a member is also entitled to receive annual statement of account indicating his balances. During the year

2009-10, 656.02 lakh annual statements of accounts were issued. At the end of the year 471.88 lakh annual statement of accounts remained pending for issue.

Employees deposit linked insurance scheme (EDLI), 1976

Employees deposit linked insurance schemes (EDLI). 1976 is applicable to all factories/establishments with effect from 1st August, 1976. All the employees, who are

members of the Employees Provident Fund Scheme, are required to become members of this Scheme. Employers are required to pay contributions to the insurance

Fund at the rate of 0.5 per cent of Pay I.e.,, basic wages, dearness allowance including cash value of food concession and retaining allowance, if any. During the year

2009-10.a sum of Rs.423.22 crore comprising of employers contribution was deposited. During the year 2009-10,a sum of RS.423.22 crore comprising of employers

contribution was deposited. During the year 2009-10, 21208 EDLI claims were settled. At the end of 2009-10, the EPFO had cumulative investments of RS.788.91 crore

under this Scheme. As amendment has been made in the employees Deposit Linked Insurance Scheme, 1976 under the Employees’ Provident Funds and Miscellaneous

Provisions Act, 1952, increasing the additional benefit, on the death of an employee who is member of the provident Fund. On the basis of average balance upto RS.50,

000/-, and where the average balance exceeds RS.50,000/-, the amount payable shall be RS.50,000/- plus 40% of the amount in excess of RS.50,000/ subject to a ceiling

of RS.1 lakh. A notification in this regard has been issued on 18th June, 2010. Earlier, the ceiling of RS.50,000/- was RS35,000/-and RS.1 lakh was only RS.60,000/- The

Scheme is proposed to be further liberalized to extend additional benefits to the members.


Employees’ Pension Scheme

The Employees’ pension scheme, 1995 has been introduced w.e.f.16.11.1995. With the introduction of the pension Scheme, the erstwhile Employees Family Pension

Scheme, 1971, has ceased to operate. However, the pensioners who were drawing benefits under the erstwhile Employees’ Family Pension Scheme,1971 will continue to

draw Family Pension under the Employees’ pension scheme, 1995

Pension Criteria

Members on attaining the age of 58 years and having rendered minimum ten years contributory service (including the membership period with ceased Employees Family

Pension Scheme, 1971) shall qualify for superannuation pension. Those be eligible for scheme certificate or withdrawal benefit, as the case may be.

Benefits under the Scheme

The Employees’ Pension Scheme,1995 Provides the following benefits to the members and their families:

Monthly member pension

Permanent total disablement pension

Widow/widower pension

Orphan pension

Nominee pension

Contribution to Pension Fund

The Scheme is financed by transferring 8.33% of the Provident Fund contributions from employers share and by contribution @ 1.16% of basic wages of employees by

the central Government. During the year 2009-10, RS.10924.52 crore were received as pension fund contributions, out of which RS.9930.25 crore were collected from

employers share and RS.994 crore were contributed by the central Government. At the end of 2009-10, the Employees Provident Fund Organization had cumulative

investments of RS.123790.43 crore under EPS Scheme.


Pension Beneficiaries

The Beneficiaries of the ceased Employees’ Family Pension Scheme,1971 continue to get benefits under the new employees’ Pension Scheme, 1995. As on 31.3.2010,

there were 2232035 members, 675001 spouses, 11546 parents 566195 children, 16566 orphans and 8663 nominees receiving pension under the Scheme. Total amount

disbursed among the pensioners during the year was RS.3120.84 crore through the nationalized banks and post offices.

Exempt Provident Fund

Under the Exempted Provident Fund Scheme, the employer forms his own Provident Fund Trust for benefits of his employees. The employer executes the Trust Deed,

prepares the Provident Fund Rules and nominates the trustees amongst its employees for administering and managing the Trust. On formation of Provident Fund Trust

the employer has to obtain recognition to the Provident Fund Trust from the Commissioner of the Income Tax and thereafter apply to the office of the Regional

Provident Fund Commissioner for granting exemption from the Provisions of the Employees’ Provident Fund & Miscellaneous Provisions Act 1952 and the Schemes

framed thereunder. Such recognised and exempted Trust is a separate legal arrangement. The employer pays its monthly contributions to the Trustees who are in charge

and responsible for day to day management and administration of the trust including that of doing necessary investments as per the pattern laid down in Rule 67 of the

Income Tax Rules 1962.

The Employee Pension Scheme contributions are remitted to the respective Regional Provident Fund Commissioner

There are around 2700 exempt trusts which manage the provident fund administration internally / outsourcing service provider

provident fund faq

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