PREFACE

Employers of exempted play a vital role in the

implementation of EPF & MP Act, 1952. The Zonal Training
Institute, South Zone conducts regular training programmes for
Employers especially exempted units to create awareness and also
appraise the role and responsibilities in giving proper and prompt
compliance under the EPF & MP Act, 1952 and Schemes framed
there under.

2. For administering the Fund by the exempted

establishments and interpretation of rules, in the right perspective,
Training on the maintenance of accounts, transfer of funds,
functioning of Trust, investment of pattern etc., is necessary. With
this in view, the training programme has been organized and this
booklet covers and depicts the different facets of the exempted
provisions and procedures including the maintenance of Demat
accounting. All topics covered under this programme are fully
supported through this booklet and it will serve as a useful
guidance and reference book for those who are dealing with
exemption.

3. The valuable guidance and suggestions received from

many serving and retired officers and officials of EPFO and their
expertise in the field offices made this book a valuable reference
book. It is hoped that the participants will be benefited by this
hand book for their successful completion of the training.
 TRAINING PROGRAMME FOR EMPLOYERS
(EXEMPTED ESTABLISHMENTS)

CONTENTS

S.No. Topic Page No.

1. SOCIAL SECURITY 1-4

2. EXEMPTION-PROVISIONS OF ACT/SCHEME-AT A 5
GLANCE

3. INVESTMENT OF PROVIDENT FUND MONIES – 6-8

PROCEDURE

4. TERMS & CONDITIONS OF EXEMPTION 9-13

5. DUTIES OF THE TRUSTEES 13

6. DUTIES OF THE EMPLOYER 14-18

7. TRANSFER OF PROVIDENT FUND 19-21

ACCUMULATIONS
 1
SOCIAL SECURITY

Definition

The term “Social Security” is of almost indefinite connotation as it covers several

measures of protection against various contingencies, “from WOMB to TOMB” or “from
the Cradle to the Grave”.

“It is a scheme of social insurance against interruption and destruction of

earning power and for special expenditure arising at birth, marriage or death. It is
an attack on five giants, namely, Want, Disease, Ignorance, Squalor and Idleness”.

2) The concept of Social Security is as old as civilisation itself. The concept of old
age, disability and survivors’ protection, as an essential ingredient of Social Security, was
included in the objectives of International Labour Organisation, set up after the First World
War in 1919.

3) The oldest institution of social security in the history of mankind is the family.
Closely connected by Flesh and blood, inspired by tales of filial devotion, fraternal
affection and parental sacrifice and encouraged by various religions, every member of the
family consider it as a part of his duty to share his weal and woe with other members.
Income from family property and family labour was pooled together and was used for the
maintenance of all members, whether protective or non-protective. The family is supposed
to look after the physical needs of its members, including food, shelter, clothing as well as
providing comfort and love acceptance and approval.

4) The break-up of the joint family system following emergence of the urbanisation
and industrialization has resulted in the need for social security through the society.

5) Chief Characteristics of Social Assistance:

1. It provides for selected social dependency needs;

2. The entire cost of the Scheme is borne by the State;
3. It applies uniform and statutory means test. It may follow from the above
study that the social assurance has the following features.
a) It is a device for providing social security benefits for special cases;
b) Assistance is granted by the state from its own fund directly or through
some appropriate Organisations;
c) Assistance is granted as a matter of right;
d) The financial resources of social assistance scheme are of the limited
order and benefits given can be only for a short duration of time;
e) It is granted to those persons who fulfil certain prescribed conditions;
and
f) Social assistance is supplemented rather than substitutive to social
insurance.

6) The purpose of social security:- The fundamental purpose is to give

individuals and families the confidence that their level of living and quality of life will not,
so far as possible, be greatly eroded by any social or economic eventuality. This involves
prevention of the occurrence of contingencies which involve loss of substantial reduction
of income.
7) According to International Labour Organisation, there are nine branches of
social security benefit which are – Medical care, Sickness benefit, Unemployment benefit,
Old age benefit, Employment injury benefit, family benefit, maternity benefit, invalidity
benefit and survivor’s benefit.

8) In the life of man there are two stages of dependency – childhood and old age
and in the intervening years of adult life, there are likely to occur spells during which he
can not earn his living. Illness enters into every one’s experience and apprehension of it is
felt at all ages. A person who falls sick is threatened with two stages of unemployment, at
first because he cannot work, and later because he would have lost his job. Similarly every
body is exposed to a certain number of risks or contingencies viz., Unemployment,
Sickness, Invalidity, Maternity, Employment Injury, Old age and death of the bread winner.
For the great majority of those who have nothing to live on but their earnings, any one of
these risks on contingencies, resulting inevitably in loss of income, is liable to plunge
workers and their families into extreme poverty.

9) SOCIAL SECURITY SYSTEM IN INDIA

The Constitution of India lays down, in its directive principles(Article 41)

“the State shall within the limits of its economic capacity and development, make effective
provisions for securing the right to work, to education and to public assistance in case of
unemployment, old age, sickness and disablement and in other cases of undeserved want.”

In India both Social Insurance and social assistance programmes provide

for Social Security needs of workers in the contingencies of sickness, maternity,
employment injury, occupational disease, old age and death. So far as Social Insurance
programmes are concerned the following schemes are in existence.

The principal Social Security Laws enacted centrally in India are the following:
❖ The Workmen’s Compensation Act, 1923.
❖ The Employees’ State Insurance Act, 1948.
❖ The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952.
❖ The Coal Mines PF Act,
❖ PF for Tea Plantations in the State of Assam.
❖ Seamen’s PF.
❖ The Maternity Benefit Act, 1961.
❖ The payment of Gratuity Act, 1972.

10.1 In addition, a number of social assistance schemes both central and state
Government Schemes – provide social assistance benefits for the welfare of specific
categories of workers. Most of these schemes cater to 90% of the work force, which is in
the unorganised sector, for whom the benefits of a contributory Social Insurance Scheme
is yet to be extended, as is provided to the workers in the Organised Sector.

10.2 Today Social Security exists for employees in Organised Sector whereas it is
absent in the Unorganised Sector. In the employee category, the complete responsibility
of social security is given to the Employer and State’s assistance is negligible.
 10.3 Out of 400 million workforces in India only about 8% of them are brought
under the PF/Pension Legislation. The Government of India is very keen in extending
these benefits to unorganised labourers in the country.

11) Evolution of Income Security for Elder, disabled and Survivor’s in

India
Govt. Employees

I. The concept of old-age Pension was brought to India by the British,

because the persons who were brought by them from England to occupy the
higher bureaucracy, had to be given old age pension, as they were entitled to
it, if they had remained in their own country. This benefit was also made
available to all Government employees as they had to rule through them.
Moreover, it would have looked discriminately, if it was available to one
section of employees, who were British citizens and not available to
employees of Indian Origin.

II. The Central Government employees are also enjoying the benefit of
pension and the payment of pensions regulated under the CCS (Pension)
Rules, 1972. Similarly the Armed Forces Personnel, Railway Employees and
members of All India Services are also enjoying the pensionary benefits at
par with the Central Government Civilian employee through separate
notifications issued by the respective Ministries/Departments. The Pension
schemes for the Government employees are financed from General Revenue
of the Government of India. Thus, in a sense it is a Social Assistance Scheme.

III. In 1965, Gratuity scheme was introduced for Government employees.

In respect of Central Government employees who join the service on or after
1.10.2001, the Government is considering framing of a separate Pension
Scheme on the recommendations of Pension Regulatory Authority set up by
the Government of India.

12) Industrial employees

I. The Employees’ Provident Funds Scheme was framed under the EPF
Act, 1952 in the year 1952. With a view to protect the family of the PF
members, who die while in service, a Scheme named Employees’ Family
Pension Scheme was framed under the EPF and Family Pension Fund Act,
1952 in the year , 1971, as a Social Insurance Scheme. In the year 1976, the
Employees’ Deposit Linked Insurance Scheme was framed under the EPF &
MP Act, 1952, providing lump sum benefit, which was linked to PF deposits
of the subscribers, who die while in service. On behalf of the employees, the
employer is required to pay the contributions towards the EDLI Scheme,
1976.

II. In the year 1995, the Employees’ Family Pension Scheme, 1971 was
replaced by the Employees’ Pension Scheme, 1995 which provides pension
on Superannuation, Family Pension to the family of the member who die
while in service or away from service or while drawing Pension. In addition,
Disablement Pension, Children Pension, Orphan Pension, Disabled Children
 Pension and pension for nominee and dependent parents and other benefits
viz. Return of capital and commutation are also being provided.

III. The working class in India was demanding one more retrial benefit and
accordingly the Government of India introduced the payment of Gratuity Act
in the year, 1972.
13) Other Schemes, in general

The Public Provident Fund Scheme, 1967 is a statutory Scheme of the Central
Government framed under the provisions of the PPF Act, 1968. The scheme came into
force w.e.f. 1.7.68. the PPF Scheme can be availed by any individual in his or spouse name
and this is a boon to self employed and entitled for income tax benefits.
14) The Government of India included the National Social Assistance
Programmes (NSAP) in the Central Budget for the year, 1995-96 and it came into effect
from 15th August, 1995. The NSAP for the time being included

1. National old age pension scheme.

2. National Family Benefit Scheme (a survivors benefit scheme).
3. National Maternity Benefit Scheme.
4. Social Security Group Insurance Scheme for weaker Sections.

It was started prior to 1991 to provide life insurance cover in unorganised

sector belonging to weaker sections.

15) The scheme for land-less agricultural labourers was started in 1988 by the
Government of India by providing Life Insurance cover to agricultural labourers. Group
Insurance Scheme integrated development programme beneficiaries was started prior to
88-89 to provide Life Insurance cover to beneficiaries.
16) Personal accident national security scheme was started by Government of
India to provide accident insurance benefits to the workers of the poor families not covered
under any insurance scheme or any act.
17) The Rural Group Insurance Scheme was started in the year 1995-96 by LIC
and is being implemented in villages through local panchayats.
18) Personal Accident Insurance Social Security Scheme for poor families was
started by General Insurance Corporation in the year 1996-97 with the active involvement
of State Governments.
19) The General Insurance Corporation has set apart a separate fund named
“solatium fund’ for the relief of victims of hit and run accident wherein the vehicle involved
in the accident was not identified and hence compensation can not be claimed under Motor
Vehicle Act. It is operated through Collector.

EXEMPTION-PROVISIONS - AT A GLANCE
TYPES OF EXEMPTION
 Exemption-Provisions of Act/Scheme-At a glance
Sl.No. Nature of Granted Authority to Authority Remarks
Exemption under grant to issue
Act/Schemes exemption Relaxation
Order
1. Exemption Sec.16(2) of Central N.A. Exemption
from the the Act Govt. to a class of
Act estts. Only
for a
specified
period.
2. Exemption Sec.17(1)(a) Appropriate R.P.F.C. Exemption
from the of 17(1)(b) Govt. (Para 79) to an estt. as
operation of a whole
EPF 1952
3. -Do- Sec.17(2) Appropriate R.P.F.C. To a class
read with Govt. (Para 79) of
Para 27-A of employees
the EPF
Scheme
4. -Do- Sec.17(2) R.P.F.C. - To an
read with individual
Para 27 of employee
the EPF
Scheme
5. Exemption Sec. 17 (1C) App. Govt. - To an estt.
from the Para 39-A As a whole.
operation of Monthly
the EPS 95 Return
6. -Do- Sec. 17(1C) App. Govt. - To a class
of estts.
7. Exemption Sec. 17(2-A) C.P.F.C. R.P.F.C. To an estt.
from the (Para 28 as a whole
operation of (7))
EDLI,
1976.
8. -Do- Sec. 17 (2B) C.P.F.C. -Do- To a class
read with of
Para 28 (4) employees.
9. -Do- Sec. 17 (2B) R.P.F.C. To an
read with individual
Para 28 (1) employee

PROCEDURE FOR INVESTMENT OF PROVIDENT FUND MONIES

 The employer of an establishment exempted from the operation of Employees'
Provident Fund Scheme, 1952 either in respect of the establishment as a whole for which,
exemption granted under Section 17(1)(a) or 17(1)(b) of the Act or in respect of an
employee/Class of employees for whom exemption granted under Paragraph 27 or 27-A of
Employees' Provident Fund Scheme, 1952, respectively, shall transfer the monthly
Provident Fund contributions (both shares, after diverting the Pension contributions from
the employer's share of Provident Fund) including the refund of withdrawals to the
respective Board of Trustees within fifteen days of the close of the month (with five days
grace period), through a cheque drawn in favour of the Trust.

The Area Enforcement Officer should ensure the actual crediting of the monthly
dues remitted by the employer duly verifying the Pass Book of the Exempted Fund and the
Bank Statement showing the realization of Cheque before due dates. All belated
remittances, as explained in the Chapter on Penal Damages, will attract levy of damages
by the Regional Provident Fund Commissioner concerned.

In addition to the contributions and refund of withdrawals remitted by the employer,

the Board of Trustees may realize the interest due on various securities/deposits, etc., kept
on its investment holdings and also on redemption proceeds (i.e., repayment on account of
matured securities). Similarly, the transfer of Provident Fund accumulations received from
the statutory or other exempted establishments will also constitute the current accretions
for a month.

Out of monthly current accretions, the Board of Trustees should discharge, in the
first instance, the payment of dues towards outgoing members of their final settlement,
transfer of account, payment of refundable and non-refundable withdrawals. These are
known as obligatory outgoings.

After meeting the obligatory outgoings, the money available (investible fund)
should be invested as per the pattern of investment notified by the Ministry of Labour,
Government of India, under Section 17(3)(a) of the Act.

The pattern of investment prescribed by the Central Government from time to time
is enclosed below:

NOTIFICATION

S.O. In exercise of the powers conferred by clause (a) of sub-section (3) of Section 17
of the Employees Provident Fund & Miscellaneous Provisions Act, 1952 (19 of 1952) and
in supersession of the Notification of the Government of India, Ministry of Labour
No.S.O.1487 dated the 25th July 1998(7th July 1998 published in the Gazette of India) the
Central Government hereby directs that every employer in relation to an establishment
exempted under Clause (a) or Clause (b) of Sub-section (i) of Section 17 of the said Act or
in relation to any employee or class of employees exempted under paragraph 27, or as the
case may be, paragraph 27A of the Employees’ Provident Fund Scheme 1952 shall transfer
the monthly provident fund contribution in respect of the establishment or, as the case may
be of the employee or class of employees within fifteen days of the close of the month to
the Board of Trustees duly constituted in respect of that establishment and that the said
Board of Trustees shall invest every month within a period of two weeks from the date of
receipt of the said contributions from the employee, the provident fund accumulations in
respect of the establishment or as the case may be of the employee, or class of employees
that is to say, the contributions, interest and other receipt as reduced by any obligatory
outgoings in accordance with the following pattern, namely:-

PATTERN OF INVESTMENT UNDER SEC.17(3)(a) OF THE ACT

NOTIFICATION: GOVT. OF INDIA, MINISTRY OF LABOUR, New Delhi,
NO. G-27031/3/99/-SS.II dated 9th July, 2003

Percentage of
S.No. Category amount to be
invested
(i) Central Government securities as defined in Section 2 of the
Public Debt Act, 1944 (18 of 1944); and / or units of such
Mutual Funds which have been set up as dedicated Funds for 25 %
investment in Government Securities and which have been
approved by the Securities and Exchange Board of India
(ii) (a) Government securities as defined in Section 2 of the
Public Debt Act, 1944 (18 of the 1944) created and
issued by any State Government ;and/or units of such
Mutual funds which have been set up as dedicated
Funds for investment in Government Securities and
which have been approved by the Securities and 15 %
Exchange Board of India; and/or

(b) Any other negotiable securities the principal whereof

and interest whereon is fully and unconditionally
guaranteed by the Central Government or any State
Government except those covered under (iii) (a)
below.
(a) Bonds/Securities of "Public Financial Institutions as
(iii) specified under Section 4(I) of the Companies Act;
"Public Sector Companies" as defined in Section 2(36-
A) of the Income Tax Act, 1961 including Public Sector 30 %
Banks; and or

(b) Short duration (less than a year) Term Deposit Receipts

(TDR) issued by public sector bank.

To be invested in any of the above three categories as

30 %
(iv) decided by their Trustees
The Trustees, subject to their assessment of the risk-return prospects, may invest
(v) upto 1/3rd of (iv) above, in private sector bonds/securities which have an
investment grade rating from at least two credit rating agencies.

2. Any money received on the maturity of earlier investments reduced by obligatory outgoing
shall be invested in accordance with the investment pattern prescribed in this Notification.
3. In case of any instruments mentioned above being rated and their rating falling below the
investment grade and the same rating has been confirmed by two credit rating agencies then the
option of exist can be exercised.
4. The Investment pattern as envisaged in the above paragraphs may be achieved by the end
of a financial year and shall come into force with immediate effect.
 HOLDING OF SECURITIES IN DEMAT FORM

OPENING OF DE-MAT ACCOUNT BY EXEMPTED PF TRUSTS.

De-mat – Dematerialisation is a process by which the investors gets physical

certificate converted into electronic balance maintained in his account with the depository
participant.

Depository is an Organisation where securities are held in electronic form through

the medium depository participants.

DP (Depository participants) is a representative of the depository in the system

maintained clients securities accounts.

Advantages of De-mat.

1. No requirement of filling up the transfer deed and lodging for transfer.

2. Immediate transfer on registration of securities as against 3-4 months.
3. Shorter settlement cycle ensure prompt liquidity (transaction plus 5 days).
4. Eliminates bad deliveries.
5. Eliminates cost of wastage of time.
6. Reduction in brokerage.
7. Special concession on stamp duty.
8. Minimum handling of paper.
9. Avoiding cost of courier.
10. Avoidance loss in transaction/mutilation resulting in expenditure.
11. Receives interest direct to depository account as direct credit.
12. Avoid loss towards interest on interest.
13. Safety in holding.
14. Depository is like a bank.
15. Depository can legally transfer ownership to an institution account.
16. DP will intimate the status of holdings.
17. One can dematerialized debt instructions, mutual fund units, Government securities
in his De-mat account. It can be held in a single De-mat account.
18. DP (Depository participant) will assist for selling dematerialized securities and also
purchase dematerialized securities.

4
TERMS & CONDITIONS OF EXEMPTION
(UNDER PARA 27AA)(REVISED)
All exemptions already granted or to be granted hereafter under section 17 of the Act or
under paragraph 27A of the Scheme shall be subject to the revised Terms and conditions
as given in the Appendix below.

APPENDIX – A
1. The employer shall establish a Board of Trustees under his Chairmanship for the
management of the Provident Fund according to such directions as may be given
by the Central Government or the Central Provident Fund Commissioner, as the
case may be, from time to time. The Provident Fund shall vest in the Board of
Trustees who will be responsible for and accountable to the Employees’ Provident
Fund Organisation, inter alia, for proper accounts of the receipts into and payment
from the Provident Fund and the balance in their custody. For this purpose, the
“employer” shall mean –

i. In relation to an establishment, which is a factory, the owner or occupier of the

factory; and
ii. In relation to any other establishment, the person who, or the authority, that has
the ultimate control over the affairs of the establishment.

2. The Board of Trustees shall meet at least once in every three months and shall
function in accordance with the guidelines that may be issued from time to time by
the Central Government/Central Provident Fund Commissioner (CPFC) or an
officer authorised by him.

3. All employees, as defined in section 2(f) of the Act, who have been eligible to
become members of the Provident Fund, had the establishment not been granted
exemption, shall be enrolled as members.

4. Where an employee who is already a member of Employees’ Provident Fund or a

provident fund of any other exempted establishment is employed in his
establishment, the employer shall immediately enrol him as a member of the fund.
The employer should also arrange to have the accumulations in the provident fund
account of such employee with his previous employer transferred and credited into
his account.

5. The employer shall transfer to the Board of Trustees the contributions payable to
the Provident Fund by himself and employees at the rate prescribed under the Act
from time to time by the 15th of each month following the month for which the
contributions are payable. The employer shall be liable to pay simple interest in
terms of the provisions of Section 7Q of the Act for any delay in payment of any
dues towards the Board of Trustees.

6. The employer shall bear all the expenses of the Administration of the Provident
Fund and also make good any other loss that may be caused to the Provident Fund
due to theft, burglary, defalcation, misappropriation or any other reason.
7. Any deficiency in the interest declared by the Board of Trustees is to be made good
by the employer to bring it upto the statutory limit.

8. The employer shall display on the notice board of the establishment, a copy of the
rules of the funds as approved by the appropriate authority and as when amended
thereto along with the translation in the language of the majority of the employees.
9. The rate of contributions payable, the conditions and quantum of advances and
other advances laid down under the Provident Fund rules of the establishment and
the interest credited to the account of each member, calculated on the monthly
running balance of the member and declared by the Board of Trustees shall not be
lower than those declared by the Central Government under the various provisions
prescribed in the Act and Scheme framed there under.

10. An amendment to the Scheme, which is more beneficial to the employees than the
existing rules of the establishment, shall be made applicable to them automatically
pending formal amendment of the Rules of the Trust.

11. No amendment in the rules shall be made by the employer without the prior
approval of the Regional Provident Fund Commissioner (referred to as RPFC
hereafter). The RPFC shall before giving his approval give a reasonable
opportunity to the employees to explain their point of view.

12. All claims for withdrawals, advances and transfers should be settled expeditiously,
within the maximum time frame prescribed by the Employees’ Provident Fund
Organisation.

13. The Board of Trustees shall maintain detailed accounts to show the contributions
credited withdrawal and interest in respect of each employee. The maintenance of
such records should preferably be done electronically. The establishments should
periodically transmit the details of members’ accounts electronically as and when
directed by the CPFC/RPFC.

14. The Board of Trustees shall issue an annual statement of accounts or passbooks to
every employee within six months of the close of financial/accounting year free of
cost once in the year. Additional print outs can be made available as and when the
members want, subject to nominal charges. In case of pass book, the same shall
remain in custody of employee to be updated periodically by the trustees when
presented to them.

15. The employer shall make necessary provisions to enable all the members to be able
to see their account balance from the computer terminals as and when required by
them.

16. The Board of trustees and the employer shall file such returns monthly/annually as
may be prescribed by the Employees’ Provident Fund Organisation within the
specified time limit, failing which it will be deemed as a default and the Board of
Trustees and employer will jointly and separately be liable for suitable penal action
by the Employees’ Provident Fund Organisation.

17. The Board of trustees shall invest the monies of the provident fund as per the
directions of the Government from time to time. Failure to make investments as
per directions of the Government shall make the Board of Trustees separately and
jointly liable to surcharge as may be imposed by the CPFC or his representative.

18. (a) The securities shall be obtained in the name of the Trust. The securities so
obtained should be in Dematerialised (DEMAT) form and in case the required
 facility is not available in the areas where the trust operates, the board of
trustees shall inform the RPFC concerned about the same.

(b) The Board of trustees shall maintain a script wise register and ensure timely
realisation of interest.

(c) The DEMAT Account should be opened through depository participants

approved by Reserve Bank of India and Central Government in accordance
with the instructions issued by the Central Government in this regard.

(d) The cost of maintaining DEMAT account should be treated as incidental cost
of investment by the Trust. Also all types of cost of investments like
brokerage for purchase of securities etc. shall be treated as incidental cost of
investment by the Trust.

19. All such investments made, like purchase of securities and bonds, should be lodged
in the safe custody of depository participants, approved by Reserve Bank of India
and Central Government, who shall be the custodian of the same. On closure of
establishment or liquidation or cancellation of exemption from EPF Scheme, 1952,
such custodian shall transfer the investment obtained in the name of the Trust and
standing in its credit to the RPFC concerned directly on receipt of request from the
RPFC concerned to that effect.

20. The exempted establishment shall intimate to the RPFC concerned the details of
depository participants (approved by Reserve Bank of India and Central
Government), with whom and in whose safe custody, the investments made in the
name of trust, viz., investments made in securities, bonds, etc. have been lodged.
However, the Board of Trustees may raise such sum or sums of money as may be
required for meeting obligatory expenses such as settlement of claims, grant of
advances as per rules and transfer of member’s P.F. accumulations in the event of
his/her leaving service of the employer and any other receipts by sale of the
securities or other investments standing in the name of the Fund subject to the prior
approval of the RPFC.

21. Any commission, incentive, bonus, or other pecuniary rewards given by any
financial or other institutions for the investments made by the Trust should be
credited to its account.
22. The employer and the members of the Board of Trustees, at the time of grant of
exemption, shall furnish a written undertaking to the RPFC in such format as may
be prescribed from time to time, inter alia, agreeing to abide by the conditions
which are specified and this shall be legally binding on the employer and the Board
of Trustees, including their successors and assignees, or such conditions as may be
specified later for continuation of exemption.

23. The employer and the Board of Trustees shall also give an undertaking to transfer
the funds promptly within the time limit prescribed by the concerned RPFC in the
event of cancellation of exemption. This shall be legally binding on them and will
make them liable for prosecution in the event of any delay in the transfer of funds.

24. (a) The account of the Provident Fund maintained by the Board of Trustees shall
be subject to Audit by a qualified independent chartered accountant annually.
 Where considered necessary, the CPFC or the RPFC in-charge of the Region shall
have the right to have the accounts reaudited by any other qualified auditor and the
expenses so incurred shall be borne by the employer.

(b) A copy of the Auditor’s report along with the audited balance sheet should
be submitted to the RPFC concerned by the Auditors directly within six months after
the closing of the financial year from 1st April to 31st March. The format of the
balance sheet and the information to be furnished in the report shall be as prescribed
by the Employees’ Provident Fund Organisation and made available with the RPFC
Office in electronic format as well as a signed hard copy.

(c) The same auditors should not be appointed for two consecutive years and
not more than two years in a block of six years.

25. A company reporting loss for three consecutive financial years or erosion in their
capital base shall have their exemption withdrawn from the first day of the
next/succeeding financial year.

26. The employer in relation to the exempted establishment shall provide for such
facilities for inspection and pay such inspection charges as the Central Government
may from time to time direct under Clause (a) of sub-section (3) of Section 17 of
the Act within 15 days from the close of every month.

27. In the event of any violation of the conditions for grant of exemption, by the
employer or the Board of Trustees, the exemption granted may be cancelled after
issuing a show cause notice in this regard to the concerned persons.

28. In the event of any loss to the trust as a result of any fraud, defalcation, wrong
investment decisions etc. the employer shall be liable to make good the loss.

29. In case of any change of legal status of the establishment, which has been granted
exemption, as a result of merger, demerger, acquisition, sale, amalgamation,
formation of a subsidiary, whether wholly owned or not, etc., the exemption granted
shall stand revoked and the establishment should promptly report the matter to the
RPFC concerned for grant of fresh exemption.

30. In case, there are more than one unit/establishment participating in the common
Provident Fund Trust which has been granted exemption, all the trustees shall be
jointly and separately liable/responsible for any default committed by any of the
trustees/employer of any of the participating units and the RPFC shall take suitable
legal action against all the trustees of the common Provident Fund Trust.

31. The Central Government may lay down any further conditions for continuation of
exemption of the establishments”.

5
DUTIES OF THE MEMBERS OF THE BOARD OF TRUSTEES
 The duties of the members of the Board of Trustees have been clearly laid down
under section 17(A) and sub clause b is reproduced below:-

(i) maintain detailed accounts to show the contributions credited, withdrawals made
and interest accrued in respect of each employee;

(ii) submit such returns to the Regional Provident Fund Commissioner or any other
officer as the Central Government may direct from time to time;

(iii) invest the provident fund monies in accordance with the directions issued by the
Central Government from time to time;

(iv) transfer, where necessary, the provident fund account of any employee; and

(v) perform such other duties as may be specified in the Scheme.

UTILISATION OF FORFEITED AMOUNT

Utilisation of forfeited amount of Provident Fund lying with establishment under
Section 17(1) of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

The forfeited amount can be utilized for the following purposes:

a) To maintain a higher rate of interest on the members account at least at par with the
rate of interest declared by Government of India in respect of unexempted establishment.

b) To operate the Death Relief Fund.

c) To make good the capital loss to the fund on account of purchase/sale redemption
of securities.

d) To meet the money order commission with despatch of Provident Fund consequent
on settlement of claims to the members of their deceased family members, where the
Provident Fund amount payable is upto Rs.500.

e) Adhoc payment of Rs.30 to the heirs of deceased members as an aid for procuring
a succession/guardianship certificate.

6
DUTIES OF EMPLOYER - EXEMPTED ESTABLISHMENT

The duties of the employer of an establishment exempted are -

1. To comply with all the conditions governing grant of exemption ;

2. To deposit the contributions on Provident Fund/Pension/Insurance Fund or Premium
on LIC Policy to the respective Board of Trustees/ LIC on or before the due date
stipulated ;
 3. To remit the Inspection charges on due dates to the Regional Provident Fund
Commissioner concerned.

4. To remit Penal Damages under Sec.14-B and Interest under Sec.7-Q of the Act
promptly, wherever due.

5. To comply with the provisions of other Scheme/s for which exemption not obtained
and in particular to ensure furnishing of Nomination and Family particulars of all
members under Employees' Pension Scheme, 1995 to the Regional Provident Fund
Commissioner concerned.

6. To constitute Board of Trustees complying with the provisions of Paragraph 79-C of

Employees' Provident Fund Scheme, 1952 and conduct elections as per the
guidelines issued.

7. To submit monthly and annual returns on due dates.

8. To ensure that the Board of Trustees maintains individual accounts of employees,

benefits are extended promptly, Rules of Private Provident Fund is updated on par
with the Statutory Scheme, to transfer the account of employee within three months,
to invest the monies as per the pattern, to supply Pass Book/Annual Statement of
Accounts to the members, etc. and the total quantum of benefits of employees
towards Provident Fund or Gratuity and Pension is not reduced after the grant of
exemption.

Note: The reasons for shortfall of Employer share of contribution to the extent of
8.33% and payable towards Pension contribution to the Regional Provident Fund
Commissioner should be mentioned in the Annual Statement of Accounts issued to
the members.

9. To make good the loss sustained by the Board of Trustees in sale/purchase of

securities and the resultant shortfall in declaring the rate of interest on par with
Statutory Fund. (It is not necessary for the employer to make good the loss as and
when sale/purchase of securities is made and if such loss could be borne by the
interest account of the fund).
10. To assist and enable the Enforcement Officer to conduct the inspection of records of
Board of Trustees and the establishment.

11. To transfer the past accumulation dues of members before the due date, on
cancellation/surrender of exemption. While doing so, the amount forfeited from the
employees account, if any, amount lying in interest account, unclaimed account
should also be transferred.

Returns to be submitted by the Employers on EPF side

a. Monthly return in The Schedule (Annexure A)

b. Triplicate copy of challan for deposit of Inspection charges in Account No:2

c. Annual Return in Form-B

d. Audited Balance Sheet of the Provident Fund Trust together with the audit report.

Returns to be submitted by the Employers on EPS side

a. Basic return in Form-3 (EPS)

b. Monthly return in Form-4,5 & 6 (EPS)

c. Annual return in Form-7 & 8 (EPS)

d. Particulars concerning the member and his/her nominee(s) in Form-2

Returns to be submitted by the Employer on EDLI side

(if exempted from the provisions of EDLI scheme, 1976)

a. Monthly return in Form 7 (IF) together with triplicate copy of challan for deposit of
Inspection Charges in Account No:22

b. Renewal application and LIC certificate in Form-3 wherever necessary (on expiry of
valid period of exemption).

(For Establishment exempted Provident Fund but not under EDLIS 1976)

a. Basic return in Form-1 (IF)

b. Monthly returns in Form-2, 3, 4(IF) alongwith triplicate copy of challan for remittance
of EDLI contributions and Administrative charges in Account No: 21 and 22
respectively.

MONTHLY/ANNUAL RETURNS.

Establishments Exempted from EPF Scheme, 1952 and complying as Unexempted under
EPS, 95/EDLI 1976 are required to submit the following Monthly and Annual Returns.

FORM No.
Particulars Due Date
EPS, 1995 EDLI, 1976
Form 3(PS) Form 1(IF) Details of employees Within 15 days from
enrolled on the date of the application of the
application of the Scheme
Scheme
Form 5A Form 5A Ownership of Within 15 days from
Establishment the application of the
Scheme
 Form 4(PS) Form 2(IF) To intimate the details 15th of the following
of employees joining month
the Provident Fund
Form 5(PS) Form 3(IF) Details of employees 15th of the following
leaving month
Single Challan For payment of Before 15th of each
contributions(EPS & month.
IF) \ administrative
charges(IF)
Form 6 (PS) Form 4(IF) Statement of dues and 25th of the following
remittances towards PF,month.
Pension and EDLI and
Adm. charges
Form 7 & 8 (PS) ---- Individual and 30th of April each
consolidated year.
Contribution Cards
To be forwarded
ALL CLAIM FORMS within 5 days.

ALL MONTHLY RETURNS SHOULD BE SUBMITTED BEFORE 25 TH OF THE

FOLLOWING MONTH AND REMITTANCES BEFORE 15TH OF THE
FOLLOWING MONTH

INSPECTION CHARGES

Section 17(3) (A) and Section 27(3A) (a) provides for payment of inspection charges by
the employers of exempted establishment to the respective Regional Provident Fund
Commissioners on or before 15th of each month. However, five days grace period is allowed.

The inspection charges should be calculated on the actual wages on which PF/EDLI
contributions are payable. The inspection charges is also payable in respect of member who is
transferred from exempted fund as a member of the Provident Fund exclusively maintained by
the employer for the executives of the establishment, if any. The total inspection charges due
in a month should be rounded to the nearest five paise. The rate of inspection charges prescribed
from time to time, by the Central Government, is given in Table below.

The inspection charges should be remitted into any branch of State Bank of India to the
credit of EPF Account No.2 or EDLI Account No.22, as the case may be. Separate Challans to
be used for depositing the inspection charges in Account No.2 and 22.
 Belated deposit will attract interest under Section 7Q as well as penal damages under
Section 14B read with the provisions of the Scheme/s.

With effect from 31.10.1953, inspection charges are leviable in respect of exemption
granted under paragraph 27. With effect from 10.8.1956 the establishments enjoying the
exemption under paragraph 27A shall pay inspection charges at prescribed rates.

S.
Period Rate Authority
No.
0.75% of the total employer’sMinistry of Labour Circular No.PF-533(1)
Upto & employees’dated 6.3.1953 & Notification No.S.O.1460
1. P.F.Contribution dated 16.6.1961.
31.12.1962.

0.6% of above in respect of 4

1.1.1963 industries in which rate of S.O.No.3793 Gazette of India dated
2.
to 30.9.1964 contribution is raised from 6 13.12.1962.
¼% to 8%.
1.10.1964 0.09% of the pay(Basic wages
to + DA + retaining allowance &
3. S.O.No.3450 dated 18.9.1964.
31.7.1998 cash value of food concession)

S.O.No.1436 dated 18.7.1998 (Ministry of

1.8.1998
4. 0.18% of the pay Labour Notification No.G.20017/1/98
onwards
/SS.II dated 9.7.1998.

BE A MODEL EMPLOYER

Deposits the PF dues before 15th of each month

Submit monthly returns before 25th of each month

and annual before 30th of April

Enroll all eligible employees as PF members.

 Comply with the duties of employers.

NON-COMPLIANCE BY EMPLOYER-
CONSEQUENCES

o Penal Damages upto 37% per annum and interest at the

rate of 12%payable on defaulted deposits.

o Interest at the rate of 12% on belated payment of

damages.

o Attachment of Bank Accounts.

o Realisation of dues from Debtors.

o Attachment of movable and immovable properties.

o Arrest and Detention.

o Action under Section 406/409 of Indian Penal Code and

Section 110 of Criminal Procedure Code.

o Prosecution.

7
TRANFER OF PROVIDENT FUND ACCUMULATION
IN THE SHAPE OF CASH/SECURITIES CONSEQUENT UPON
GRANT/CANCELLATION OF EXEMPTION
Hitherto, on grant of exemption under Section 17 of the Act, or Para 27/27A of the
Employees’ Provident Funds Scheme 1952, the past accumulations have been transferred
partly in cash and partly in securities.
2. The Central Board of Trustees at its 163rd meeting held on 19.08.2003 has decided that
consequent to grant of exemption or in any other eventually necessitating transfer of past
accumulations to an establishment or trust, 100% of past accumulations be transferred in
cash in all cases. All pending cases are also required to be regulated accordingly, However,
where the requisition for transfers are pending in Headquarters Office, the decision to
transfer 100% past accumulations in cash may be made after getting specific instructions
from Headquarters Office in each individual case.

3. The amount transferred in cash should be invested as per the prescribed pattern of
investment immediately and submit the proof thereof to the Regional Provident Fund
Commissioner.

(Authority: Headquarters Office Lr.No.Invest.I/1 (10)2000/42517, dated 4.9.2003)

PROCEDURE FOR TRANSFER OF PREVIOUS ACCUMULATIONS

A. Procedure for transfer of Special Deposit Account on cancellation of

exemption or on coverage of the establishment.

1. The deposit Bank which holds the Special Deposit Accounts, should be approached
by preferring an application for transfer of Special Deposit Account in favour of Central
Board of Trustees, Employees’ Provident Funds and also to transfer the balance to the State
Bank of India, Securities Services Branch, Mumbai Main Branch, Mumbai, where the
Special Deposit Account of Central Board of Trustees is being maintained.

2. Memorandum in Form Annexure VIII addressed to the State Bank of India,

Securities Services Branch, and Mumbai. (This form is available with Bankers).

3. A copy of the Regional Provident Fund Commissioner’s order/coverage Notice

instructing the establishment to transfer the funds.

4. Statement showing the details of deposits made, interest due, collected, etc., as on
the date of coverage(Applicability of the Act to the establishment or as on the date of
cancellation of exemption as the case may be) should be submitted in quadruplicate
together with the SDS Pass Book with up to date entries.

5. The interest upto 31st December of the previous year should have been realized and
credited to the account.

6. Copy of the resolution passed by the Trustees for transfer of Special Deposit
Account.

7. Acceptance of Special Deposit Account towards previous accumulation dues

should be only through transfer of balances from the books of deposit bank to the State
Bank of India, Securities Services Branch, Mumbai and not by closure of the account and
remitting the proceeds in cash or by cheque, etc, to the Account of Central Board of
Trustees,. Employees’ Provident Funds.
8. After the transfer is effected, SDS Pass Book with due endorsement thereon should
be collected from the transferor branch of the Bank and submitted to the Regional
Provident Fund Commissioner along with photocopy of the Pass Book.

B. Procedure for Transfer of other Securities (Paragraph 28 of Employees’

Provident Fund Scheme, 1952).

(1) Previous accumulation dues should be transferred only in cash. Wherever the
instruments are kept in Government/Guaranteed securities, Post office Term Deposit,
Special Deposit Account, Certificates, etc., they may be accepted only if the instrument is
transferable to the Central Board of Trustees, Employees’ Provident Funds, otherwise cash
should be paid.

(2) The securities should be endorsed/transferred through transfer deed in favour of

Central Board of Trustees, Employees’ Provident Funds irrespective of the fact, whether
they are Stock Certificate, Government Promissory Notes, etc.

(3) The endorsement should be made only by the authorised Trustees of the Fund.

(4) Endorsement should be certified by the public Debt Office of Reserve Bank of
India/authority issued the securities, by affixing the seal on the instrument itself.

(5) Endorsed securities should be forwarded to the Regional Provident Fund

Commissioner for onward transmission to the State Bank of India, Securities Services
Branch, Mumbai.

(6) Actual purchase price of the securities should be intimated to this office duly
certified by the area Enforcement Officer of the Employees’ Provident Fund Organisation.

(7) Original or authenticated copy of the memorandum and articles of association, copy
of Certificate of Incorporation and the appointment and the authority in favour of the
authorised Trustees of the Fund to deal with securities should be forwarded.

(8) Securities which have already been notified for repayment and securities which are
in the ‘short period’ i.e. which are due for repayment within a period of one month cannot
be accepted on account of the past accumulations.

(9) A certificate from the Income-Tax Commissioner approving the transfer of the
accumulated assets of the Old Private Provident Fund to the new one, i.e. Employees’
Provident Funds, should be obtained and forwarded as and when received. The transfer
need not be delayed only on account of this.

(10) Securities purchased after the date of application of the Act should not be
transferred, i.e all accumulation after the date of application of the Act should be
transferred only in cash, by deposit in EPF Account No.1 in State Bank of India.

(11) The details of interest due on securities but not collected beyond the notified period
should be furnished.

(12) Income Tax deduction certificate, if any, should be surrendered.

(13) Wherever any security is not transferable by endorsement in favour of Central
Board of Trustees, Employees’ Provident Funds such securities should not be forwarded.
In lieu of this, the transfer should be made in cash only.

(14) Wherein a previous accumulation bearing no guarantee as regards principal and

interest, it can be transferred only if the deposit account is transferable in the name of
Central Board of Trustees, Employees’ Provident Funds, by the bank on the instrument as
well as in the books of the bank, subject to acceptance of Central Govt., failing which the
amount kept in such deposits should be transferred in cash.

(15) In the case of NSC and NPSC, appreciated value will be taken into account in
determining the amount for transfer, in case the difference between face value and
appreciated value has been credited to the members.

(16) Securities etc., to be transferred within thirty days and cash in hand/Savings Bank
Account of the Trust should be transferred within ten days.