V "Employee" as defined in

Section 2(f) of the Act

means any person who is
employee for wages in any
kind of work manual or
otherwise, in or in
connection with the work
of an establishment and
who gets wages directly or
indirectly from the
employer and includes any
person employed by or
through a contractor in or
in connection with the
work of the establishment.
V Rhe Employees' Provident Fund Organisation
(EPFO) is a statutory body of the Government
of India under Ministry of Labour and
Employment. It administers a compulsory
contributory Provident fund, pension and a
insurance scheme for Indian Work force. It is
one of the largest social security organisations
in the world in terms of members and volume
of financial transactions undertaken.
V Rhe Employees' Provident Funds and
Miscellaneous Provisions Act, 1952 came into
effect on 4th March 1952. Rhe Organization is
administered by a Central Board of Rrustees,
comprising of representatives of
the Government of India, provincial
governments, employers and employees. Rhe
Board is chaired by the Union Labour Minister
of India. Rhe Chief Executive of the EPFO, the
Central Provident Fund Commissioner, reports
to the Union Labour Minister through the
Permanent Secretary in the ministry. Rhe head
office of the Organisation is in New Delhi
V All the employees (including casual, part time, Daily
wage contract etc.) other then an excluded employee
are required to be enrolled as members of the fund the
day, the Act comes into force in such establishment.
V "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 witch
are paid or payable in cash, but dose
not include
1. Rhe cash value of any food
concession;
2. Any dearness allowance (that is to
say, all cash payment by whatever
name called paid to an employee
on account of a rise in the cost of
living), 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.
3. Any present made by the
employer.
"Excluded Employee" as defined under pare 2(f) of the
Employees' Provident Fund Scheme means an
employee who having been a member of the fund has
withdraw the full amount of accumulation in the fund
on retirement from service after attaining the age of 55
years; Or An employee, whose pay exceeds Rs. Five
Rhousand per month at the time, otherwise entitled to
become a member of the fund.
V Rhe Employee Provident Fund,
or provident fund as it is
normally referred to, is a
retirement benefit scheme that
is available to salaried
employees.
V Employees' Provident Fund
Scheme takes care of following
needs of the members:
1. Retirement.
2. Medical care.
3. Housing.
4. Family obligation.
5. Education of children.
6. Financing and insurance
policy.
V As per amendment-dated 22.9.1997 in the Act, both
the employees and employer contribute to the fund at
the rate of 12% of the basic wages, dearness allowance
and retaining allowance, if any, payable to employees
per month. Rhe rate of contribution is 10% in the case
of following establishments:
V Any covered establishment with less then 20
employees, for establishments cover prior to 22.9.97.
V 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,
V Any establishment which has at the end of any
financial year accumulated losses equal to or exceeding
its entire net worth and
V Any establishment engaged in manufacturing of (a)
jute (b) Breed (d) coir and (e) Guar gum Industries/
Factories. Rhe contribution under the Employees'
Provident Fund Scheme by the employee and employer
will be as under with effect from 22.9.1997.
V Rhe rate of interest is fixed by the
Central Government in
consultation with the Central
Board of trustees, Employees'
Provident Fund every year during
March/April. Rhe interest is
credited to the members account
on monthly running balance with
effect from the last day in each
year. Rhe rate of interest for the
year 1998-99 has been notified as
12%. Rhe rate of interest for 99-
2000 w.e.f. 1.7.'99 was 11% on
monthly balances. 2000-2001 CBR
recommended 10.25% to be
notified by the Government.
 A member of the provident fund can withdraw full
amount at the credit in the fund on retirement from service
after attaining the age of 55 year. Full amount in provident
fund can also be withdraw by the member under the
following circumstance:
V A member who has not attained the age of 55 year at the
time of termination of service.
V A member is retired on account of permanent and total
disablement due to bodily or mental infirmity.
V On migration from India for permanent settlement abroad
or for taking employment abroad.
V In the case of mass or individual retrenchment.
¢ In the case of the following contingencies, the
payment of provident fund be made after
complementing a continuous period of not less than
two months immediately preceding the date on which
the application for withdrawal is made by the member:
V Where employees of close establishment are
transferred to other establishment, which is not
covered under the Act:
V Where a member is discharged and is given
retrenchment compensation under the Industrial
Dispute Act, 1947.
V A member can withdraw
upto 90% of the amount of
provident fund at credit
after attaining the age of 54
years or within one year
before actual retirement on
superannuation whichever
is later. Claim application
in form 19 may be
submitted to the
concerned Provident Fund
Office.
V Amount of Provident Fund at the credit of the
deceased member is payable to nominees/ legal heirs.
Claim application in form 20 may be submitted to the
concerned Provident Fund Office.
V Rransfer of Provident Fund account from one region to
other, from Exempted Provident Fund Rrust to
Unexampled Fund in a region and vice-versa can be
done as per Scheme. Rransfer Application in form 13
may be submitted to the concerned Provident Fund
Office.
V Rhe member of Provident Fund shall make a
declaration in Form 2, a nomination conferring the
right to receive the amount that may stand to the
credit in the fund in the event of death. Rhe member
may furnish the particulars concerning himself and his
family. Rhese particulars furnished by the member of
Provident Fund in Form 2 will help the Organization
in the building up the data bank for use in event of
death of the member.
V As soon as possible and after the close of each period of
currency of contribution, annual statements of accounts
will de sent to each member through of the factory or other
establishment where the member was last employed. Rhe
statement of accounts in the fund will show the opening
balance at the beginning of the period, amount
contribution during the year, the total amount of interest
credited at the end of the period or any withdrawal during
the period and the closing balance at the end of the period.
Member should satisfy themselves as to the correctness f
the annual statement of accounts and any error should be
brought through employer to the notice of the correctness
Provident Fund Office within 6 months of the receipt of
the statement.
V Rhe amount you invest is eligible for
deduction under the Rs 1,00,000
limit of Section 80C.
V If you have worked continuously for
a period of five years, the withdrawal
of PF is not taxed.
V If you have not worked for at least
five years, but the PF has been
transferred to the new employer,
then too it is not taxed.
V Rhe tenure of employment with the
new employer is included in
computing the total of five years.
V If you withdraw it before completion
of five years, it is taxed.
V But if your employment is
terminated due to ill-health, the PF
withdrawal is not taxed.
V Statutory Provident fund.
V Voluntary Provident fund.
V Recognized Provident fund (RPF).
V Unrecognized Provident fund (URPF).
V Public Provident Fund (PPF).
V For all industries employing 20 or
more persons engaged in any industry
specified in Schedule - I attached to
the Employees' Provident Funds &
Miscellaneous Provisions Act, 1952 or
for all Establishments or classes of
Establish- ments to which the said
Act has specifically been made
applicable by the Central
Government by issue of notification
in Gazette of India, such Provident
Fund is compulsory for employees
drawing salaries (Basic + DA) of upto
Rs. 6500/- pm. V
  is set up
under the provisions of the PF Act,
1925. Rhis fund is maintained by
government and semi-government
organisations, local authorities,
railways, universities and recognised
educational institutions.
V For all other
Industries/Establishments and for
all employees drawing salaries of
above Rs. 6500/-/- employed in
Industry/Establishment in which
such PF is compulsory, the
Provident Fund is voluntary and the
benefit of provident fund can be
extended by setting up a private PF
Rrust and by getting the same
recognized under Income tax Act,
1961 or by getting the
Establishment/ employees covered
under the EPF & MP Act, 1952 /EPF
Scheme, 1952 on voluntary basis.
V It is a fund to which the
Commissioner of
Income-tax has given the
recognition as required
under the Income-tax
Act.
V It is the Provident Fund,
which is not recognized
by the Commissioner of
Income-tax. Rhe
employee and employer
both contribute towards
this fund. Rhe
employee's contribution
to URPF is not treated as
deductible expenditure.
V Rhe Public Provident Fund has
been established by the central
government. You can voluntarily
decide to open one. You need
not be a salaried individual, you
could be a consultant, a
freelancer or even working on a
contract basis. You can also open
this account if you are not
earning.
V Self-employed people (doctors,
lawyers, accountants, actors,
traders, pensioners) can also
enjoy the benefit of tax rebate
under section 88 by contribution
to PPF
V Rate of return on investment is
8%.
V Rhe accumulated sum is
repayable after 15 years. Rhe
entire balance can be withdrawn
on maturity, that is, after 15 years
of the close of the financial year
in which you opened the
account.
V It can be extended for a period of
five years after that. During
these five years, you earn the rate
of interest and can also make
fresh deposits.
V Rhe amount you invest is eligible
for deduction under the Rs
1,00,000 limit of Section 80C.
V On maturity, you pay absolutely
no tax.
V Any individual can open a
PPF account in any
nationalised bank or its
branches that handle PPF
accounts. You can also
open it at the head post
office or certain select post
offices.
V Rhe minimum amount to
be deposited in this
account is Rs 500 per year.
Rhe maximum amount you
can deposit every year is Rs
70,000.
V Even in Factories/Establishments where PF. is
compulsory, such Factories/ Establishment have two
options - one to comply with the statutory scheme i.e.
Employees Provident Fund Scheme, 1952 and another
to set up their own PF Rrust, get it recognized by the
Income Rax authorities and to seek exemption from
RPFC/appropriate Govt. to run its own Rrust subject to
such conditions as may be imposed by them. Rhe
former is called unexempted establishments; the later
exempted ones.
 V
  
  
 


 
   
  
 
       
Employerǯs Exempt from Exempt upto Exempt from Employer does
contribution tax 12% salary- tax not contribute
to PF excess is
taxable
Deduction Available Available Not available Available
under section
80c
Interest Exempt Exempt upto Exempt Exempt
credited to PF notified rate
Lump-Sum Exempt Exempt in Employee Exempt
payment at some cases contribution is
Retirement exempt
V Labour minister Mallikarjun Kharge declared a 9.5%
bonanza on provident fund deposits, as decided by the
Central board of trutees(CBR) on September 15.
V Its a one percentage point increase in the rate from the
8.5% paid in the past five years.
V Finance ministry notification says that any rate in excess of
8.5% will be taxed.
V Rhe Central Board of Direct Raxes notified a taxfree PF rate
of 8.5% for 2010-11 effective from September 1.
V Rhe 1% extra income (or Rs 1,700 crore) that the labour
ministry has projected as a gift to the workforce would be
fully taxable.
V Rhe tax-free PF rate notified by the income tax department has
never been lower than the EPF rate declared for the year.
V In recent years, while the EPF rate was at 8.50%, the ceiling was
at 9.50%. Rhis year, when the EPF rate has been hiked to 9.50%,
the ceiling on tax-free provident fund returns has been lowered
to 8.50%.
V Rhe income tax department notifies a tax-free PF rate for the
whole year. But this year, itǯs only applicable from September 1.
So the 9.5% provident fund return would be tax-free from April
to August but taxable thereafter.
V EPFO, Chatterjee said after reconciliation of account on accrual-
based system found that it had a surplus of Rs 1,731 crore.
V As the money belonged to over six crore subscribers,
the CBR decided to raise the interest rate for this fiscal
by a percentage point to 9.5 from 8.5 per cent, a rate
being maintained for the past five years since 2005-06.
V Rhe surplus in the interest suspense account is the
main reason to increase the interest rate by 1% for the
F.Y. 2010-2011 of the EPF.
V Rhe move to increase the interest rate by one
percentage point from the earlier 8.5%, would cost an
additional Rs. 1,600 crore, which would be met from
the surplus of Rs.1,731 crore available in the interest
suspense account with the EPFO
V EPFO board members, however, are confident that the
income tax department would reconsider its decision.
V If the IR department re-notifies the interest rate then
it would be beneficial for the workers as it would
increase the returns.
V If the interest rate decided by the IR dept is 9.5% then
EPF will be regarded as most attractive in terms of
return on investment along with tax benefits.
V Rhe incremental PF return will be taxable in the hands
of the workers if the finance ministry doesnǯt re-notify
the tax ceiling.
V Levying the tax would be difficult because the tax-free
PF rate notified by the Income Rax department is
applicable only from September 1st. So the 9.5% PF
return would be Rax-Free from April to August but
taxable thereafter.
V For company-run trusts calculating the tax liability on
1% PF income for 7 month would be a headache.
V Employeesǯ Provident Fund Organisation (EPFO) will
face a lot of problems since it manages 5 crore PF
accounts.
V Rhe increase in PF rate will benefit only the salaried
employees and not those who are self employed.
V Rhe accounts' which are not operated for 36 months
will stop getting interest.
V Rhe corporateǯs which follow their own PF trusts have
to match the new rates.
V Rhe raising of the rate of return to
9.5 per cent has increased the
visibility of the EPF in the minds of
investors.
V Rhe EPF interest is higher than the
8% return offered by post office
deposits and provident fund, and
the 7.75% rate of interest on bank
deposits held up to 10 years. Even
100% debt funds may be unable to
match the EPF's interest of 9.5% as
they hold their securities to
maturity.
V Rhe raising of the return here also
means a challenge for other areas
like monthly income plans of
mutual funds and the new pension
scheme because investors will
scrutinise their performance closely.
V Pension funds and long-term
debt options have a return
that is taxable, whereas the
return on EPF is Rax free.
V Any investment made under
EPF follows the EEE model:
 First ǮEǯ-Any amount invested
in EPF is exempted under
section 80C to a limit of Rs. 1
lakh.
 Second ǮEǯ-All the
interest earned in EPF
account is tax-free and the
account holder doesnǯt have
to pay any tax on the same
 Rhird ǮEǯ-Rhe amount
that you withdraw at the
time of maturity is tax-
free as there is no tax at
maturity.
V We can see the rates rolling back from 9.5% to 8.5% in the
next fiscal year as it ll be difficult for EPFO to generate the
return because:
 Rhe money canǯt be invested in to equity markets so that
extra return is generated. Rhis was because the CBR
members opposed the idea of investing in stock markets.
Rhis letter was given to EPFO by the finance ministry. Rhe
reason for the opposition was how can the hard-earned
money of the common man be exposed to market risks.
 Rhe returns earned from safe deposit instruments are too
less to offer a return of 9.5%
V Commenting on the decision, industry chamber FICCI
has indicated that the development could put pressure
on interest rates of competing saving instruments and
would have negative implications for the government
finances.
V Another body, Assocham, said that the high interest
rate will not be sustainable either by the EPFO or by
exempted trust on the basis of investment pattern
decided by the government.