EMPLOYEES’ PROVIDENT FUND AND MISCELLANEOUS

PROVISION ACT, 1952

INTRODUCTION
The Employees’ Provident Fund is social welfare legislation intended to protect the interest
of the workers employed in factories and other establishments. It is implemented by the
Employees’ Provident Fund Organisation (EPFO) of India. The Employees’ Provident Fund
Bill was passed by both the Houses of the Parliament and it received the assent of the
President on 4th March, 1952. The nomenclature of the Act was changed as “The Employees’
Provident Funds and Miscellaneous Provisions Act, 1952” (with effect from 1st August,
1976). Now it stands as The Employees’ Provident Funds and Miscellaneous Provisions Act,
1952 [EPF AND MP ACT, 1952]

OBJECTIVES
The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 aims to provide a
type of social security to the industrial workers. The Act mainly provides retirement or old
age benefits, such as Provident Fund, Superannuation Pension, Invalidation Pension, Family
Pension and Deposit-Linked Insurance.
The Act provides payment of terminal benefits on the happening of various contingencies
such as retirement, closure, retirement on attainment of the age of superannuation, voluntary
retirement and retirement due to factors which result in incapacity of the employee to work.

APPLICABILITY
General Applicability
(i) Every establishment which is a factory engaged in any industry specified in Schedule
I and in which 20 or more persons are employed
(ii) Any other establishment which employs 20 or more persons or class of such
establishments which the Central Government may, by notification in Official
Gazette specify in the behalf.
Extended Applicability
(i) By Central Government: By giving a not less than 2 months’ notice to any
Establishment even if it employs less than 20 employees.
(ii) Central PF Commissioner: By notification in OZ, on an application received from
Employer and majority of Employees. (Voluntary Applicability)
Continued Applicability
An establishment to which this Act applies must continue to be governed by this Act, even if
the number of persons employed therein falls at any time below 20.
The Ministry of Labour and Employment through the Notification specified that the
Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 shall also apply to
“Municipal Councils and Municipal Corporations constituted under sub-clauses (b) and (c) of
clause (1) of Article 243Q of the Constitution of India.

NON-APPLICABILITY
Co-operative Society
(i) Registered under the Co-operative Societies Act, 1912 or similar law in any State and
(ii) employing less than 50 persons, and
 (iii) working without the aid of power.
Establishments under control of Central Government
(i) any establishment belonging to or under the control of the Central
Government or State Government, and
(ii) whose employees are entitled to the benefit of contributory provident fund
or old age pension in accordance with any scheme or rule framed by the
Central Government or State Government governing such benefits.
Establishments set up by or under any Act
(i) any other establishment set up under any Central, Provincial or State Act
(ii) whose employees are entitled to the benefits of contributory provident fund or old age
pension in accordance with any scheme or rule framed under the Act governing
pension in accordance with any scheme or rule framed under that Act governing
such benefits. Central Government may exempt any establishment based on its
financial position.
Class of Establishments exempted by Central Government
(i) Central Government may, by notification in OZ, exempt-
a. Any class of Establishments, or
b. Any individual Establishment, if it constitutes a class within itself.
(ii) The exemption is granted taking into consideration-
a. The financial position, or
b. Other circumstances of the case, or
c. On the opinion of the Central Government that it is expedient to do so.
(iii) The exemption shall be for such period and subject to such conditions as
specified, either retrospectively or prospectively.
(iv) Such exemption by Central Government cannot be granted to an individual
establishment.
KEY AMENDMENTS TO THE EMPLOYEES’ PROVIDENT FUND ACT, 1952
The Ministry of Labour and Employment, Government of India, has brought into force the
following significant amendments with effect from 1st September, 2014 under the existing 3
schemes of EPF Act, 1952. These are as follows:

The Employees’ Provident Fund Scheme, 1952

The definition of ‘excluded employee’ has been revised whereby the members drawing
wages exceeding Rs.15,000 per month are excluded from the provision of the PF scheme.
The wage ceiling for an employee has been raised from 6,500 to 15,000 per month.

The Employees’ Deposit-linked Insurance Scheme, 1976

 The contribution payable under the Insurance Scheme shall now be calculated
on a monthly pay of INR 15,000, instead of INR 6,500.
 In the event of death of a member (on or after 1 September 2014), the
assurance benefits available under the Insurance Scheme has been increased by twenty
percent (20%) in addition to the already admissible benefits.

The Employees’ Pension Scheme, 1995

 New members (joining on or after 1 September 2014) drawing wages exceeding INR
15,000 per month shall not be eligible to voluntarily contribute to the Pension Scheme.
 The maximum pensionable salary for the purpose of determining the monthly pension
has been revised from INR 6,500 to INR 15,000 per month.
 The pensionable salary shall be calculated on the average monthly pay for the
contribution period of the last 60 months (earlier 12 months) preceding the date of exit from
the membership.
 The monthly pension for any existing or future member shall not be less than INR
1,000 for the financial year 2014-15.
The above-mentioned amendments to the 3 schemes by the Government Of India for the
financial year 2014-15 have enhanced the scope, applicability and benefits provided to the
employees under the EPF Act. Further, it has also enhanced the liability of the employers.
Now the employers are required to enrol additional eligible employees and to contribute to
the increased wage ceiling. All these amendments have been incorporated at the relevant
place in the chapter.
The important amendments to the schemes framed under the Employees' Provident Funds
and Miscellaneous Provisions Act, 1952 ("EPF Act") as follows:

AMENDMENTS TO EMPLOYEE PROVIDENT FUND ACT, 1952 IN 2016-17

1. New PF Withdrawal Rules: The Ministry of Labour and Employment, Government of
India, has recently made a few amendments in the Employees’ Provident Fund Scheme,
1952. These guidelines are mainly related to ‘Early Withdrawals’ from Provident Fund and
provisions related to PF withdrawals. These Amendments are related to;
 Full EPF balance cannot be withdrawn before attaining Retirement Age.
 Continuity of EPF membership.
 Increase in Age limit to withdraw 90% of PF balance.
 Partial withdrawal of EPF amount on Resignation
 Increase in retirement age.
These new PF withdrawal rules were made effective from 10th February, 2016.
2. Interest to be paid on Inoperative Employee Provident Fund Account: As per the terms
of this Amendment, if an EPF Account lies idle for 36 (Thirty Six) months or more, it will
not be automatically treated as inoperative, but will continue to accrue interest.
3. Electronic Challan cum Return (ECR) gets a process-upgrade (Version 2): The
Employees’ Provident Fund Organization (EPFO) has moved towards the next phase in
digitization of processes. Earlier, the EPFO had released a new digitized process for Pradhan
Mantri Rojgar Protsahan Yojana (PMRPY) and Universal Account Number (UAN) 2.0.
On the 20th December, 2016, the Employees’ Provident Fund Organization (EPFO) launched
the next version of the Electronic Challan cum Returns (ECR). Consequently, to carry out the
migration to the newer version of ECR under unified portal, the portal was made inactive
from 17th Dec to 20th Dec, 2016.
The EPFO has reduced the complexity of the existing process by revising the existing ECR
file format and the ECR filing portal. Previously, around 25 fields were required to be filled
in order to file an ECR. The new ECR file format contains only 11 fields. It consolidates the
existing ‘ECR filing portal’, ‘claim-status’ portal and ‘challan payment portal’ into one
unified filing and payment portal. The ECR (Version 2) will be a completely UAN based
format so only the contribution of UAN registered employees can be uploaded.
In ECR (Version 2) the following fields have been omitted:
 Member ID
 Employee contribution due
 Employer contribution due
 Employee Pension Scheme contribution due
 All arrear fields and other employee information fields
All ‘arrear related fields’ will now be a part of the new arrear file and all ‘employee
information fields’ would be captured at the time of UAN generation. Furthermore, ‘UAN’
and ‘gross wages’ columns have been added to the ECR.

What is UAN?
UAN stands for Universal Account Number to be allotted by EPFO. The UAN will act as an
umbrella for the multiple Member Ids allotted to an individual by different establishments.
The idea is to link multiple Member Identification Numbers (Member Id) allotted to a single
member under a single Universal Account Number. This will help the member to view details
of all the Member Identification Numbers (Member Id) linked to it. If a member is already
allotted Universal Account Number (UAN) then he/she is required to provide the same on
joining new establishment to enable the employer to in-turn mark the new allotted Member
Identification Number (Member Id) to the already allotted Universal Identification Number
(UAN).
4. Provident Fund - Enrolment Campaign 2017: The Ministry of Labour and Employment,
Government of India has pursuant to its notification bearing ref. No. G.S.R.1190 (E) dated
30th December, 2016 notified the Employees’ Provident Funds (Seventh Amendment)
Scheme, 2016 (“Enrolment Campaign 2017”) giving an opportunity to defaulting companies
to register their employees as members under the Employees’ Provident Funds Scheme.
The Central Board (EPF) in its 215th meeting held on 19 December, 2016, decided to launch
a special campaign from 1-1-2017 to 31-3-2017 to enrol left out eligible workers for bringing
them under the social security umbrella of EPFO. The campaign seeks to enrol new
establishments and employees with or without past service. This Campaign was further
extended till 30th June, 2017.
5. Withdrawal from Provident Fund to facilitate housing needs of PF members (Head
Office circular dated 21-4-2017):
a. As per this Amendment, paragraph 68-BD has been inserted in the EPF Scheme, 1952 for
withdrawal of, and financing from, the provident fund for purchase of dwelling house or flat
or the construction of a dwelling house.
In paragraph (1) of the said circular, all the field offices were requested to give wide publicity
through electronic as well as print media about this amendment to the employers and the
subscribers.
b. Bulk mails may be sent to the employers, trade unions and the PF subscribers. Awareness
campaigns may also be launched by organizing seminars, workshops, press releases etc. so
that willing and eligible PF members can avail this facility.
c. An action taken report along with clipping of newspaper/media may be forwarded to Head
Office immediately.
6. New Scheme for PF Defaulters: Employees Provident Fund Organisation has introduced a
new scheme, in which special drive was to be initiated from 1st January, 2017 by the EPFO
for coverage of the establishment which are not yet covered but which are liable for EPF
coverage.
The Establishment which is legally liable for coverage will be covered under the Employees
Provident Fund Act.
 According to the Scheme, following benefits will be provided to the defaulters:
a) Only Employer Share will be levied, No Employees share.
b) Interest as applicable on Employer’s Share.
c) Damages @ 1/- Per Annum
The above will be with a condition that, the Establishment is not legally liable before
01.04.2009.
7. Online PF Withdrawal Application Launched: Under Aadhaar based Online Claim
Submission scheme, all EPF Members who have activated their UAN and seeded their KYC
(Aadhaar) with EPFO will be able to apply for PF final settlement (form19), Pension
withdrawal benefit (Form10-C) and PF part withdrawal (Form 31) from the their UAN
Interface directly.
The three forms collectively form more than 80% of EPFO’s claim workload. Members can
complete the whole process online and they neither need to interact with the employer nor
with the EPFO field office to submit online claim. They are not required to give any
supporting document while preferring online PF part withdrawal case. Member’s applying
online will be taken as his self-declaration for preferring the advance claim.
8. Submission of Self Declaration for Advance for Medical Treatment: Ministry of Labour
and Employment has amended Paragraph 68-J and Paragraph 68-N of Employees’ Provident
Fund Scheme, 1952 and it will come into force from the date of its publication in the official
Gazette. According to it, a member would only be required to submit a self-declaration,
which has already been included in the composite claim form, to avail advance under the EPF
Scheme in case of illness of members/ dependent and also in case of differently abled
members.

HOW TO CALCULATE EMPLOYEES' PROVIDENT FUND BALANCE

AND INTEREST
Employee Provident fund interest is calculated on the Contributions made by the employee as
well as the employer. Contribution made by the employee equals 12% of his/her Basic Pay
plus Dearness Allowance (DA). When the Basic Pay plus DA is less than or equal to Rs
15000, the employee contribution is 12% of Basic Pay + DA whereas the employer
contribution is 3.67% of the Basic Pay + DA.
Typically, Employer 12% Contribution is divided as follows:
 3.67% into Employee Provident fund
 8.33% into Employees’ pension scheme
 0.5% into Employees’ Deposit Linked Insurance Scheme (EDLIS)
 0.01% towards EDLIS Administrative Charges
If the employee income is below or equal to 15,000/- (Compulsory)
1. Employees' Basic Pay + DA: Rs 15000.
2. Employee contribution towards EPF: 12% x 15000 = Rs.1,800/-
3. As per the Act -12% Employer contribution will be divided into two parts i.e. 8.33%
towards Employees’ Pension scheme and rest 3.67% towards Employee Provident fund.
4. But employer contribution towards provident fund is Rs.15,000 x 3.67% = Rs.550.5/- 
5. Remaining 8.33% towards Employee pension scheme (EPS) that is 15,000/-x 8.33%
= Rs.1249.5/-. 
If the employee income is above 15,000/- (Exempted but Voluntary)
 There are 3 methods of computing the contributions if the income is above the threshold of
Rs 15000. Any one of these methods can be adopted by an employer. The most commonly
used is the first method.

Method Employee PF Contribution Employer PF Contribution

s

1 12% of Basic Pay plus DA 12% of Basic pay - 8.33% of 15000

2 12% of Basic Pay plus DA 3.67% of 15000

3 12% of 15000 3.67% of 15000

In the EPF calculator, we have used the 1st method for computing the employee and the
employer contribution. Just to understand our methodology, let us take the following case:
1. Employees' Basic Pay + DA: Rs 25000.
2. Employee contribution towards EPF: 12% x 25000 = Rs 3000
3. As per the Act -12% Employer contribution will be divided into 2 parts i.e. 8.33%
towards Employees’ pension scheme and rest 3.67% towards Employee Provident fund.
4. Employer contribution towards provident fund @12% on Rs.25,000/- = Rs. 3000/-
5. But employer contribution towards Employee pension scheme (EPS) is calculated on
Rs. 15,000/- only i.e. @ 8.33% = 1250/- (rounding off). 
6. Rest of the provident fund amount Rs.3000 - 1250 = 1750 is paid towards employees’
provident fund.
Hence the final employer contribution towards Employee Provident fund will be Rs 1750
EPF Calculator
In lieu of the above steps, if we use the formula used in Method 1 that is, 12% of Basic Pay
-8.33% of 15000, we get 12% x 25000 - 8.33% x 15000 = 1750. Hence the 2 methods
produce the same result.
Once the Contribution of the employee and the employer is computed, we compute the
interest on the contribution. The interest is computed on the opening balance of each month.
As the opening balance for the first month is zero, the interest earned on the 1st month is
zero.
For the second month, interest is computed on the closing balance of the 1st month which is
the same as the opening balance of the second month. The closing balance of the 1st month is
calculated by adding the employee's and the employer's contribution for the 1st month.
Similarly, the interest on the 3rd month is computed on the closing balance of the 2nd month.
The closing balance of the 2nd month is calculated by adding the closing balance of the 1st
month and the employee as well as the employer contribution of the 2nd month.
The sum of the employee as well as the employer contribution at the end of the year is added
to the sum of the interest earned in each of the 12 months of the year. The result so obtained
is the closing EPF balance at the end of the year.
 This amount becomes the opening balance for the 2nd year. The interest in the 1st month of
the 2nd year is computed on the opening balance of the 2nd year.

Illustration: (Assuming 9% rate of interest on EPF)

Total EPF balance at the end of the year = Balance at the end of 12 month (Employee plus
the Employer contribution) + Sum of the interest earned in each month in the year = 57000 +
2351 = Rs 59351
As regards the withdrawal, one can withdraw the full EPF balance on attaining the age of 58
years. However, he can withdraw 90% of the EPF corpus on attaining the age of 57 years.