Epf Act

Notes-LL/14
Employees' Provident Funds and Miscellaneous Provisions Act, 1952
(Came into force on 14 March 1952)
There are various schemes in this act: -
❖ The Employees’ Provident Funds Scheme, 1952,

❖ The Employees’ Deposit-linked Insurance Scheme, 1976, and
❖ The Employees’ Pension Scheme, 1995
Objectives: -
• It institutes a compulsory contributory fund for the future of the

employee after his retirement or for his dependents in case of his early
death.
➢ The Act applies to:

• every factory establishment in any industry specified in
Schedule I of the Act and in which 20 or more persons
are employed and
• any other establishment employing 20 or more persons
which the central government may specify by notification
in the official gazette.
• The central government may add to Schedule I any other
industry if it is of the opinion that provident fund scheme
should be framed.
❖ Contract Labour is included but casual labour is excluded for counting

the strength of employees. An apprentice is also not included.
❖ Directors, working patterners, Managing Partners, domestic servants
and contractors are not employees.
❖ It is applicable to educational institution but not charitable institutions.
❖
****This wage-ceiling is 15,000 with effect from 1 September, 2014. The EPFO
has recently proposed to enhance this wage-ceiling to 21,000 per month.
The Act does not apply to the following categories of establishments:

➢ Establishments registered under Cooperative Societies Act employing
less than 50 persons and working without the aid of power.
➢ Newly set-up establishment for an initial period of 3 years.
➢ Any other establishment belonging to or under the control of the central
or state government and 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 appropriate government.
1
Definitions:-
Appropriate Government:
➢ In relation to an establishment belonging to the central government are,
railway company, a major port, a mine or an oilfield or a controlled
industry or in relation to an establishment having departments or
branches in more than one state and in relation to any other
establishment, the state government.
Basic Wages:
➢ All emoluments which are earned by an employee while on duty or on
leave or on holidays with wages in accordance with the terms of contract
of employment but does not include
• the cash value of any food concession,
• any dearness allowance, house rent allowance, overtime
allowance, bonus, commission or any other similar allowance
payable to the employee in respect of his employment or of
work done in such employment,
• any presents made by the employer [Sec. 2(b)].
Employee:
➢ Any person who is employed for wages in any kind of work, in
connection with the work of an establishment, and who gets his wages
directly or indirectly from the employer, and includes any person
employed by or through a contractor
➢ engaged as an apprentice, not being an apprentice engaged under the
Apprentices Act,1961
The central government is empowered to frame:
Employees’ Provident Funds Scheme [Sec. 5]

Employees’ Pension Scheme [Sec. 6A]
Employees’ Deposit linked Insurance Scheme [Sec. 6C]
Employees’ Provident Funds Scheme

➢ The central government is empowered to frame the Employees’
Provident Funds Scheme for the establishment of provident funds
under the Act
Central Board of Trustees
❖ After framing of the Scheme, a Provident Fund has to be established,

the Central Board of Trustees. The Central Board of Trustees is to
consist of:
• a chairman and a vice-chairman appointed by the central
government
2
• not more than 05 central government officials
• not more than 15 representatives of state governments
• 10 representatives of employers in consultation with
organizations of employers, and
• 10 employees’ representatives in consultation with
organizations of employees, all appointed by the central
government.
****The accounts of income and expenditure of the fund will be audited

annually by Comptroller and Auditor General of India and forwarded to the
central government
Executive Committee
For assisting the Central Board of Trustees, the central government may
appoint the Executive Committee. The Executive Committee is to consist of:
• a chairman from amongst the members of the Central Board,

• 02 official members of the Board,
• 03 representatives of the state governments,
• 03 representatives of employers,
• 03 representatives of employees, all from amongst the
members of the Central Board and
• Central Provident Fund Commissioner ex-officio.
State Board
❖ The central government is also empowered to constitute State Board of

Trustees as laid down in the Employees’ Provident Fund Scheme. The
powers and functions of the State Board are to be assigned by the
central government.
Contribution: -
• Employee contribution to EPF: 12% of salary.
• Employer contribution to EPF: 3.67% of salary.

• Employer contribution to EPS: 8.33% of salary
• EPF admin charge :1.1%
• EDLIS admin charge :0.01%
3
Employees’ Pension Scheme: - EPF Pension which is technically known as
Employees’ Pension Scheme (EPS), is a social security scheme. The scheme
makes provisions for employees working in the organized sector for a pension
after their retirement at the age of 58 years. However, the benefits of the
scheme can be availed only if the employee has provided a service for at least
10 years (this does not have to be continuous service).
The pension amount in PF depends on the pensionable salary of the member

and the pensionable service. The member’s monthly pension amount is
calculated as per the following formula:
Member’s Monthly Salary = Pensionable salary X Pensionable service / 70

❖ The maximum pensionable salary is limited to ₹ 15,000 every month.
4
Types of Pensions: -
➢ Widow pension or vridha pension is applicable to the widow of the
member eligible for a pension. The pension amount will be payable until
the death of the widow or her remarriage
➢ Child Pension: -In case of death of the member, monthly children
pension is applicable for the surviving children in the family in addition
to the monthly widow pension. The monthly pension will be paid till the
child attains the age of 25 years.
➢ Orphan Pension: -In case the member dies and has no surviving widow,
his children will be entitled to get the monthly orphan pension of 75%
of the value of monthly widow pension.
Employees’ Deposit-Linked Insurance Scheme

➢ The Employees’ Deposit-linked Insurance scheme for the purpose of
providing insurance benefits to the employees covered under the Act
➢ The employer is required to pay to the fund not more than one per cent
of the aggregate of the basic wages, dearness allowance and retaining
allowance.
➢ The employer is also required to pay to the fund an additional amount
not exceeding one-fourth of the contribution for insurance as
determined by the central government to defray administrative
expenses.
➢ This amount is not to be spent to meet the cost of any benefits provided
under the Scheme.
➢ The insurance fund is also to vest in the Central Board of Trustees.
❖ The scheme came into force with effect from 1 August 1976. All the
members of the Employees’ Provident Funds
❖ Following is the formula to compute the EDLI pay-out:
[Employee’s Average monthly salary for the last 12 months (capped

at INR 15,000 per month) * 30] + Bonus Amount (INR 2,50,000)
❖ The maximum benefit an employee can receive under EDLI is INR
7,00,000.
Following are the key features of the Employees Deposit Linked Insurance
Scheme (EDLI) that apply to all the beneficiaries of the policy:
❖ The claim amount is 30 times the salary of the employee.

❖ EDLI applies to all the employees whose basic salary is less than INR
15,000 per month. If the basic salary is above INR 15,000 per month,
then the maximum benefits one can receive is INR 7,00,000.
❖ EDLI offers a bonus of INR 2,50,000. The minimum amount of benefit
that EPFO offers is INR 2,50,000 with retrospective effect.
5
❖ Organisations with more than 20 employees have to register for EPF.
As a result, an employee who holds an EPF account will automatically
become eligible for the Employees Deposit Linked Insurance Scheme
(EDLI). In other words, employees don’t have to contribute towards
EDLI separately.
❖ Employees Deposit Linked Insurance Scheme protects the insured
person round the clock with no exceptions to the insurance coverage.
❖ Employers can take other group insurance policies. However, the
benefits from such a scheme have to be equal to or more than the
benefits offered under EDLI.
❖ Employer’s contribution is at 0.5% of the basic salary or a maximum of
INR 75 per month per employee. If the company has no other group
insurance policies, the maximum contribution is capped at INR 15,000
per month.
❖ EDLI considers both the basic salary and dearness allowance together
for all calculations.
❖ The benefit is directly credited to the claimant’s account.
❖ Age and other factors do not have any impact on the employee’s
eligibility for the scheme.
❖
Benefits
➢ On the death of a member while in employment of the same
establishment for a continuous period of 12 months preceding
➢ the month in which he died, the persons entitled to receive the
provident fund accumulations of the deceased are also
➢ to be paid, in addition, an amount equal to the average monthly wages
drawn multiplied by 20 times
Employees' Provident Funds Appellate Tribunal

➢ The central government is empowered to constitute one or more
Employees’ Provident Funds Appellate Tribunals to exercise the powers
and discharge the functions specified under the Act.
➢ No order of the central government appointing a person as the presiding
officer is to be questioned and no act or proceeding before a tribunal is
to be called in question on the ground merely by defect in the
constitution of the Tribunal.
➢ The appellate tribunal is to consist of one person only.
➢ A person is qualified for the appointment as a presiding officer of the
tribunal if the person is or has been or is qualified to be a Judge of a
High Court or a District Judge.
➢ The presiding officer of the tribunal will hold office for a term of five
years or until they attain the age of 65 years.
Interest Payable by the Employer

The employer is liable to pay simple interest at the rate of 12 per cent per
annum or at a higher rate as specified in the scheme on any amount due from
him under the Act.
6
Pandit Deendayal Upadhayay Shramev Jayate Karyakram (2014)
➢ Pandit Deen Dayal Upadhayay Shramev Jayate Karyakram launched in

2014 reforming Employees’ Provident Fund Schemes in a major way.
➢ The main components of the Karyakram having relevance to the PF
scheme include:
• Portability of the provident fund account of the employees
through a Universal Account Number (UAN) which be linked
with bank account,
• Introduction of a minimum monthly pension of 1,000,
• Establishment of Shram Suvidha or labour facilitation portal
and making inspection transparent and accountable, (iv)
providing easy and convenient employees’ access to PF
accounts and insurance scheme
• Rationalizing submission of returns by employers.
Schedule: -
I- List of industries engaged in the manufacturing.

II- Matters related to Provident Fund Scheme
III- Matters related to Pension Scheme
IV- Matter related to Insurance Scheme
………………………………………………………………………………………………….

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Notes-LL/14

Employees' Provident Funds and Miscellaneous Provisions Act, 1952

(Came into force on 14 March 1952)

There are various schemes in this act: -

❖ The Employees’ Provident Funds Scheme, 1952,

• It institutes a compulsory contributory fund for the future of the

➢ The Act applies to:

❖ Contract Labour is included but casual labour is excluded for counting

The Act does not apply to the following categories of establishments:

The central government is empowered to frame:

Employees’ Provident Funds Scheme [Sec. 5]

Employees’ Provident Funds Scheme

Central Board of Trustees

❖ After framing of the Scheme, a Provident Fund has to be established,

****The accounts of income and expenditure of the fund will be audited

• a chairman from amongst the members of the Central Board,

❖ The central government is also empowered to constitute State Board of

• Employee contribution to EPF: 12% of salary.

• Employer contribution to EPF: 3.67% of salary.

The pension amount in PF depends on the pensionable salary of the member

Member’s Monthly Salary = Pensionable salary X Pensionable service / 70

Employees’ Deposit-Linked Insurance Scheme

[Employee’s Average monthly salary for the last 12 months (capped

❖ The claim amount is 30 times the salary of the employee.

Employees' Provident Funds Appellate Tribunal

Interest Payable by the Employer

➢ Pandit Deen Dayal Upadhayay Shramev Jayate Karyakram launched in

I- List of industries engaged in the manufacturing.

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