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Employees Provident Fund and Miscellaneous Provisions Act,1952

The Employees’ Provident Fund Organization of India is a state sponsored compulsory contributory pension and insurance scheme. It is one of the largest social security organizations in the world in terms of members and volume of financial Transactions undertaken.

The promulgation of Employees State Insurance Act, 1948, by the Parliament was the first major legislation on social security for workers in independent India. It encompasses certain health related eventualities that the workers are generally exposed to thus resulting in loss of wages or earning capacity, total or partial. The social security provision made in the Act counterbalances and negated the resulting physical and financial distress in times of such contingencies.

Purpose of the Scheme

The Indian Government, as part of its social security scheme, has designed that both employers and employees should contribute a certain portion of their monthly salary to the employee’s Provident fund which will be available to the employee or his family on retirement or death.

The Employees’ Provident Funds & Miscellaneous Provisions Act, 1952 was enacted by Parliament and came into force with effect from 14th March 1952.

Salient Features of the Scheme

  • Contributory Scheme- equal contribution is made by both employee and employer.
  • The governing law is the Employees’ Provident Fund & Miscellaneous Provisions Act 1952.
  • Establishments covered under this Act are required to comply with the statutory provisions of the Actand also the provisions of the Schemes framed under the Act namely
  • Employees’ Provident Fund Scheme, 1952,
  • Employees’ Pension Scheme, 1995 and
  • Employees’ Deposit Linked Insurance Schemes, 1976.
  • PF amount is free from any Court attachments.
  • Generally Maximum contribution rate that the employer needs to contribute to the PF Fund is 12% of the salary of the employees.
  • The contribution by the employer is a tax-deductible expense
  • The contribution on behalf of the employee is not considered as income in the hands of the employees.
  • PF Scheme can be maintained in the form of a Trust to be created between the employer and Trustees with prior approvals of Regional PF   Commissioner.
  • The trust should be recognized by the Commissioner of Income Tax
  • The Trust has to maintain its accounts and get it audited.
  • Generally, a statement on the balance of the member is circulated to the members at the end of each year.
  • All expenses relating to the administration of the Trust is borne by the employer.