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EPF & Miscellaneous Provision Act 1952

Applicability :
i. It extends to the whole of India except the State of Jammu
& Kashmir.
ii. to every establishment which is a factory engaged in any
industry specified in Schedule I and
iii. to any other establishment notified by the Central
Government
In which 20 or more persons are employed.
Voluntary Coverage
• If any establishment is not covered under
• the Act, and if the employer and majority of
the employees are willing
• The establishment may be got covered
• voluntarily.
Employee
• Employee means any person
• who is employed on wages,
• in any kind of work, manual or
• otherwise
1. Employees who are getting salary up to
Rs.15000 ( Rs.6500 till 31st August 2014 ) are
covered statutorily.
2. Employees who are getting more than
Rs.15000 …….
.May be excluded employee or,
.Get the benefit of PF as per the discretion of
the employer

.If employer includes these employees in EPF


.He has two options :
(i) he may decide to extend the benefits on full
salary or
(ii) up to the salary of Rs15000 (6,500 pm.)

ONCE COVERED ALWAYS COVERED


If employee is covered under the EPF Act,1952
he will get all three statutory benefits
1. Employees Provident Fund Scheme
2. Employees Pension Scheme
3. Employees Deposit Linked Insurance Scheme
Salary = Basic Wage +
D.A. +
Retaining Allowance +
Cash value of food concession
Rate of contribution for EPF Scheme

• By the employee :
• @12% of the EPF Salary every month.

• Full amount of the employee’s contribution


• goes to his Provident fund account.
• Contribution by the Employer :
• @12% of the EPF Salary every Month
But the employer’s Contribution is
bifurcated
8.33% of the salary up to Rs.15000
goes to Employee’s pension Scheme
> Balance to the EPF account.
The contribution by the Central Govt.

• Earlier it was @1.16% limited to the amount


payable on his salary

• From 1-9-2014 NIL


10% Contribution
1. Any establishment covered prior to 22-9-97 in
which less than 20 employees
2. Any Sick Industrial company
3. Any establishment which has at the end of
any Financial year accumulated losses equal to
or exceeding its entire worth.
10% Contribution
4. Any establishment engaged in manufacturing
of
i. Jute
ii. Beedi
iii. Brick
iv. Coir
Ex:
If the salary of an employee is Rs20,000 pm and
covered under the act of EPF 1952.
Contribution up to EPF salary.
Find the contribution of employer towards :
1. Pension Fund
2. Provident fund
Administration Charge
1.1% of EPF Salary payable by employer till
31st Dec 2014

0.85% of EPF Salary from 1st January 2015


0.65% from 1-4-2017
Withdrawals
A member can withdraw for the following
purposes if he has completed 5 years service
and his own share of contribution with
interest is not less than Rs.1000.
1. For the alteration or improvements to
dwelling house
a. 12 months salary ( Basic + D. A. )
b. The cost of alteration or
c. Balance in PF a/c
LEAST OF THREE
2. For purchase of a site/plot for construction of
a house the maximum withdrawal can be :
i. The cost of site/plot or
ii. 24 months salary (Basic + D.A. ) or
iii. Balance in PF a/c
LEAST OF THREE
3. For Ready built house or construction of a
house :
a. 36 months salary
b. The cost of the house
c. Balance in PF a/c

LEAST OF THREE
Advances for Repayment of Loan
If a loan is already taken from a Govt. body or a
Co-operative Society for purchase of a
dwelling house / flat or for the construction of
a dwelling house
Advances for Repayment of Loan
withdrawal from PF for repayment of such loan
shall be the least of the following amounts:
(a) Outstanding loan
(b) Balance in PF a/c
(c) 36 months’ salary
Provided the member has completed 10
years of membership.
Advance for Illness
Eligibility >Non refundable advance from his account in the
fund for any of the three circumstances of illness:
1. Hospitalization lasting for one month or more, or
2. Major surgical operation in a hospital, or
3. Suffering from TB, leprosy, paralysis, cancer, mental
derangement or heart ailment
Advance for Illness
Such an advance even for the treatment of a
member of his family.
The amount of such an advance not to exceed
the member’s own contribution with interest
in the fund or the member’s salary for 6
months.
Advance for Marriage/Education
‘Non Refundable’ advance from the PF for
(i) the member’s own marriage,
(ii) the marriage of his or her daughter, son,
sister or brother or
(iii) for the post matriculation education of his or
her son or daughter -
Conditions:
(1) The member should have completed 7 years’ of membership
of the fund, and
(2) the amount of his own share of contributions with interest
should be Rs1,000 or more.
(3) This advance shall not exceed 50% of the member’s own
share with interest.
(4) Maximum 3 advances shall be admissible to a member in his
lifetime.
Taxation
• Amount withdrawal before 5 years of service is taxable.
• But, it is not taxable if his service are terminated by reasons
of :
a. His illness
b. For a cause beyond the control of the employee.
c. Discontinuation of the employer’s business.
If an employee gets the provident
fund and transfer to another recognized
provident fund trust on joining new service,
total service with all the employers as
provident fund member has to be counted for
tax benefit.
Concept checker
Q1. Wages under EPF Act, 1952 means……
Basic + DA + Cash value of any food concession +
retaining allowance
Q2. What is the matching rate of contribution by
the employee and the employer under the
EPF Act, 1952?
a. @ 8.33% of the eligible salary
b. @12% of eligible salary
c. @10% of the eligible salary
Ans. b
Q3. Employer’s contributions under the EPF Act,
1952 are bifurcated in two parts :
1. ___ % of salary towards Employees pension
scheme, 1995.
2. ____ % is deposited in the PF a/c of the
employee.
Ans. 1. 8.33
2. 3.67
Q4. What is the Central Government
Contribution in Employee’s pension Scheme,
1995?
Ans. 1.16% of the eligible salary
Q5. Rate of interest under the EPF and
miscellaneous Provisions Act, 1952 for the
assessment year 2011-12 is _______.
Ans. 8.5%
Q6. The employer’s contribution to any RPF is
exempt up to ……….. of salary, excess of …….. is
included in the gross salary.
Ans. 12%, 12%
Q1.An employee aged 40 years is covered under
an unrecognized Provident Fund. He and his
employer are contributing @12 % of his salary
towards provident fund.
The employee is currently getting a monthly
salary of Rs.10,000 p.m.
If his salary remains constant until his
retirement at the age of 60 years and interest
rate is 9% pa convertible monthly.
1. What amount will he get as PF accumulations
on retirement?
Sol
PMT= 24% of Rs10000 =2400
N = 20 *12 = 240
I=9
P/Y = 12
C/Y = 12
FV = solve = 1602928.488
2. What would be tax treatment of all such
receipts from the unrecognized PF?
Sol:
i. Employee’s own contributions = 1200 * 240 =
Rs2,88,000 tax free.
ii. Interest on the employee’s contributions
amounting to Rs5,13,464 to be treated and taxed
as ‘income from other sources’.
iii. Employer’s contributions and interest thereon
amounting to Rs.8,01,464 to be treated as taxed
as ‘salary’.
• NEW DELHI, MAR 4, 2013:
• More than Rs 22,636 crore is lying in
inoperative accounts in the Employees
Provident Fund, the Lok Sabha was informed
today.