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y "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.

The 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. y The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 came into effect on 4th March 1952. The Organization is administered by a Central Board of Trustees, comprising of representatives of the Government of India, provincial governments, employers and employees. The Board is chaired by the Union Labour Minister of India. The Chief Executive of the EPFO, the Central Provident Fund Commissioner, reports to the Union Labour Minister through the Permanent Secretary in the ministry. The head office of the Organisation is in New Delhi

y 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.

Any dearness allowance (that is to say. The cash value of any food concession. Any present made by the employer. bonus. all cash payment by whatever name called paid to an employee on account of a rise in the cost of living). 2. . overtime allowance. 3.y "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. house rent allowance. but dose not include 1. commission or any other allowance payable to the employee in respect of employment or of work done in such employment.

"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. otherwise entitled to become a member of the fund. whose pay exceeds Rs. Or An employee. . Five Thousand per month at the time.

or provident fund as it is normally referred to. 5. Family obligation. The Employee Provident Fund. 2. Medical care. Education of children. Financing and insurance policy. 4. Housing. . 3. Employees' Provident Fund Scheme takes care of following needs of the members: Retirement. is a retirement benefit scheme that is available to salaried employees.y y 1. 6.

Any sick industrial company as defined in clause (O) of Sub-Section (1) of Section 3 of the Sick Industrial Companies (Special Provisions) Act.9. if any.1997 in the Act. for establishments cover prior to 22.y y y y y As per amendment-dated 22. Any establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth and Any establishment engaged in manufacturing of (a) jute (b) Breed (d) coir and (e) Guar gum Industries/ Factories.97. both the employees and employer contribute to the fund at the rate of 12% of the basic wages.9.1997. The rate of contribution is 10% in the case of following establishments: Any covered establishment with less then 20 employees. payable to employees per month. 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction.9. . The contribution under the Employees' Provident Fund Scheme by the employee and employer will be as under with effect from 22. dearness allowance and retaining allowance.

1. The interest is credited to the members account on monthly running balance with effect from the last day in each year. The rate of interest for the year 1998-99 has been notified as 12%.25% to be notified by the Government.'99 was 11% on monthly balances. . Employees' Provident Fund every year during March/April.f.e.y The rate of interest is fixed by the Central Government in consultation with the Central Board of trustees. The rate of interest for 992000 w. 2000-2001 CBT recommended 10.7.

A) 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: y A member who has not attained the age of 55 year at the time of termination of service. . y A member is retired on account of permanent and total disablement due to bodily or mental infirmity. y On migration from India for permanent settlement abroad or for taking employment abroad. y In the case of mass or individual retrenchment.

B) 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: y Where employees of close establishment are transferred to other establishment. . 1947. which is not covered under the Act: y Where a member is discharged and is given retrenchment compensation under the Industrial Dispute Act.

Claim application in form 19 may be submitted to the concerned Provident Fund Office. .y 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 20 may be submitted to the concerned Provident Fund Office. .y Amount of Provident Fund at the credit of the deceased member is payable to nominees/ legal heirs.

y Transfer of Provident Fund account from one region to other. . Transfer Application in form 13 may be submitted to the concerned Provident Fund Office. from Exempted Provident Fund Trust to Unexampled Fund in a region and vice-versa can be done as per Scheme.

These 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. . a nomination conferring the right to receive the amount that may stand to the credit in the fund in the event of death. The member may furnish the particulars concerning himself and his family.y The member of Provident Fund shall make a declaration in Form 2.

y As soon as possible and after the close of each period of currency of contribution. . 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. The statement of accounts in the fund will show the opening balance at the beginning of the period. annual statements of accounts will de sent to each member through of the factory or other establishment where the member was last employed. 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.

If you have worked continuously for a period of five years. but the PF has been transferred to the new employer. the PF withdrawal is not taxed. . it is taxed. If you withdraw it before completion of five years. the withdrawal of PF is not taxed. The tenure of employment with the new employer is included in computing the total of five years.y The amount you invest is eligible for y y y y y deduction under the Rs 1. If you have not worked for at least five years.00. But if your employment is terminated due to ill-health. then too it is not taxed.000 limit of Section 80C.

y Recognized Provident fund (RPF). y Voluntary Provident fund.y Statutory Provident fund. . y Public Provident Fund (PPF). y Unrecognized Provident fund (URPF).

6500/. universities and recognised educational institutions. Statutory PF is set up under the provisions of the PF Act. local authorities. . This fund is maintained by government and semi-government attached to the Employees' Provident Funds & Miscellaneous Provisions Act. such Provident Fund is compulsory for employees drawing salaries (Basic + DA) of upto Rs.ments to which the said Act has specifically been made applicable by the Central Government by issue of notification in Gazette of India. 1925.y For all industries employing 20 or more persons engaged in any industry specified in Schedule . railways. 1952 or for all Establishments or classes of Establish.

6500/-/. the Provident Fund is voluntary and the benefit of provident fund can be extended by setting up a private PF Trust and by getting the same recognized under Income tax Act. 1961 or by getting the Establishment/ employees covered under the EPF & MP Act. 1952 on voluntary basis.employed in Industry/Establishment in which such PF is compulsory. 1952 /EPF Scheme.y For all other Industries/Establishments and for all employees drawing salaries of above Rs. .

y It is a fund to which the Commissioner of Income-tax has given the recognition as required under the Income-tax Act. .

which is not recognized by the Commissioner of Income-tax.y It is the Provident Fund. The employee's contribution to URPF is not treated as deductible expenditure. The employee and employer both contribute towards this fund. .

y Self-employed people (doctors. traders. You can voluntarily decide to open one. actors. pensioners) can also enjoy the benefit of tax rebate under section 88 by contribution to PPF y Rate of return on investment is 8%. a freelancer or even working on a contract basis. You can also open this account if you are not earning. y . accountants. you could be a consultant.The Public Provident Fund has been established by the central government. lawyers. You need not be a salaried individual.

00.000 limit of Section 80C. During these five years. after 15 years of the close of the financial year in which you opened the account. y On maturity.The accumulated sum is repayable after 15 years. you pay absolutely no tax. you earn the rate of interest and can also make fresh deposits. y . that is. y The amount you invest is eligible for deduction under the Rs 1. The entire balance can be withdrawn on maturity. y It can be extended for a period of five years after that.

You can also open it at the head post office or certain select post offices.000. .y Any individual can open a PPF account in any nationalised bank or its branches that handle PPF accounts. The maximum amount you can deposit every year is Rs 70. y The minimum amount to be deposited in this account is Rs 500 per year.

such Factories/ Establishment have two options . Employees Provident Fund Scheme.y Even in Factories/Establishments where PF. is to comply with the statutory scheme i. . The former is called unexempted establishments.e. get it recognized by the Income Tax authorities and to seek exemption from RPFC/appropriate Govt. to run its own Trust subject to such conditions as may be imposed by them. 1952 and another to set up their own PF Trust. the later exempted ones.

Statutory Provident Fund Employer s contribution to PF Deduction under section 80c Interest credited to PF Lump-Sum payment at Retirement Exempt from tax Recognized Provident Fund Exempt upto 12% salaryexcess is taxable Available Unrecognize d Provident Fund Exempt from tax Public Provident Fund Employer does not contribute Available Not available Available Exempt Exempt Exempt upto notified rate Exempt in some cases Exempt Exempt Employee Exempt contribution is exempt .


as decided by the Central board of trutees(CBT) on September 15. The 1% extra income (or Rs 1. . Its a one percentage point increase in the rate from the 8.5% for 2010-11 effective from September 1.5% y y y y bonanza on provident fund deposits.y Labour minister Mallikarjun Kharge declared a 9. The Central Board of Direct Taxes notified a taxfree PF rate of 8.5% paid in the past five years. Finance ministry notification says that any rate in excess of 8.700 crore) that the labour ministry has projected as a gift to the workforce would be fully taxable.5% will be taxed.

when the EPF rate has been hiked to 9.y The tax-free PF rate notified by the income tax department has never been lower than the EPF rate declared for the year. y The income tax department notifies a tax-free PF rate for the whole year.50%. So the 9. it s only applicable from September 1.50%. the ceiling was at 9.5% provident fund return would be tax-free from April to August but taxable thereafter.731 crore.50%. the ceiling on tax-free provident fund returns has been lowered to 8. This year. . y EPFO.50%. Chatterjee said after reconciliation of account on accrualbased system found that it had a surplus of Rs 1. y In recent years. But this year. while the EPF rate was at 8.

which would be met from the surplus of Rs.y As the money belonged to over six crore subscribers.5 from 8.5%. 1. y The move to increase the interest rate by one percentage point from the earlier 8.731 crore available in the interest suspense account with the EPFO .600 crore.1. would cost an additional Rs.Y. y The surplus in the interest suspense account is the main reason to increase the interest rate by 1% for the F. a rate being maintained for the past five years since 2005-06. 2010-2011 of the EPF.5 per cent. the CBT decided to raise the interest rate for this fiscal by a percentage point to 9.


y If the interest rate decided by the IT dept is 9. are confident that the income tax department would reconsider its decision. y If the IT department re-notifies the interest rate then it would be beneficial for the workers as it would increase the returns. however.5% then EPF will be regarded as most attractive in terms of return on investment along with tax benefits.y EPFO board members. .

y For company-run trusts calculating the tax liability on 1% PF income for 7 month would be a headache.5% PF return would be Tax-Free from April to August but taxable thereafter.y The incremental PF return will be taxable in the hands of the workers if the finance ministry doesn t re-notify the tax ceiling. . y Levying the tax would be difficult because the tax-free PF rate notified by the Income Tax department is applicable only from September 1st. So the 9.

y The accounts' which are not operated for 36 months will stop getting interest. y The increase in PF rate will benefit only the salaried employees and not those who are self employed. y The corporate s which follow their own PF trusts have to match the new rates.y Employees Provident Fund Organisation (EPFO) will face a lot of problems since it manages 5 crore PF accounts. .

5% as they hold their securities to maturity. and the 7. Even 100% debt funds may be unable to match the EPF's interest of 9. y The EPF interest is higher than the 8% return offered by post office deposits and provident fund.75% rate of interest on bank deposits held up to 10 years. y The 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.5 per cent has increased the visibility of the EPF in the minds of investors.y The raising of the rate of return to 9. .

whereas the return on EPF is Tax free.y Pension funds and long-term debt options have a return that is taxable.  Second E -All the interest earned in EPF account is tax-free and the account holder doesn t have to pay any tax on the same . y Any investment made under EPF follows the EEE model:  First E -Any amount invested in EPF is exempted under section 80C to a limit of Rs. 1 lakh.

. Third E -The amount that you withdraw at the time of maturity is taxfree as there is no tax at maturity.

This letter was given to EPFO by the finance ministry.y We can see the rates rolling back from 9. This was because the CBT members opposed the idea of investing in stock markets.5% .5% to 8. The reason for the opposition was how can the hard-earned money of the common man be exposed to market risks.5% in the next fiscal year as it ll be difficult for EPFO to generate the return because:  The money can t be invested in to equity markets so that extra return is generated.  The returns earned from safe deposit instruments are too less to offer a return of 9.

y Another body.y 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. 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.