The Act applies to:
- Every factory, engaged in industry prescribed by the Act and employs 20 or more persons.
- Every establishment and its departments and branches, in which 20 or more persons are employed. Educational Institutions are also considered as establishments.
The Act is applicable to establishments with less than twenty employees, by notification in an official gazette.
Basic wages means all wages or salary earnings by an employee, paid or payable to him in cash, while on duty or paid leave.
Basic Wages does not include:
- Food Concession
- Dearness Allowance
- House-rent allowance
- Bonus- commission or any other payment.
- Any presents made by the employer
Non-applicability of the Act:
- Any registered Co-operative society in which the employment is less than 50 persons and working without the aid of power.
- Any Govt establishment that has a separate contributory provident fund or old-age pension.
- An undertaking covered under a separate Act.
The maximum wage ceiling limit is Rs. 15000/.
The employee can pay at a higher rate but the employer is not under any obligation to pay at such a higher rate.
What is UAN?
UAN refers to the Universal Account Number, which is a 12 digit number which is allotted by the Employee Provident Fund Organization (EPFO). The UAN no. remains the same throughout life irrespective of the changes in the number of jobs.
Exemption from the provision of the Act:
- It shall be granted by the AG.
- Notification is given in an official gazette.
- AG shall check the conditions for exemption.
- An exemption shall be given prospectively or retrospectively.
Recovery of money from Employer:
- The authorized officer shall issue a Recovery Certificate with the specified amount.
- The Certificate shall be sent to the jurisdictional Recovery Officer.
- Mode of recovery-
- By way of sale of the property.
Transfer of Accounts:
If the new establishment is not covered under PF Act: The employee who is not covered under PF Act, and the new establishment has a Provident Fund of its own, in this case, at the request of the employee to the employer, the amount standing to the credit will be transferred to his account in the new establishment.
If the old establishment wasn’t covered under PF Act: If an employee is employed in an establishment where PF Act doesn’t apply, because such establishment has its PF account, and obtains employment in an establishment which PF Act shall apply, then the amount standing to the credit will be transferred to his account in the new establishment.
Employees Provident Fund Scheme
Quantum of contribution:
- Employee – 12% of pay (Basic + DA + Retaining allowance).
- Employer – 12% of Pay% of pay
- CG is empowered to increase the rate of contribution to 12%
* While EPF rules allow the employee to contribute up to 100 percent of one’s basic pay, the employer need not match the enhanced rate of contribution.
However, the draft EPF Bill proposes to reduce the EPF rate of contribution to 10 percent, both by the employee and the employer. Further, it also mentions that the government may notify a specific rate of contribution and the period for which such rate will apply for any class of employees.
Income tax benefit
PF contributions are entitled to income tax deduction under section 80C. The maximum amount of deduction that can be claimed under this section is Rs 1.5 lakh. Reducing the percentage of the PF contribution may result in higher tax payout if no other tax-saving investments are made.