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Hello Experts, My sister who is also a HR professional in a company is facing a Sec 7A notice and recovery u/s 14 of EPF Act.
The allegation on the given company is that EPF has not been paid since 2018.
However the given company had given an option to its employees who want to opt out of EPF and majority of the employees agreed on the same.
Thus the given company stopped deducting EPF for the employees and told their EPF consultant to prepare a reply to the given RPFO. However the consultant seemed to have not provided the same to the RPFO and now the company has to face the consequences.
Therefore I need to understand as to what should be approach now in dealing with RPFO as they have put a hefty liability and penalty on the given company.
Awaiting your valuable suggestion.

It seems EPF consultant had not guided the company properly. Legally it is not possible to stop deducted EPF contribution if employment is active. Any written letter of consent for stopping contribution is null and void under EPF law.
If said employees have re-entered in the service (New joining) after stopping EPF, than only company has some room to defend.

Dear Rahul Is there any ruling/judgement regarding this of not being able to stop PF contribution.Please share if possible. Regards Anuradha
No ruling or judgement is required. Act is very specific - read it once again. It is not all possible to stop contribution of covered employees by any means.
Face the 7A hearing and deposit the shortfall amount with penal interest etc. at the earliest to avoid further future problem. More delay will create more liability.
S K Bandyopadhyay ( WB, Howrah)
+91 98310 81531

Dear Anuradha,
Mr. Bandyopadhyay has rightly said, it is in the law.
For more clarity you may refer "The Employees’ Provident Funds Scheme, 1952"
Para 26 (6). which is as follows:
"Notwithstanding anything contained in this paragraph [an officer not below
the rank of an Assistant Provident Fund Commissioner] may, on the joint request
in writing, of any employee of a factory or other establishment to which this
Scheme applies and his employer, enroll such employee as a member or allow him
to contribute more than rupees [fifteen thousand rupees] of his pay per month if
he is already a member of the Fund and thereupon such employee shall be
entitled to the benefits and shall be subject to the conditions of the Fund, provided
that the employer gives an undertaking in writing that he shall pay the
administrative charges payable and shall comply with all statutory provisions in
respect of such employee."
In above section you will get answer of your query.
Rahul Sindhwani

Dear Rahul
Thanks for once again responding. But the employees for whom the EPF contribution was mutually agreed to be stopped were those who are drawing more than Rs 15000 per month as Basic pay.
Also prior to that the total deductions done for all the employees was limited to max basic salary being Rs 15000 per month.
Thus as PF is tax saving and retirement benefit measure, if some employee(s) decide to not have any contribution done when there salaries are above Rs 15000 per month ,how can that be illegal?
All these employees who had basic pay beyond Rs 15000 are contributing Rs.150,000 in other tax saving and retirement measures like ELSS, PPF etc.
Also I understand the The Employees’ Provident Funds Scheme, 1952" Para 26 (6) is dealing with EPS and not much to do with reascending the contributions of excluded members desirous of withdrawing from the scheme.
Once again thanks a ton for your time and responses.

It appears that there are employees who are the member of EPFO but their Basic have been crossed 15,000/- and those employees are willing to stop PF Contribution. Please note as per definition of "Excluded Employees " under PF & Misc. Act are those who have joined with 1st service with more than 15,000/- basic / Was member of EPFO but discontinue membership after with drawl of accumulation amount and again join to any organization with more than 15,000/- basic/ retired on or after attaining the age of 58 years and with drawn the PF accumulation and again join to other organization irrespective of Basic salary.
Once any employee continue as member of EPFO other than above conditions and even the basic salary is more than 15,000/- will continue as covered employee otherwise illegal. Discontinuation of EPFO membership can not be as per wish or will of either employee or employer.
S K Bandyopadhyay ( WB, Howrah)
+91 98310 81531

Dear Anuradha,
I am sharing you a link of EPF FAQ.
Kindly refer the question no. 36 , 41 & 42 and there answers.
Apart from this, there are few contribution which are mandatory under law (Just like labour welfare fund Act) which has to be paid. This is why, it is illegal to stop paying contribution of such employees whose salary is above than Rs 15000. However, company is only liable to pay contribution upto Rs. 15000. Contribution on salary above than Rs: 15000/- is voluntary .
Apart from this, para 26 (6) is sub part of chapter IV of "The Employees’ Provident Funds Scheme, 1952", which talk about the membership of the Fund. I am sharing the scheme for your reference as well. You may cross check detail on page no. 32 & 33 for more clarity.
Rahul Sindhwani

Attached Files
File Type: pdf EPFScheme.pdf (820.2 KB, 14 views)

Now it is a regular feature by EPFO to issue notice u/s 7(a). Did your company collected requests from the employees (not to deduct PF from their salaries)?. Your PF consultant does not seem to
give right guidelines to the company
Now the only solution is to appear before APFC and explain the position. Show all the records (wages register, attendance register, Bank statement, vouchers, ledger etc) in support of your company's stand. Request him to consider the case sympathetically.
But this need not be amicably solved. PF stand is legal and it should be obeyed by the company.
The purpose of above is to get ample time and also payment(interest, damages etc) in suitable instalments and thus providing some relief to the company.

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