Understanding Provident Fund Contributions and Regulations in Employment

I have the following doubts to clarify. Experts, please clarify my doubts.

1. Is it mandatory that the company has to be in existence for 3 years to register for PF? I want to know if there is any fixed time period for a company to register for PF after its incorporation.

2. Suppose an employee has a basic pay of Rs. 5000 at the start and crosses the ceiling limit of Rs. 6500 in the coming year. Can the employer decide to cease the PF privilege?

Please clarify these doubts.

Thanks and regards,
Shijit.

Dear Shijit,

Please go through the blogspot SOP4HR (SOP4HR), which will explain the needed information.

Regards,
Tushara

I went through this link before posting my query. Can somebody quickly reply to these specific questions?

Shijit.

Dear Shijit,

There is no fixed time to register under PF after incorporation. The main criteria are whenever the number of employees reaches twenty, you are required to obtain a PF code. If the number later falls below twenty, contributions are still to be paid.

Regarding your second query, once an employee becomes a member of PF, they will remain a member regardless of their salary. However, you can restrict contributions to ₹6,500.

Thank you,
J S Malik

Thanks, Malik, for clearing my doubt. I have one more clarification, please. What about the employee contribution? Can employee contribution be restricted at the ceiling level? Or should the employee continue to contribute 12% even after crossing the limit of Rs. 6500?

Regards, Shijit.

Dear employee,

The employee will also contribute 6500, but he can put in an application for contribution towards VPF, i.e., Voluntary Provident Fund. In this case, he can double his contribution. It means if his basic salary is 7000 and both the employer and employee are contributing 6500, then the employee can contribute 24% of 6500, whereas the employer will contribute 12% of 6500.

Thank you,
J. S. Malik

Hello Priya,

Sorry to interrupt the conversation, but it's like the employee can increase their contribution towards the PF even if the employer is depositing 12%. For example, let's take Co A, which is depositing Rs 780 as PF. The employee can also deposit Rs 1000 towards PF, and that extra amount will be deducted from their salary as PF contribution.

So, in their salary slip, the deductions will be as follows:
- Employer Contribution: Rs 780
- Employee Contribution: Rs 1000

This is done to save more, and you also get tax benefits in this case. Many people choose to do it after making an application in that regard.

Regards,
Sourabh Deval

Hi Shiji,

Sorry for interrupting. As per my knowledge, the employer will pay only on EPS amount (8.33%) if the employee's basic salary is 6500 or above. The employer will not be eligible to pay the rest of his contribution. Even if the employee contributes his share as he wants.

Regards, Sanjeev

Dear Sanjeev,

You are correct. The employer pays 8.33% of 6500 towards EPS, but the balance is credited to the EPF account of the subscriber.

Thanks,
J.S. Malik

Hi Folks,

The point of making PF contribution of the statutory amount (maximum) of Rs 780 or more depends on the company policy. Regardless of whether it is Rs 780 or more, Rs 541 will be contributed to the Pension fund (as a ceiling limit), and the rest of the amount will be transferred to the Employee PF account.

No employee or employer will be allowed to make a PF contribution of less than 12%, and VPF can also be contributed up to the maximum statutory rate.

Just like that, you cannot invest too much amount in the VPF account. As defined by Sourabh, it is not possible for the employer to contribute Rs 780 and the employee to contribute Rs 1000.

There won't be any policy in any organization that allows for different contribution percentages for employees and employers.

Hope I am right.

Regards,

R Sudhakar
9962006113

Mr. Malik,

Can u plz clarify one more doubt for me!! I have given the PF withdrawal application to my old employer and they said they have submitted the same to PF office, it was in the 1stweek of March 09 and till now i haven’t received the amount. Could u plz tell me wht should be my next step to know the status on it? Is their any ways where i can check the status of my withdrawal form?

Please clarify.

Thanks in advance.

I have the following doubts to clarify. Experts, please clarify my doubts.

1. When any employee completes 10 years or more of service in any organization, if he resigns from his job at that time, is he entitled to withdraw the total deposited pension amount or is he liable to pay a monthly pension?

Please clarify these doubts.

Thanks and regards,
Samir 😕

Dear Shijit,

No, there is no provision of 3 years for EPF coverage. In fact, presently, if a company is established with a single employee, EPF coverage will be mandatory.

Secondly, when an employee becomes a member of EPF, they will remain a member until they resign from the organization. Increment in salary doesn't affect the same, and minimum contribution will be mandatory.

Thanks & Regards,

Sumit Kumar Saxena

9899669071, 0120-4131277

Dear Samir,

When an employee completes 10 years of service in any organization, they become eligible to receive a pension under the Employee Family Pension Scheme 1995 or 1997. Upon leaving the job, the employee can withdraw only their share (12%) and the employer's share (3.67%). The pension will be paid to them after reaching the age of superannuation at 58 years or under a Voluntary Retirement Scheme (VRS) at ages 50 or 55.

I hope this clarifies your doubts.

Thanks and regards.

Hello Sudhakar,

I am no expert or a senior, but as far as my knowledge goes, an employee can increase his contribution towards PF. As you say, the employer deposits 8.33% in EPS and the rest in EPF, which is correct. The maximum for EPS will not be more than Rs 541, as you have correctly mentioned. An employee can increase his contribution by opting for VPF.

"No employee or employer will be allowed to make a PF contribution of less than 12%, and VPF can also be contributed up to the maximum of the statutory rate."

So, an employee can increase his contribution to double his initial contribution. Let's take an example of Rs 780; he can contribute his share of Rs 780 + VPF of Rs 780 as well, totaling Rs 1560. This is the maximum limit, so he can also contribute Rs 1000 after making the application in that regard.

This is my understanding. Please, seniors, let me know if I am wrong... :(

Regards,
Sourabh Deval

Dear Sir/Madam,

Kindly do the needful to check my PF account balance in the below-mentioned account.

Account No. - DL-22456/97

Kindly take the necessary action and revert back.

Thanks & Regards,

Naveen Jindal

Hi, this is Rashmi Ranjan Mohanty. I was working in SATURN TELECOM PVT LTD from September 1996 to 2002. My PF account number is 166, and the company code is DL/13890 in New Delhi. They deducted PF from January 1997, but I don't know whether it was deposited or not. Please help me. I want to withdraw that money as I am no longer with that company.
Thank you.
With regards,
Rashmi Mohanty.

Dear Shijit,

Every employer needs to get registered once the employee strength surpasses 20. The concept of three years will be applicable only when the employer wants to maintain and manage PF contributions by forming its own PF committee and trust. The PF office provides such a facility to the organization under Sec(17), provided the company does not have any negative record (towards the payment of contributions) in the immediate previous three years and the company has an employee strength of more than 100. The company still needs to maintain all the records as required and submit the returns, but the fund control will be with the company, provided the benefits offered by the company are better than the statutory benefits. In this scenario, the company can get registered for separate maintenance of PF accounts. The concept of three years is only applicable in the PF act.

Hope this clears up any doubts.

Regards,
R. Sudhakar
9962006113

Hello Sourab,

You are right, but the deduction will be shown as PF contributions and VPF contributions, and not under the same head as PF contributions. VPF contributions do not attract any statutory interest; it is only your way of saving and is useful only for the purpose of tax exemption and saving.

Regards,
R Sudhakar
9962006113