Facing PF Damages and Interest Charges Despite Timely Payment – What Should We Do?

Dear Folks,

Our company has received a letter from the PF office for the levy of damages under Section 14-B. We received a Code Allotment letter on 8th May 1998, stating to deposit the amount within 30 days from the date of the letter.

1) Coverage was given from Oct 1997 as we completed 20 employees during that month.

2) The amount was paid on 26/05/1998, after we received the Code allotment letter on 8th May 1998.

3) Interest demand under section 7 is Rs. 11714.

4) Damages under section 14B amount to Rs. 34565.

As we have made the payment of PF Dues from Oct 1997 within 30 days from Code allotment, are we still liable to pay interest and liquidity damages?

We have again received a notice from the PF Commissioner. Please advise URGENTLY!

Regards,
Anuradha

Dear Anuradha,

Here, I pointwise address your query:

1) Coverage was given from Oct 1997, as we completed 20 employees during that month. Here, you made an error. You have to deposit your PF contribution from Nov 1997 itself onwards, even though you have not been allotted a number.

2) The amount was paid on 26/05/1998, after we received the Code allotment letter on 8th May 1998. Please check:
I. Have you paid the entire contribution from the beginning, i.e., Oct. 2007 or not? Do you have sufficient proof to support this, i.e., PF challan duly endorsed by the bank.
II. The endorsement letter clarified that your organization was covered w.e.f. Oct 2007.

3) Interest demand under section 7: Rs. 11714
4) Damages under section 14B: Rs. 34565/-
You can ask the PF authorities to provide you with the entire calculation regarding the above interest and damages. Upon receipt of this, you will be able to check where the problem exists.

Hope this serves the purpose. In case of difficulty, you can freely ask me.

Regards,
Manish Phansalkar

Dear Anuradha,

Mr. Manish is absolutely right. You should have made payment every month by writing "applied for" against the code number. Think logically, the PF department will pay your members with interest from October 1997 onwards, whereas you deposited the same in May 1998. So, from where will they pay interest to members? Legally, you are liable to pay interest and damages both.

Regards,
J. S. Malik

Dear Manish & Mr. JS Malik,

Thanks for your reply!

Check whether:
I. Have you paid the entire contribution from the beginning i.e., Oct. 1997 or not? Do you have sufficient proof to support i.e., PF challan duly endorsed by the bank?
Yes, we have paid.

II. In the endorsement letter, it was clarified that your organization covered w.e.f. Oct 1997?
Yes, it is clearly stated.

What is the time limit for PF authorities to raise an inquiry? Do they have any? Like the IT has a time limit of 8 years. How can the PF authorities inquire about issues that are 12 years old... why haven't they raised this issue before?

Our company is ready to pay the interest of the given period, but why the damages?

Regards,
Anuradha

Dear Anuradhaji,

You are right, but please confirm if the P.F authorities have issued any notice earlier related to the above issue. A similar case happened in our company where an ex-employee received a notice to deposit some amount. However, due to unknown reasons, that employee destroyed the notice. After a long period of 7 years, we received a notice from that department stating that a certain amount is due from our company. When we inquired why this notice was issued after 7 years, the office showed us three notices that were issued by them and received by our company's employee.

(Sahil)

Dear Sahil,

No, the PF authorities had not sent any notice earlier on this matter. We have asked about that too.

Regards,
Anuradha

Dear Anuradha,

Once the Act is applicable, from Oct. 1997, your employer has to deposit the contribution from that month (i.e., Oct. 1997), despite the allotment of Code. Upon having a Code for your establishment, you are supposed to submit your Annual return for the last contribution year (1997 - 1998). There is nothing in the Act stating that an employer has to remit the contribution after the allotment of Code; rather, it should be deposited from the date of coverage of the establishment.

Regarding the determination of the escaped amount, there is no time limit under the Act to initiate an inquiry by the P.F. Authorities u/s 7A, 7B, 7C, provided that a reasonable opportunity shall be given to the employer to present the case.

In your case, you have deposited the contribution late; therefore, simple interest u/s 7Q on damages u/s 14-B, depending upon the period up to the date of the case initiated (37% in your case), shall be levied. The reason for such damages and interest is that the PF organization has already credited the interest in your employees' p.f. account from the date of coverage, i.e., Oct. 1997.

The solution now is to go to the concerned RPFC/APFC, who is your inquiry officer in the case, and request him to waive off the damages up to a reasonable extent and remit the same without making further delay. It will be in the favor of your company; otherwise, the same will be recovered from the company accounts by appointing a recovery officer who will attach the company accounts. There is no need to go to Tribunal; otherwise, 75% has to be deposited in the court before initiating the legal proceedings.

Thanks,
Mohd. Arif Khan

Dear Anuradha,

First of all, you need to understand what is 14-B?

14-B Power to recover damages - Where an employer defaults in the payment of any contribution to the Fund, the Pension Fund, or the Insurance Fund, or in the transfer of accumulations required to be transferred by him under subsection 2 of section 15 or subsection 5 of section 17, or in the payment of any charges payable under any other provision of this Act, or of any Scheme or Insurance Scheme, or under any of the conditions specified under section 17, the Central Provident Fund Commissioner or such other officer as may be authorized by the Central Government, by notification in the Official Gazette, may recover from the employer by way of penalty such damages, not exceeding the amount of arrears, as specified in the Scheme.

There are sufficient replies for your satisfaction. The first fault is that you did not deposit PF dues on time. When you apply for PF coverage, you must deposit PF contributions monthly, like A/F (applied for), and your check should clear. The second thing is the delay in payment, and you deposited interest. After depositing the challan, you should inform RPFC with the attached deposit challan. If you deposited interest, it is necessary to deposit damages. There is an attachment rate of damages; you can calculate it yourself, or ask RPFC how they calculated it. But depositing damages is necessary.

For more details, you can contact Kumar at 9811747078 or email at kumaresic@rediffmail.com.

Dear Arif,

Please let me know the following things:
1. Till what date should PF contributions be made for the month?
2. When should the Annual Return be submitted?
3. What is RPFC/APFC?

I am a graduate in Arts and have completed diplomas in HR and Labour Law. However, I am not currently in touch with these subjects as I am working in recruitment. I am finding it very difficult to secure a job in General HR as my CV is getting rejected during the initial screening process. Please let me know if you have any openings in this field.

Thank you.

Dear Anuradha,

Dr. Kumar has made a good point, and you can schedule a meeting with the PF department to re-calculate the same and submit an application to the PF officer regarding your revised summary. We have resolved many cases like this before. If you encounter any issues, please inform us of the area of your company where it is registered and provide a copy of your application/challan, etc.

Best Regards,
Sajid

Hi,

Can anybody please advise me on the following:

Our company has been depositing the employees' PF amount of 12% on the basic salary, which was above the limit beyond the basic salary of Rs 6500. For example, if somebody's basic salary was Rs 12,000, then 12% on Rs 12,000, both employers' and employees' contributions deposited with the PF authority. This practice has been followed for a very long time.

Now, some lawyers have instructed the management to restrict the contribution of both the employees and employers to be reduced to the basic salary amounting to Rs 6500. Can the management now reduce the contribution? If so, what are the remedies available for both the management and the employees?

Please advise.

Regards,
Alex

Hi,

Please reply to this letter with a photocopy of the letter under which you were given 30 days and the challan under which you have deposited the dues mentioned in the letter. I hope this matter will be settled because nowadays this process is being done through a computer. Computers cannot recognize the details of the letter; they will simply check the due date and the date of deposit.

Regarding "Applied for challans," for the last two months, SBI, SEC-2 NOIDA, is not accepting the challans with the code "applied for."

Regards,

Dabas P
Dabas Consultancy Services

Dear Anuradha,

Please take the notice seriously. Firstly, they must have mentioned the date of representation in front of the Deputy Commissioner or officer. Please meet on the scheduled date. You will have to pay the interest and damages as there is no way to reduce it. In case the firm where PF is applicable by law, immediate payment in the challan with the application form has to be made. Since you had rightly applied but made the payment late, interest has been charged. It cannot be possible that your company did not receive earlier intimation or notice from the PF office. The PF office follows steps of recovery and sends all the notices for recoveries to the employer. A similar case has happened with my company, but we had received earlier intimation which our PF consultant had not informed. We had to pay interest and damages or the PF office immediately issues a non-cognizable warrant against the employer.

So do not waste time in suggestions; make the payment and show it to the PF authorities.

Dear Alex, in your firm's case, you cannot reduce the PF deduction from 12% on 10000/-. You can freeze at that amount, and for any new employee who joins, limit it to 6500/-. It is against the law to reduce the deduction from a higher basic to a lower basic. Be careful. The reduction is possible, but it has to be appealed in the PF office, and reasons are to be given. Only in special cases is it allowed; otherwise, you cannot reduce it.

Thanks,

Amal Shere

Dear Mr. Vasudeo,

Please let me know the following things:
1. Till what date should PF contributions be made for the month?
2. When should the Annual Return be submitted?
3. What do RPFC and APFC stand for?

I am a graduate in Arts who completed a Diploma in HR and then a Diploma in Labor Law. However, I am not currently involved in these subjects as I am primarily focused on recruitment. I have been facing challenges finding a job in General HR as my CV often gets rejected during the initial screening. Please inform me if there are any openings in this field that you are aware of.

The date for the payment of P.F. contributions is the 15th day of the following month, with a grace period of 5 days in some special conditions. The Annual Return of P.F. needs to be submitted to the concerned PF office by April 30th for the last financial year. (For P.F. contribution purposes, the financial year runs from March to February.)

RPFC stands for Regional Provident Fund Commissioner, while APFC stands for Assistant Provident Fund Commissioner.

Thank you,
Mohd. Arif Khan

I want to know that if PF contribution is not submitted by the 15th, what will be given after the 15th. How many penalty charges will be paid by an employer after the 15th? Please tell me this by days accordingly.