Confused About PF Contribution Due Dates? Seeking Clarity on Payment Timelines and Penalties

Dear All,

Conclusion Regarding Issue of 'Due Date':

The due date for payment of Provident Fund contributions is 15 days from the end of the month in which wages are paid (plus a grace period of 5 days). Thus, if wages pertaining to April 2012 are paid on, say, 7th May 2012, the due date for payment of the Provident Fund contribution is 20th June 2012 [i.e., 15th June 2012 as increased by a grace period of 5 days].

It is very clear that the PF officials have not accepted the above-mentioned procedure, which is further substantiated by the following point:

• In the online system, there are two columns named wage month and contribution month. If we select the wage month as November, it would automatically show the contribution month as December. Hence, the system would calculate the interest for the respective period by default.

• In our case, the company pays the salary on the 5th of every month (wages pertaining to April 2012 are paid on, say, 5th May 2012), and subsequently, we pay the PF contribution on the 15th of the same month (May 15, 2012). In this cycle, if the amount realized date has crossed the 20th of that particular month (realized date after May 20, 2012), then the PF office sends a show-cause notice to pay the interest for the non-contribution period, for the days after the 15th with damages. Moreover, the interest and the damages are calculated up to the date of the show-cause notice (for example, it could be 1 year, 2 years, etc.).

Looking forward to your expert opinion in this regard.

Regards,
Shanmuganand
Asst Mgr-HR & Admin

I have not come across such a calculation of interest by default through an online system, nor have I seen Show Cause Notices issued by the PF department. I do not intend to say that it is untrue.

You mentioned that the conclusion regarding the issue of "due date" is not pertaining to the EPF & MP Act 1952 but rather to the Deductibility of Provident Fund Contributions under the Income Tax Act, in my view.

If the PF department is taking a stand as you mentioned, then, in my view, it is incorrect.

To determine the "Due Date" for payment of Provident Fund contributions under the EPF & MP Act 1952, clause (1) of Paragraph 38 of the Employees' Provident Fund Scheme, 1952 is relevant. It reads as follows:

(1) The employer shall, before paying the member his wages in respect of any period or part of the period for which contributions are payable, deduct the employee's contribution from his wages. This, together with his own contribution as well as an administrative charge of such percentage of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee and in respect of which provident fund contributions are payable as the Central Government may fix, shall be paid within fifteen days of the close of every month to the Fund by separate bank drafts or cheques on account of contribution and administrative charge.

I hope there should not be any confusion regarding the "Due Date" for payment of Provident Fund contributions under the EPF & MP Act 1952.

As Regards to Employer's Contribution:

Under Section 36(1)(iv) read with Section 43B, the employer's contribution to the Provident Fund is deductible subject to prescribed limits if the same is paid on or before the "due date" by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act or rule or otherwise. Where such payment has been made otherwise than in cash, the sum has been realized within fifteen days from the "due date."

As Regards to Employees' Contribution:

i) Any sum received by the assessee from its employees as contributions to the Provident Fund is treated as income under Section 2(24)(x).

ii) The deduction for payment of employees' contribution can be claimed by virtue of Section 36(1)(va), according to which it is deductible if such sum is credited by the assessee to the employee's account in the relevant fund under any Act or rule or otherwise on or before the "due date."

Thus, it is clear that both employer's and employees' contributions are deductible if paid by the assessee on or before the "due date" under the relevant Act or rule, i.e., EPF & MP Act 1952.

There is an ambiguity regarding the interpretation of the words "fifteen days from the close of the month" appearing in Paragraph 38 of the Employees' Provident Fund Scheme. It is unclear whether it should be reckoned from the month in which such contributions are received by the assessee from its employees or from the month in respect of which such contributions are received by the assessee, in cases where wages are paid in subsequent months. This ambiguity should be resolved in favor of the assessee, i.e., fifteen days are to be reckoned from the close of the month in which employees' contributions are recovered, i.e., the month of payment of wages.

But this all pertains to the Deductibility of Provident Fund Contributions under the Income Tax Act and not to provisions under the EPF & MP Act 1952.

Experts are requested to make comments on this.

Provident Fund Contribution Grace Period

Please find attached an old circular dated 28th April 1964 issued by the PF Commissioner regarding a grace period of five days for the payment of PF contributions. I believe this information may be useful for all the members.

Regards,
N. Nataraajhan
Sakthi Management Services

Thank you very much for sharing this old and very important circular. I was in search of this circular for quite a long time. There is one more circular from 1976 amending this one. If you or any other member of this forum finds and shares it, I will be highly obliged. To my knowledge, many HR professionals are not aware of these two circulars.

I could not open the attachment on my iPhone. I will make my comments after reading it.

Thanks once again.

Regards.

I am attaching some important files that will be helpful to you regarding sections 14B and 7Q of the EPF Act.

Regards,
Arihant

Thank you very much for sharing the information in this forum. Your attachment "PF UPDATE May 2011" is very informative. I request all the members to read it.

Full Bench Judgement of Delhi High Court

As regards interest and damages, I am sharing herewith a Full Bench Judgement of the Delhi High Court dated 12/09/2012, titled "Quashing Interest Charged Under Sec.7Q by EPF Authority," which is very important for us to know.

Regards.

It is an interesting discussion. The P.F. & M.P. Act 1952 is a self-contained code. If any dispute arises regarding the implementation or interpretation of any provision of the P.F. Act, it needs to be resolved within the framework of the provisions of the P.F. Act only. For this purpose, the P.F. Act has itself created a machinery under Sections 7A, 7B, 7C, and 7D of the P.F. Act. I, therefore, do not concern myself with the provisions of the Income Tax Act to decide what the due date is under the P.F. Act.

The P.F. Act does refer to the due date when it mandates under Para 38 of the P.F. Scheme 1952 that the employer's and the employee's contributions shall be remitted within 15 days of the close of every month. Now, the question is whether 'every month' refers to the month to which the wages pertain or to the month in which the wages shall be deducted.

The commencing words of Para 38 of the P.F. Scheme 1952, which read as "the employer shall, before paying the member his wages in respect of 'any period or part period'...," will abundantly clarify that though the wages are paid in May and contributions are deducted in May, the wages pertain to the period of April. The words "close of every month" thus refer to the close of the month to which the wages pertain but not to the month in which the wages are paid and contributions are deducted. Therefore, the due date for the payment of wages of April will expire within 15 days + 5 days grace period, and the P.F. Department is right in demanding interest for the delay in the payment of contributions.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

I just want to make it clearer by stating that the contribution in respect of wages for April shall be paid within 15 days of the close of April, but not within 15 days of the close of May in which the wages are paid and the contribution is deducted.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

Dear All,

It is a very interesting discussion. Each member has contributed something but not in full. I would like to summarize as follows:

- Wages for any completed month are paid normally in the following month (e.g., April salary in the first week of May).
- The due date is 15 days from the end of the month to which the salary pertains (15th of May without a 5-day grace period).
- The grace period is to be sparingly used and it cannot be a regular practice.
- Prior to 1.09.1997, damages levied were inclusive of the interest portion, but after 26.09.2008, damages are levied at 5% (for delays up to 59 days), 10% (for delays up to 199 days), 15% (for delays up to 179 days), and 25% (for delays of 180 days and above).
- Damages are not automatic, and courts can always be approached for relief if damages are not justified in certain circumstances as equitable relief.

Regards,
G S Rao

As far as my limited knowledge goes, the last date for the realization of EPF/EPS accumulation is the 15th of every month instead of the 20th or 25th. However, for consultants who are in the business of not accepting this fact, their decision to pay on the 20th or 25th should also be considered a welcome move.

Thanks and regards,

Sumit Kumar Saxena

Help Needed with EPF Damages Notice

Will somebody help me? I have received a damages notice from the EPF office for late payments. Due to the company being under loss, we have delayed payments, but the damages are huge. I would like to know if we have to pay a penalty and interest for the employer's share as well. I understand that we have to pay for the employee share deducted from the salary and kept, but do we also have to pay for the employer's share?

Please give me your input. Has anybody paid damages like this?

Suppose I have paid April month's wages on 10th May and the PF Challan for April month is deposited on 15th May in SBI through another bank's cheque. The same will be realized on 21st May. How many days are delayed, including the grace period?

Thank you.

If a company is going through a loss and has not contributed to the PF amount, both the employee and employer's contributions. Now, the company wants to settle the account. What will be the process involved in doing so?