PF Deductions Not Submitted: What Legal Risks Does Your Company Face?

Query Regarding PF Deductions and Legal Implications

I have a query to ask – if PF is being deducted from employees' salaries, but due to the size of the organization, PF cannot be deposited, then what legal actions can happen to the organization? What precautionary measures can be taken against it?

Please help.

Regards,
Tanushree

Please provide a brief description regarding the same. If you have submitted the PF return, you may file a revised return. If the matter is after March 2012 (PF online), you may upload the ECR of this member.

Regards,
Vikram Trivedi
PF ESI Consultant
[Phone Number Removed For Privacy Reasons]

You can deposit the deducted amount right now. However, the belated payment will attract damages and interest at 5% for up to 2 months delay, 10% for 2-4 months, 15% for 4-6 months, and 25% thereafter. You need not pay these damages right now; a letter will be issued later in this regard. Please try to deposit the arrears immediately.

Regards,
S. Sethupathy
Excellent HR Services
Erode

Good morning all, Mr. S. Sethupathy said it correctly in another way; if you deducted the PF amount and did not deposit it to the PF organization, it is a legal offense. As per the law, you are the collection agent who collects (deducts) money from the wages and deposits it into the respective PF accounts. However, in your case, you did not do that; you kept the money with you. This means, in one way, you stole money in between. Legally, it's an offense.

Legal Implications of Not Depositing PF

You used the word "size," which raised a doubt: Your company may not fall under the PF act according to the size (number of employees). If that is the case, legally, you can't deduct under the name of PF. However, in this case, you did it, which means you stole the money.

Steps to Rectify the Situation

First, repay the deducted money, then pay the damage charges according to the PF authorities' letter.

I have a few questions to find a possible way out. Was there no clarity on what caused the failure to remit? Is your organization small in size, meaning the number of employees? Did you register your company with the RPFC? If yes, and you know that you have deducted but not paid due to reasons such as the person in charge of PF being unwell and leaving the organization without paying such dues, it is payable. Pay without waiting through a challan. During inspections, this may be pointed out by inspectors. As long as you have not intentionally evaded, you will not have any problem. Approach PF authorities; they will help in solving your issue. Otherwise, pay without any further delay. Let whatever may come afterwards, and defend or pay a penalty later.

PF Claims and Legal Consequences

Now, PF claims could be filed in Consumer Court as well. Not depositing PF will have far-reaching consequences, including imprisonment.

Thanks,
Regards,
Mritunjay Nath Sahu
GM(HR)

Understanding PF Deductions for Small Companies

The query is incomplete, and therefore providing a correct answer is not possible. Like others, I will assume that you are a company with fewer than 20 employees. In that case, you are not required to register or pay for PF. Therefore, you should not deduct PF from the concerned employees. I assume you deducted it in error or based on the assumption that you would cross the limit, which is also incorrect as you need to deduct only after crossing the limit. If you have deducted the same, refund the money to the employees as arrears.

You cannot be prosecuted for not depositing PF where it does not apply. However, you can face action under the Payment of Wages Act for illegal deductions.