Dear Sachin,
All employers to whom the Employee's Provident Fund and Miscellaneous Provisions Act, 1952 applies, have a statutory liability to contribute to Employee's Deposit Linked Insurance scheme, 1976 to provide the benefit of Life Insurance to all their employees. EDLI is an insurance benefit which is paid to the PF members who die while in service.
As per Employees’ Deposit Linked Insurance (Amendment) Scheme 2011
Method of calculation is as follows:
Higher of the below mentioned would be paid to the nominee of the deceased:
Payout to the nominee of the deceased would be higher if the average monthly wages drawn (subject to a maximum of INR 6500) during the 12 months preceding the month in which he died, multiplied by 20 times
OR
An amount, equal to the average balance in PF account of the deceased during preceding 12 months period.
If average balance is below Rs.50,000, Rs.50,000 is paid
If average balance is above Rs.50,000, in this case Rs.50,000 + 40% of the balance above Rs.50,000 subject to maximum of Rs.1,00,000 is paid
Maximum amount Payable is INR 130,000
Example:
Mr. Rao was working with ABC Ltd., died on 15th April 2011. His date of Joining was 1st April 2008 and his current basic salary was Rs 6500 per month. His average PF balance for the preceding 12 months was Rs.1,50,000.
Step-1: Calculation based on wages
12 month average pay = 6500
20 times of the same = 6500×20 = 1,30,000
Step-2: Calculation based on PF balance
Average balance in PF account = 1,50,000
Hence, 50,000 + (1,00,000×40%) = 90,000
Higher of the two i.e. Rs.1,30,000 is paid as benefit.
Regards,
Avinash K.