17 interesting Facts about PF (Provident Fund) act in India!!

In this post, I tried to answer some of the most frequently asked question regarding PF (Provident Fund) act. Hope this post will help you to get some of your concern regarding said Act. I would suggest that you should go through my post Fundamentals of PF act in India to get a fair idea about PF act first. I would appreciate if you share other queries in your mind through comment section so that I can add them in my upcoming post which will be continuation of this post.

FAQ 1 : Do employee joining a new company should be made member of PF, if he exceeds PF prescribed limit i.e. Rs 15,000/-?

This is most frequently asked question regarding PF. It actually depends upon some facts. 

Below are some cases and action which should be taken:

Case 1: Employee was not the member of PF in previous company—In this case you can exclude him from PF eligibility, provided his Basic +DA is more than prescribed limit of Rs 15,000/- in your organization. In case employee still wants to be member of PF and both employee and employer agree then employee can also be made member of PF.

Case 2: Employee was member of PF in earlier company—In this case, you cannot exclude him from PF.

Case 3: Employee is fresher: In this case as there is not previous employer hence he was not member of PF ever, he can be excluded from PF.

Please note:

• You need to get Form 11 signed from employee, in which employee will give declaration about his membership in PF in previous company.
• Also company should have a policy in place to support above mentioned actions.

FAQ 2: Do we need to continue PF membership of employee whose wages become more than 15,000/- after increment?

An employee who is member of PF as his wage (Basic+DA) is less than or equal to 15,000 get increment and now his revised wage is more than 15,000, in that case, employee cannot be excluded from PF as he is already a member of PF. Hence he will continue to be member of PF.His PF contribution can be limited to 15,000 provided company policy allows that.

FAQ 3: Can an employer reduce wages of an employee, in relation to PF contribution?

As per PF Section 12, an employer cannot do so. But in case, employer is currently deducting PF on higher than prescribe limit of Rs 15,000/- and depositing the same to RPFC, in that case, employer can reduce and limit it to Rs 15,000/-.

FAQ 4: In my company, numbers of employees are less than 20. Can we also take volunteer PF Code and start contribution?

Yes. A company can apply for PF code even if the numbers of employees are less than 20. On reaching 20 or more, it is compulsory to take PF Code.

FAQ 5: There is some ambiguity whether to deduct PF on some of the salary components like arrear, Notice Pay, Leave Encashment etc or not?

We all are aware that PF should be deducted on Basic and DA. But we always have some ambiguity in terms of some components. Here are some clarifications:

PF deduction on wage arrears : Yes, PF should be deducted on arrear paid against component which fall under definition of wages.

PF deduction on Notice pay: No

PF deduction on leave encashment : No

PF deduction on pay for maternity benefit:  Yes

Suspension Allowance : No

Special Allowance : there is an ambiguity in this case. Hence I would advise not to keep this as part of your salary structure.

FAQ 6: Principal employer is liable to pay Provident fund of contractual employee?

Yes, Principal employer is liable to pay Provident Fund in case contractor defaults in doing so, hence principal employer should ensure that contractor should have a PF code and contribute towards PF of his employee working for principal employer. In case of non availability of PF code in name of contractor, principal employer can make contribution in its PF code.

FAQ 7:  Do Part time, Employee engaged through contractor, Trainee and Apprentice comes under PF act?

Part time employee : Yes

Employee engaged through contractor : Yes

Trainee : Yes

Apprentice under Apprentice Act : No

FAQ 8: Do education institutions comes under PF Act?

Yes

FAQ 9: Can I withdraw my previous company PF after joining some other company?

No, you can not. Although every next person changing the job withdraw PF of previous company but it is not allowed as per act. 

A person can only withdraw PF, when the person is without job at the time of applying for PF withdraw and 2 months have passed. In fact, it is clearly mentioned in PF Withdraw form i.e. Form 19 also. Currently, PF Office doesn’t have mechanism to track people changing job and withdrawing PF but in future with e commerce in place, it won’t be possible for people withdrawing PF while changing the job. As per law, you are supposed to transfer your existing PF in your new company using Form 13.

FAQ 10: Can I withdraw money from PF in between? If yes, for which cases?

Yes, you can withdraw partial money from PF in following cases .

1. Marriage or education of self, children or siblings 

• You should have completed a minimum of seven years of service. 
• The maximum amount you can draw is 50% of your contribution
• You can avail of it three times in your working life.
• You will have to submit the wedding invite or a certified copy of the fee payable. 

2. Medical treatment for Self or family (spouse, children, dependent parents) 

• For major surgical operations or for TB, leprosy, paralysis, cancer, mental or heart ailments
• The maximum amount you can draw is 6 times your salary
• You must show proof of hospitalization for one month or more with leave certificate for that period from your employer. 

3. Repay a housing loan for a house in the name of self, spouse or owned jointly 

• You should have completed at least 10 years of service.
• You are eligible to withdraw an amount that is up to 36 times your wages. 

4. Alterations/repairs to an existing home for house in the name of self, spouse or jointly 

• You need a minimum service of five years (10 years for repairs) after the house was built/bought.
• You can draw up to 12 times the wages, only once. 

5. Construction or purchase of house or flat/site or plot for self or spouse or joint ownership 

• You should have completed at least five years of service.
• The maximum amount you can avail of is 36 times your wages. To buy a site or plot, the amount is 24 times your salary.
• Can be avail of it just once during the entire service.

FAQ 11:  How to file RTI to get update on PF withdrawal or transfer status or PF balance?

You can get immediate answers to your grievances though RTI. You can refer below article to get more detail.

http://www.jagoinvestor.com/2012/03/rti-for-epf-withdrawal-or-transfer.html

FAQ 12: What is VPF (Volunteer PF)?

You can contribute more than 12% of your Basic+DA in PF and get same interest on additional contribution. This is called VPF. Please note, employer need not to contribute the same amount in this case.

FAQ 13: What is EDLI (Employee Deposit linked Insurance)?

Very few people know that PF gives Life Insurance which is called EDLI. Contribution to EDLI is made by employer and employee does not contribute anything in EDLI. Employer need to contribute 0.5% of employee wage capped at 15,000/- per month to EDLI. Employee gets Life insurance coverage under EDLI.

Currently PF has increased maximum payout which is Rs 1.3 Lakhs in case of death. Click here to download the notification.

FAQ 14: Can Employer take insurance policy from insurance company to substitute EDLI?

Yes, Employer can take insurance policy to substitute EDLI.

Employer need to ensure that the benefits from insurance policy are much better than what employee can get from EDLI through PF. Eg. Sum insured in case of death should be more than 1.3 Lakhs. Employees of the company should be aware about it and should have no objection in this. You can approach any insurance company, which provide Group Term Life insurance. 

FAQ 15: What is the interest we get on PF?

This keep changing and you need to keep an eye on such announcement from time to time. It is declared by Central Govt.

FAQ 16: Provided Fund contribution is taxable income?

No

FAQ 17: Do expats need to contribute to PF?

Yes. Please refer notification received from PF on 01st October 2008. Download the notification.

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