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22 August 2018
The Employees' Provident Funds and Miscellaneous Provisions Act 1952 (EPF Act) applies to notified factories and trading and commercial establishments employing 20 or more persons. It excludes employees whose monthly wages exceed Rs15,000 (approximately $219) and who have either:
Three schemes are framed under the EPF Act:
Employees' Provident Funds Scheme
Under this scheme, provident funds are established to provide benefits for:
Employees and their employers must contribute to provident funds at the rate of 12% of basic wages.
Employees' Pension Scheme
Under this scheme, pension funds are established to provide for:
Of the aforementioned 12%, 8.33% is remitted to the pension fund. The central government also contributes 1.16% of employees' salaries to the pension fund.
Employees' Deposit Linked Insurance Scheme
This scheme provides life insurance benefits to employees. Under the scheme, only employers are required to contribute to the fund at the rate of 0.5% of the aggregate of basic wages, dearness allowance and retaining allowance (if any).
As per the Employees' Provident Funds Scheme, members may withdraw their provident fund accumulations on completion of service. However, partial withdrawal prior to completion of service may be permitted under certain circumstances, including in the event of:
The entire amount of provident fund accumulations may be withdrawn by a member under the following circumstances:
The 222nd meeting of the Central Board of Trustees of the Employees' Provident Fund Organisation was held on 26 June 2018.
A key decision of the board was the approval of a proposal to permit provident fund members to withdraw 75% of their accumulations after a period of one month of continuous unemployment instead of two months. The proposal would come into effect when the EPF Act and the Employees' Provident Funds Scheme are amended.
Currently, members may withdraw all of their provident fund accumulations after two months' continuous unemployment. Following such withdrawals, the member's provident fund account is closed and their social security is discontinued.
Under the proposed change, members would be able to withdraw 75% of their provident fund accumulations after one month of continuous unemployment and the remaining 25% after two months' continuous unemployment. This reduction would benefit members, who would be better positioned to meet their financial requirements.
For further information on this topic please contact Pooja Ramchandani or Suryansh Gupta at Shardul Amarchand Mangaldas & Co by telephone (+91 11 4159 0700) or email (email@example.com or firstname.lastname@example.org). The Shardul Amarchand Mangaldas & Co website can be accessed at www.amsshardul.com.
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