THE EMPLOYEE’S PROVIDENT FUNDS AND MISCELLANEOUS PROVISIONS ACT’1952 :- The purpose of this act is to give social security to the workers. The employees get retirement old age benefits and family pension etc. with the help of this act. It increases the habit of savings among the employees. A particular percentage of amount is deducted from the salary of the employees and the employer also is supposed to deposit the same amount in the account of employees.

Benefit of the Employees Provident Fund Account: Following are the benefits for the employees who are covered under this scheme:-

  1. Good amount of saving is done for the future of employee and his family for his old age or to meet some social commitments.
  2. Family pension is given after the death of the employee.
  3. Employer also deposits the amount in the PF account of the employee equal to the contribution made by employee subject to certain conditions.
  4. The interest rate on balance on provident fund account is quite attractive.
  5. No income tax is paid on interest earned on Provident Fund account.
  6. Deduction from income is allowed is allowed for the amount deposited by the employee up to Rs.1,50,000/= for financial year 2016-171. However, no rebate is given in employer’s contribution. For example, if your income from salary is Rs.5,00,000/= during financial year 2016-17 and you deposit Rs.1,60,000/= as Provident Fund as your contribution then you can claim deduction from your income up to Rs.1,50,000/= . It means in above case, your taxable income shall be Rs.3,50,000/= only.
  7. No income tax is paid on withdrawal of money from provident fund account
  8. Loan facilities are also available against your Provident Fund account.
  9. Provident Fund account can not be attached against any dues etc.

APPLICABILITY OF EMPLOYEES PROVIDENT FUND ACT

This act is applicable in following cases:-

  1. Any establishment where 20 or more employees are working.
  2. Central Government has the right to apply this act to any establishment even employing less than 20 employees.
  3. The basic salary plus Dearness Allowance of the employee should not exceed Rs.6500/= per month. If it exceeds Rs.6500/= it is the option of the employee. He can contribute in to Provident Fund account but in that case employer is not supposed to his contribution.
  4. With effect from 01.09.2014, the ceiling limit of basic salary + dearness allowance is increased from Rs.6500/= to Rs. 15000/=.

It is really a wonderful decision of Government of India which can cover lakhs of employees who were not taking the benefit of this scheme prior to 01.09.14.

RATE OF CONTRIBUTION TO EMPLOYEE’S PROVIDENT FUND ACCOUNT

Employees’ Contributions:- 12% of basic salary plus dearness allowance

Employer’s Contribution:– 12% of basic salary plus dearness allowance

Note: If employee wants to deposit more than 12%, he/she can deposit but employer will deposit only 12% of basic salary.

RELATED TERMS:

  • Learn Accounting, Free Accounting Tips
  • General Accounting Terms
  • General Tips Relating to Indian Income Tax Act
  • Free Tally Learning
  • General Tips Relating to Sales Tax-VAT
  • General