CMA Laws and Ethics Employees Provident Fund Act 1952 Question and Answers

Employees Provident Fund and Miscellaneous Provisions Act 1952

Question 1. Objective and Scope of the Employees Provident Fund
Answer:

• An act to provide for the institution of provident funds, pension funds, and deposit-linked insurance fund
• Applies to the whole of India excluding Jammu and Kashmir.
• Administered by Govt, of India through the Employees’ Provident Fund Office.
• The objective of the act is to protect the interest of workers and provide them security in old age.
• This applies to employees receiving wages less than or equal to $ 15,000 per month.

Question 2. Applicability of Employees Provident Fund
Answer:

• Factory having 20 or more persons engaged in the industry mentioned under Schedule I
• Any other establishment to which Central Govt, notifies.

Employees Provident Fund  Excludes:

• Co-operative establishments with less than 50 persons and working without power
• Establishment of under control or under Act of CGor SG where employees are entitled to benefits of provident or pension schemes.

Employees Provident Fund  Note:

• Act to apply even if later on the number of persons is reduced to less than 20
• Act to apply even if the unit divides itself and operates as an independent unit

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Question 3. Employee for Employees Provident Fund
Answer:

A person employed for wages.

Employees Provident Fund  Includes:

• Contract employee
• Apprentice excluding apprentice engaged under Apprenticeship Act
• Part-time employee.

Question 4. Provident Fund
Answer:

• Every employee working in a factory or establishment shall be entitled and required to be a member from the date of joining onwards.
• Contribution is mandatory.
• 10% of the basic wage, dearness allowance, and retaining allowance of an employee to be paid by the employer as the Employer’s Contribution.
• The employee needs to pay an amount equal to the employer’s contribution.
• Employees may even opt to pay higher, but this casts no obligation on the employer.

Question 5. Pension Scheme
Answer:

• Pension to be provided in case of: Superannuation ; Retirement; Total Disablement; Death during service; death after superannuation; widow pension (minimum : ? 450 p.m.); children pension (minimum : ? 115 p.m.); orphan pension (minimum ; ? 170 p.m.)
• A minimum of 10 years is required for entitlement of pension under the Act.
• Superannuation refers to the attainment of the age of 58 years.

⇒ \(\text { Pension }=\frac{\text { PensionableSalary } \times(\text { PensionableService }+2)}{70}\)

• Pensionable Salary to be computed as 12 months’ average salary

Question 6. Employee Deposit Linked Insurance Scheme
Answer:

• 1 % of the basic wage, dearness allowance retaining allowance, and cash value of food concessions of an employee to be paid by the employer as Employer’s Contribution.
• The employee does not make any contribution.
• The employer is also required to pay charges at the rate of 0.01% of the employee members for meeting the administrative charges, subject to a minimum of 2 per month.

Question 7. Noteworthy Points
Answer:

• Casual/temporary/workers called on an urgent basis or for short durations are not to be regarded as employees of the EPF Act.
• Employees Provident Fund Appellate Tribunal presides over cases for determining monies due from employers.

Employees Provident Fund and Miscellaneous Provisions Act 1952 Descriptive Question And Answers

Question 1. What are the benefits of a member of an Employees Provident Fund & Misc? Provisions Act 1952 can get on retirement/death?
Answer:

Retirement benefits are:

1. Accumulated Balance in PF A/C of the employee.
2. The employee pension on reaching 50/58 years of age or leaving/ retirement capital return of pension.
3. Widow pension, children pension, nominee pension, or death of member.
4. Deposit-linked insurance to the family or the nominee.

Question 2. Explain basic wages under The Employees Provident Fund Act, of 1952. Enumerate the items which are not included in it.
Answer:

Basic Wages: As per Section 2(b) of the Employees Provident Funds and Miscellaneous Provision Act, 1952, the term “Basic Wages” means all emoluments which are earned by an employee while on duty or leave

or on holidays with v/ages in either case by the terms of the contract of employment and which are paid or payable in cash to him, but do not include:

1. the cash value of any food concessions;
2. any dearness allowance (that is to say all cash payments, by whatever name called, paid to an employee on account of a rise in the cost of living), house rent allowance, overtime allowance, bonus, commission or pay, and other similar allowance payable to the employee in respect of his employment or of work done in such employment; or
3. any presents made by the employer.

Question 3. State the Salient features of Employees Deposit Linked Insurance as outlined in Employee’s Provident Fund & Misc. Provisions Act, 1952.
Answer :

Employees Deposit-linked Insurance Scheme:

1. The Central Government may, by notification in the Official Gazette, frame a scheme to be called the Employees’ Deposit-linked Insurance Scheme to provide life insurance benefits to the employees of any establishment or class of establishments to which this Act applies.
2. There shall be established, as soon as may be after the framing of the Insurance Scheme, a Deposit linked Insurance Fund into which shall be paid by the employer from time to time in respect of every such employee about whom he is the employer, such amount, not being more than one percent of the aggregate of the basic wages, dearness allowance and retaining allowance (if any) for the time being payable about such employee as the Central Government may, by notification in the Official Gazette, specify.
   • Explanation: For this sub-section, the expressions “dearness allowance” and “retaining allowance’’ have the same meanings as in Section 6.
3. The employer shall pay into the Insurance Fund such further sums of money, not exceeding one-fourth of the contribution which he is required to make under sub-section (2), as the Central Government may, from time to time, determine to meet all the expenses in connection with the administration of the Insurance Scheme other than that expenses towards the cost of any benefits provided by or under that scheme.
4. The Insurance Fund shall vest in the Centra! Board and be administered by it in such manner as may be specified in the Insurance Scheme.
5. The Insurance Scheme may provide for all or any of the matters specified in Schedule IV.
6. The Insurance Scheme may provide that any of its provisions shall take effect either prospectively or retrospectively on such date as may be specified on this behalf in that Scheme.

Question 4. A person was declared insolvent and the Court ordered the attachment of all his properties. State whether the accumulations in the Provident Fund Account of the person is attachable.
Answer:

• According to Sec. 10 of E.P.F. & M.P. Act, 1952 the amount standing to the credit of any member in the fund or of any exempted employee in a fund shall not in any way be capable of being assigned or charged and shall not be liable to attachment
• under any decree or order of any Court respect of any debt or liability incurred by member or order of any Court in respect of any debt or liability incurred by the member or exempted employee and neither the Official Assignee nor any Receiver appointed under respective
• Acts shall be entitled to or have any claim on any such amount.
• The said treatment will also hold good in case of the death of the person and the accumulated amount is payable to his nominee.

Question 5. Is the amount standing to the credit of a member of the Provident Fund attachable in the execution of a decree or order of the Court Examine the law, on this point, laid down in the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Answer:

Protection against attachment:

• Statutory protection is provided to the amount of contribution to Provident Fund under Section 10 from attachment to any Court decree.
• Sub-section (1) of Section 10 provides that the amount standing to the credit of any member in the fund or any exempted employee in a provident fund shall not in any way, be capable of being assigned or charged and shall not be liable to attachment under any decree or order or any Court in respect of any debt or liability incurred by the member or the exempted employee and neither the official assignee appointed under the Presidency
• Towns Insolvency Act, 1909 nor any receiver appointed under the Provincial Insolvency Act, 1920 shall be entitled to or have any claim on any such amount.
• ‘The amounts standing to the credit of aforesaid categories of persons at the time of their death and payable to their nominees under the scheme or the rules, and the amount shall be free from any debt or other liability incurred by the deceased or the nominee before the death of the member or the exempted employee and shall also not be liable to attachment under any decree or order of any Court.

Question 6. Employees provident funds and Miscellaneous Provisions Act, 1952 does not apply to certain establishments. List out those establishments, (5 marks)
Answer:

The Employees Provident Fund and Miscellaneous Provisions Act, 1952 does not apply to certain establishments as specified under Section 16 of the said Act.

They are as follows:

• Any establishment registered under the Co-operative Societies Act, 1912, or under any other law for the time being in force in any potato relating to co-operative societies employing less than 50 persons and working without the aid of power or
• To any establishment belonging to or under the Control of the Central Government or a State Government and whose employees are entitled to the benefit of a Contributory Provident Fund or old age pension. Or
• Any other establishment set up under any Central Provincial or State Act and whose employees are entitled to any Contributory provident fund or old age pension.
• Any newly set up establishment (less than 3 years). Central Government having regard to the financial position of any class of establishment or other circumstances of the case may exempt that class of establishment from the operation of this Act for such period as specified in the notification Issued for this purpose.

Question 7. When can a member withdraw from his National Pension Funds account? 
Answer:

Withdrawal from the National Pension Fund Account is allowed for the following purposes-

• For the purchase of a dwelling house/flat or the construction of a dwelling house including the acquisition of a suitable site for this purpose;
• For repayment of loans in special cases;
• Withdrawal within one year before the retirement;
• Such withdrawals are not required to be repaid.

Question 8. Enumerate the Central Record Keeping Agency under the Pension Fund Regulatory and Development Act 2013.
Answer:

Section 21 of the Pension Fund Regulatory and Development Act, 2013 deals with the Central Record keeping Agency:

• The Authority shall, by granting a certificate of registration under sub-section (3) of Section 27, appoint a central record-keeping agency: Provided that the Authority may, in the public interest, appoint more than one central record-keeping agency.
• The central record-keeping agency shall be responsible for receiving instructions from subscribers through the points of presence, transmitting such instructions to pension funds, effecting switching instructions received from subscribers, and discharging such other duties and functions, as may be assigned to it under the certificate of registration^ as may be determined by regulations.
• All the assets and properties owned, leased, or developed by the central record-keeping agency, shall constitute regulated assets and upon expiry of the certificate of registration or earlier revocation thereof, the Authority shall be entitled to appropriate and take over the regulated assets, either by itself or through an administrator or a person nominated by it in this behalf:
• Provided that the central record-keeping agency shall be entitled to be compensated the fair value, to be ascertained by the Authority, of such regulated assets as may be determined by regulations:
• Provided further that where the earlier revocation of the certificate of registration is based on violation of the conditions in the certificate of registration or the provisions of this Act or regulations, unless otherwise determined by the Authority, the central record-keeping agency shall not be entitled to claim any compensation in respect of such regulated assets.

Employees Provident Fund and Miscellaneous Provisions Act 1952 Practical Question And Answers

Question 1. Mr. Malhotra aged 50 years joined the P.F. Scheme on 01.01.2003. He decided to leave the service w.e.f. 01.07.2012 provided he gets a Pension under the E.P.F. Scheme. Advise based on Rules.
Answer:

Pension is allowed when:

• an employee attains the age of 50 Years or more and
• When he has completed a total sen/ice of 10 years or more and
• when he is not receiving any other EPF Pension from any other

Employer. It is presumed he is not receiving any other EPF Pension.

• He has attained the minimum age of 50 years but he has not completed a minimum of 10 years of service.
• Hence, he will not be entitled to a pension if he leaves w.e.f. 1.7.12. He will, however, be entitled to a pension if he leaves the Employment after 1.1.2013.

Question 2. ‘A’ on retirement withdrew the entire amount of his accumulation in the Provident Fund. Later on, he was appointed for a fixed tenure. Employer disagreed to allow P.F. benefit given his retirement and withdrawal of the entire amount. Offer your views based on Rule’s position.
Answer:

When any employee withdraws all his deposited amount from his provident fund account, his account is treated as closed and no further benefit can be given to the employee on this account. Hence employer was right.

Question 3. An inspector appointed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 inspects 10 p.m. (five hours after factory timings) and seeks to take copies of the “shareholders Register”. How far under the Act is his action reasonable?
Answer:

Under Section 13(2) of the Employees Provident Funds and Miscellaneous Provision Act,1952, an inspector can inspect and make copies of, take an extract from any book, register, or other documents maintained about the establishment and where he has reason to believe that any offense under this Act has been committed by an employer seize with assistance as he may think fit, such book, register or other documents or portions thereof as he may consider relevant in respect of that offense.

• The register of shareholders is not relevant to any offense mentioned in the Act.
• He is not justified in taking copies of such a register. Moreover, he should take copies of documents during working hours.
• It is unreasonable on his part to take copies at 10.00 p.m.
• In the present case, the inspector had sought to take copies of the shareholder’s register which is irrelevant to the offense, after working hours (10.00 pm) which is not reasonable.

Question 4. Sushil retired from the services of ABC Limited, on 31st March 2014. He had a sum of? 10 lakhs in his Provident Fund Account. It became due for payment to Sushil on 30 April 2014, but the company made the payment of the said amount after one year. Sushil claimed for the payment of interest on the due amount at the rate of 15 percent per annum for one year. Decide, whether the claim of Sushil is tenable under the provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Answer:

According to Section -7Q of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, the employer shall be liable to pay simple interest of 12% per annum or at such higher rate as may be specified in the Scheme on any amount due from him under this Act from the date on which the amount has become so due till the date of its actual payment.

However, the higher rate of interest specified in the Scheme cannot exceed the lending rate of interest charged by any scheduled bank. As per the above provision, Sushil can claim for the payment of interest on the due amount of 12 percent per annum or at the rate specified in the Scheme, whichever is higher, for one year. Here in the absence of a specified rate, Sushil can claim only 12 percent per annum interest on the due amount. Hence, the claim of Sushil for an interest rate of 15% is not tenable.

Question 5. After serving 15 years, Mr. Anand died on 30.09.2015 when his last twelve months’ average monthly wages were? 5,000. Calculate the amount to Employees Linked Deposit Insurance (ELDI) which can be paid to the nominee of Anand. (3 marks)
Answer:

As per the current amendment [The Employees Deposit Linked Insurance Scheme, 1976 as amended by the Employees Deposit Linked Insurance (Amendment) Scheme, 2011], higher of the below-mentioned would be paid to the nominee of the deceased. –

Average monthly wages drawn (up? to 6,500) during the twelve months preceding the month of death, multiplied by twenty. (Maximum amount payable is ? 1,30,000)

Or

An amount equal to the average balance in the accounts of the deceased in . the fund where the average balance exceeds? 50,000, the amount payable shall be? 50,000 plus 40% of the amount over $ 50,000 (subject to a maximum benefit of $ 1,00,000). [In this case, it is assumed that the average Fund balance is $ 1,00,000]

Hence,

Option A = 5,000 x 20= 1,00,000

Option B = 50,000 + 40% of 50,000 =  70,000

Therefore, the amount to be paid to the nominee of Mr. Anand (Higher than A and B) is $ 1,00,000