changes in pf after supreme court judgement

1. Recent changes in Provident Fund
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GOVARDHAN REDDY
RAMAKRISHNA

2. PwC
Agenda
1
2
About PF
PF before SC judgement
PF after SC judgement

3. WHAT IS PROVIDENT FUND..??
Employee Provident Fund (EPF) is one of the main platforms of savings in
India for nearly all people working in Government, Public or Private sector
Organizations. It is implemented by the Employees Provident Fund
Organization(EPFO) of India.
It is a mandatory, tax-qualified, defined, contribution retrial benefit plan
wherein equal contribution at the specified rate is made by the employer and
the employee and the same is payable in lump sum on retirement.

4. PwC
The Employees' Provident Funds & Miscellaneous Provisions Act, 1952 has
been enacted with the main objective of protecting the interest of the
employees after their retirement and their dependents after death of the
employee. The Act provides insurance to workers and their dependents against
risks of old age, retirement, discharge, retrenchment or death
Purpose & Object

5. PwC
• The Employees' Provident Funds &
Miscellaneous Provisions Act, 1952 extends to
whole of India except the state of Jammu &
Kashmir.
• It applies on every establishment employing 20
or more persons & engaged in industry specified in
Schedule I of the Act or any other activity notified
by the Central Government.
• It applies to all departments / branches of an
establishment wherever situated.
• Any establishment employing even less than 20
persons can be covered voluntarily under section
1(4) of the Act.
Slide 5
EPF Applicability

6. PwC
• Employees drawing salary / wages at the time of joining up-to Rs. 15000/-
per month are governed by the provisions of the Act;
• Employees drawing salary / wages more than Rs. 15000/- per month may
also be brought under the purview of the Act at the discretion of the
management and by furnishing a joint undertaking to the Provident Fund
Commissioner;
• Employees engaged through the Contractor in or in connection with the
work of an establishment are also covered under the purview of the Act
Slide 6
EPF Eligibility

7. PwC
Provident
Fund
Employer
contribution
Employees
pension
scheme
EPF
Employee
contribution
12% of
(basic + DA)
8.33% of
(Basic+DA)
or 15000.
Max:1250p.m
12% of (Basic +DA)
- 8.33% of (basic
+DA) or 15000

8. PwC
Rate of EPF Contribution

9. PwC
Scope Contribution Withdrawal
Slide 9
• Employees Provident Funds Scheme, 1952
• Employees Deposit-linked insurance scheme, 1976(EDLI)
• Employees Pension Scheme,1995 (EPS)
( Earlier employees Family pension scheme, 1971)

10. PwC
Scope
●Employer’s contribution was 12% of salary
●Employee’s contribution was 12% of salary
●Allocation to pension fund from employer’s contribution –
8.33% of salary (ceiling of INR 15,000 per month was
applicable)
Contribution Withdrawal
Slide 10

11. PwC
Scope Contribution Withdrawal
Slide 11
Employees’ Provident Fund can be withdrawn in below
three cases:
• At the time of retirement (On or after 58 years of age)
• If unemployed for two months of time
• Death before the specified retirement age

12. PwC Slide 12

13. Key changes & challenges

14. PwC
Digital media • Future is now
2011
2013
2013
2013
Slide 14
Transfer Case (C)
No.19 of 2019
(arising out of T.P.
(C) No. 1273 of
2013)
2019
Civil Appeal No.
6221 of 2011:
Civil Appeal Nos.
3965-66 of 2013
Civil Appeal
Nos. 3969-70
of 2013:
Civil Appeal Nos.
3967-68 of 2013:
Implication of Supreme Court Verdict on PF

15. PwC Slide 15
Case Citation – Regional Provident Fund Vs Vivekananda Vidyamandir And
Others (Supreme Court of India), Appeal Number : Civil Appeal No(s). 6221 of
2011, Date of Judgement/Order : 28/02/2019
Rule of Universality :
If a particular allowance is universally paid by various employers or is paid to all
the employees of an establishment without any reference to the quantum of
efforts put in by such employee or the quantum of the output, the same takes the
form of salary/dearness allowance and needs to be included for the purpose of
determining the quantum of PF deduction. So overtime allowance, bonus,
commission or any other similar allowance payable to the employee in respect of
his employment or of work done in such employment shall stand excluded.
Likewise any variable earning which may vary between individual according to
their efficiency and diligence will stand excluded from the term “basic wages”.
Supreme Court Decision

16. PwC
Judgement
Impact
Impact
Slide 16
• Whatever is payable by all concerns or earned by all permanent employees had
to be included in basic wage for the purpose of deduction under section 6 of the
Act.
• In order that the amount goes beyond the basic wages, it has to be shown that
the workman concerned had become eligible to get this extra amount beyond
the normal work he was otherwise required to put in
• “Allowances in question were essentially a part of the basic wage camouflaged
as part of an allowance so as to avoid deduction and contribution accordingly to
the PF account of the employees”
• The order will be applicable to those with a basic salary and allowances upto
Rs. 15000 as PF contribution. Beyond that , PF is not mandatory”
Supreme court held that
Definition

17. PwC
Judgement
t
impact
Slide 17
Definition
As per the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952,
“basic wages” means all emoluments which are earned by an employee while on
duty or on leave or on holidays with wages in either case in accordance with the
terms of the contract of employment and which are paid or payable in cash to
him. However, the Act excludes these two important emoluments following from
the definition of Basic Wages or Salary:
(i) the cash value of any food concession;
(ii) 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 any other similar allowance
payable to the employee in respect of his employment or of work done in such
employment

18. PwC
Judgement
●As per the Supreme Court judgment, segregation of ‘special allowance’ from
basic wages cannot be done for the purpose of deduction of Provident Fund.
This judgment will have great impact on the companies as well as on the salary
class people.
●The impact of such a decision could be two-fold. One, the contribution towards
EPF will be on a higher amount and hence less take-home pay for the
employee. And, secondly, the retirement kitty will see more inflows as higher
monthly PF contribution will move into the employee’s PF account
Impact
impact
Slide 18
Definition

19. PwC