What is a provident fund? How does a company administer it?

Question

The kind of provident fund I know is that a company pays10% of one's basic salary plus increments and asks the employee to contribute 10% (that is the equal amount of what company pays to the employee) upon drawing of monthly salary. Than this amount is put in a bank and is awarded to the employees whenever they need it. The bank profit is also paid to the employees.

Answer 1

CONTRIBUTION OF EMPLOYERS

Rates of Contribution:

a) The Employees' Provident Fund Scheme

In respect of establishments employing 20 or more persons and engaged in industry notified under  Section 6  of Act ( other than the Establishments. declared as sick ) 12% of the basic pay DA , Cash value of food concession and retaining allowance , if any, subject to a maximum of Rs.6500/- per month. Voluntary higher contributions are also acceptable at the joint request of the member and the employer . However, the rate of contribution is 10% in respect of the following categories of establishments:

Any establishment covered prior to 22.9.97 in which less than 20 persons are employed.

Any sick industrial company as defined in Clause(0) of Sub-Section(1) of Section 3 of the sick industrial companies ( special provisions ) Act 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction.

Any Establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.

Any Establishment engaged in manufacturing of  (a) Jute , (b) Beedi , (c) Brick , (d) Coir (other than spinning sector), (e) Guar Gum Industries/Factories.

b) The Employees' Pension Scheme

From and out  of employer's share of Provident Fund contributions 8.33% of the total wages limited to Rs. 6500/- per month is segregated and credited to the Employees' Pension Fund in  A/C No. 10 ( w.e.f. 1-06-2001 ).

The Central Government also would contribute at the rate of 1.1 / 6% of total wages.



c) Employees' Deposit Linked Insurance Scheme:



No amount is recovered from employee's wages . Employer should pay 0.5% of total wages subject to a ceiling of Rs. 6500/- per month ( w.e.f. 1-06-2001 ).

This money generally goes to govt (EPFO) and when a employee needed it, he gets it by govt.

One can not withdraw it whenever he wants. Under certain circumstanses it is allowed to take part or full payment. Otherwise you got it, when you retires or resigns. There is no Bank rate of interest on it, you will get flat 8.5% progressive rate of interest on PF amount. EPS and EDLI amount depends upon your total length of service and last withdrawn salary.

Hope it clears.

Answer 2

it is not 10 % it is 12 %

They deposit the amount in bank each month and thats it, it is the duty for the PF office to administer it then.

Yearly you will get a Annual PF statement in which you will have details like Employee and Employer PF accumulated for last year and this year and total for that.

Uma

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