the employees provident funds scheme 1952



As we all know that THE EMPLOYEES PROVIDENT FUNDS SCHEME 1952 (“EPF Act”) came into effect in 1952. The law applies to all over India except the state of Jammu and Kashmir. The EPF Act established to provide financially, social security and stability in the form of retirement or old age benefits to the employees of applicable establishments. Under the Act, both employer and employee mandatorily required to contribute a certain amount on a monthly basis as provided under the Act to its employee’s retirement fund which the employees can withdraw subject to some terms and conditions.


Section 5 of the EPF Act provides for the scheme ie., Employees’ Provident Funds Scheme, 1952 (“EPF Scheme”). The legislation is applicable to below-mentioned entities:


  • To every establishment which is a factory involved in any industry specified in Schedule I and in which 20 or more person is employed;
  • Applicable to cinema theaters with over 5 employees;
  • Any establishment which does not meet the above criteria can also obtain registered through voluntarily mode with the EPFO under Section 1(4).

It is to be noted that once an establishment is registered under the EPF Act, all the provisions of the EPF Act shall continue to be applicable even if the employee count falls below 20 persons.


Section 2(f) of the EPF Act provides for the definition of employee to be covered under the ambit of the Act. It provides that

“Employee” means any person working to obtain wages in any type of work, manually or otherwise, in or in connection with the work of an enterprise and who gets his wages, directly or indirectly from the employer, and includes any person who works before or through a contractor in or in Participating, working with the institution. He works as an apprentice, not an apprentice engaged under the apprentice law, 1961 (52) from 1961) or under permanent orders from the residence. Here is a diagram to understand clearly to whom the Act is applicable;



Provident Fund 12% 3.67%
Employee Pension Scheme 8.33%
Total 12% 12%



The terms Wages is paramount term as all the calculations of PF depends upon it. Most of the industries face challenges in determining the wages of an employee for calculation of PF to be deposited in the fund. Section 2(b) of the Act defines the terms “Wages” as:

“Basic wages” means all the rewards that any employee earns during service, vacation, or vacation leave with pay in either case according to the conditions of work that are paid or paid in cash to him, but they do not include:

The monetary value of any food concession;

I.e. a high allowance (i.e. cash payments, whatever his name paid to the employee due to the high cost of living), a home rent allowance, overtime allowance, bonus, commission or any other similar allowance paid to the employee in respect of his job or the work he does in that work;

Any gifts presented by the business owner

Article 2 (b) read with Article 6 of the Provident Fund Act states that contributions must be paid as follows:


(A) Basic wages;

(B) The cost allowance (including the monetary value of any food concession);

(C) Keep the allowance.


Consequently, one can say that it is welfare legislation that provides old-age benefits to the applicable employee as discussed above. Both employer and employee required to contribute 12% to the fund. The employee shall deduct 12% from the wage payable to the employee and deposit to fund on the employee’s behalf. An employee can withdraw the fund subject to certain conditions.

ITR: How To File Form ITR


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