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Module 2- Employees Provident Funds and Miscellaneous Provisions Act, 1952

Introduction, Objectives and Ambit of the Act

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 uses the tools of
EPF and other such funds to make the contribution equitable between employer and
employees.
Social Security and EPF Act
The EPF Act is India’s most significant social security legislation. It has been enacted
so as to provide for the institution of provident funds, pension fund and deposit-linked
insurance fund for employees in factories and other establishments. The EPF Act is
administered by the Government of India through the Employees’ Provident Fund
Organisation4 (“EPFO”). An establishment in India, employing a minimum of 20
employees is required to register with the EPFO and make provident fund (“PF”)
contributions for eligible employees. Establishments employing less than 20 persons
may voluntarily register with the EPFO and upon voluntarily registration, the EPF Act
shall apply as if the registration were mandatory. Certain large organizations that have
their own mechanism to provide PF benefits to their employees can seek an exemption
from complying with the provisions of the EPF Act. Such exemptions are ordinarily
granted if the company’s internal PF mechanism is commensurate with or more
beneficial to employees than that stipulated under the EPF Act.
Two conditions for the application of Act:
• More than 20 persons employed
• Factory premises
Definitions
Section 2(aa) – Authorised Officer
Authorised officer means the Central Provident Fund Commissioner, Additional
Central Provident Fund Commissioner, Deputy Provident Fund Commissioner,
Regional Provident Fund Commissioner or such other officer as may be authorised by
the Central Government, by notification in the Official Gazette.
Section 2(b) – Basic Wages
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, but does not
include— (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

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commission or any other similar allowance payable to the employee in respect of his
employment or of work done in such employment; (iii) any presents made by the
employer.
Case Law: Regional Commissioner EPF (TN) v. Management of Southern Alloy
foundries-
The special allowance was not agreed to be treated by the employer and the employees
as part of the basic wages or dearness allowances and therefore, it cannot be included
for computation of the contribution payable by the employer under the provision of
the Employees Provident Fund and Family Pension Act, 1952.
Section 2(c) – Contribution
Contribution means a contribution payable in respect of a member under a Scheme or
the contribution payable in respect of an employee to whom the Insurance Scheme
applies.
Section 2 (d)- Controlled Industry
Controlled Industry means any industry the control of which by the Union has been
declared by a Central Act to be expedient in the public interest.
Section 2 (fff) – Exempted Establishment
Exempted establishment means an establishment in respect of which an exemption has
been granted under section 17 from the operation of all or any of the provisions of any
Scheme or the Insurance Scheme, as the case may be, whether such exemption has
been granted to the establishment as such or to any person or class of persons employed
therein.
EPF Scheme
Section 5 of Employees Provident Funds Miscellaneous Provisions Act, 1952
Employees' Provident Funds Scheme
(1) The Central Government may, by notification in the Official Gazette, frame a
scheme to be called the Employees" Provident Fund Scheme for the establishment of
provident funds under this Act for employees or for any class of employees and specify
the establishments or class of establishments to which the said Scheme shall apply and
there shall be established, as soon as may be after the framing of the Scheme, a Fund
in accordance with the provisions of this Act and the Scheme.
(1A) The Fund shall vest in, and be administered by, the Central Board constituted
under section 5A.
(1B) Subject to the provisions of this Act, a Scheme framed under sub-section 1 may
provide for all or any of the matters specified in Schedule II.

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(2) A Scheme framed under sub-section 1 may provide that any of its provisions shall
take effect either prospectively or retrospectively on such date as may be specified in
this behalf in the Scheme.
Under EPF scheme, an employee has to pay a certain contribution towards the scheme
and an equal contribution is paid by the employer. The employee gets a lump sum
amount including self and employer's contribution with interest on both, on retirement.
Section 6 of Employees Provident Funds Miscellaneous Provisions Act, 1952
Contributions and matters which may be provided for in Schemes
The contribution which shall be paid by the employer to the Fund shall be ten percent.
Of the basic wages, dearness allowance and retaining allowance, if any, for the time
being payable to each of the employees whether employed by him directly or by or
through a contractor, and the employee’s contribution shall be equal to the contribution
payable by the employer in respect of him and may, if any employee so desires, be an
amount exceeding ten percent of his basic wages, dearness allowance and retaining
allowance if any, subject to the condition that the employer shall not be under an
obligation to pay any contribution over and above his contribution payable under this
section.
Provided that in its application to any establishment or class of establishments which
the Central Government, after making such inquiry as it deems fit, may, by notification
in the Official Gazette specify, this section shall be subject to the modification that for
the words ten percent, at both the places where they occur, the words 12 percent shall
be substituted.
Provided further that where the amount of any contribution payable under this Act
involves a fraction of a rupee, the Scheme may provide for rounding off of such
fraction to the nearest rupee, half of a rupee, or quarter of a rupee.
Explanation I - For the purposes of this section dearness allowance shall be deemed to
include also the cash value of any food concession allowed to the employee.
Explanation II. - For the purposes of this section, "retaining allowance” means
allowance payable for the time being to an employee of any factory or other
establishment during any period in which the establishment is not working, for
retaining his services.
Case Law: Solanki Workshop v. Regional PF Commissioner- The Responsibility of
making payments of contribution of the employer and employee shall lie on the
employer.
Case Law: Himachal State Forest Corp. v. RPF Commissioner- The holding
company cannot be held liable for the not payment of contributions by a subsidiary
company.

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[6A. Employees’ Pension Scheme.—(1) The Central Government may, by notification in the
Official Gazette, frame a scheme to be called the Employees’ Pension Scheme for the purpose of
providing for—
(a) superannuation pension, retiring pension or permanent total disablement pension to the
employees of any establishment or class of establishments to which this Act applies; and
(b) widow or widower’s pension, children pension or orphan pension payable to the beneficiaries
of such employees.
(2) Notwithstanding anything contained in section 6, there shall be established, as soon as may be
after framing of the Pension Scheme, a Pension Fund into which there shall be paid, from time to time, in
respect of every employee who is a member of the Pension Scheme,—
(a) such sums from the employer’s contribution under section 6, not exceeding eight and
one-third per cent. of the basic wages, dearness allowance and retaining allowance, if any, of the
concerned employees, as may be specified in the Pension Scheme;
(b) such sums as are payable by the employers of exempted establishments under sub-section (6)
of section 17;
(c) the net assets of the Employees' Family Pension Fund as on the date of the establishment of
the Pension Fund;
(d) such sums as the Central Government may, after due appropriation by Parliament by law in
this behalf, specify.
(3) On the establishment of the Pension Fund, the Family Pension Scheme (hereinafter referred to as
the ceased scheme) shall cease to operate and all assets of the ceased scheme shall vest in and shall stand
transferred to, and all liabilities under the ceased scheme shall be enforceable against, the Pension Fund
and the beneficiaries under the ceased scheme shall be entitled to draw the benefits, not less than the
benefits they were entitled to under the ceased scheme, from the Pension Fund.
(4) The Pension Fund shall vest in and be administered by the Central Board in such manner as may
be specified in the Pension Scheme.
(5) Subject to the provisions of this Act, the Pension Scheme may provide for all or any of the matters
specified in Schedule III.
(6) The Pension Scheme may provide that all or any of its provisions shall take effect either
prospectively or retrospectively on such date as may be specified in that behalf in that Scheme.
(7) A Pension Scheme, framed under sub-section (1), shall be laid, as soon as may be after it is made,
before each House of Parliament, while it is in session, for a total period of thirty days which may be
comprised in one session or in two or more successive sessions, and if, before the expiry of the session
immediately following the session or the successive sessions aforesaid, both Houses agree in making any
modification in the scheme or both Houses agree that the scheme should not be made, the scheme shall
thereafter have effect only in such modified form or be of no effect, as the may be; so, however, that any
such modification or annulment shall be without prejudice to the validity of anything previously done
under that Scheme.]
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[6C. 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 for the purpose of providing life insurance benefits to the employees of any establishment or
class of establishments to which this Act applies.

1. Subs. by Act 25 of 1996, s. 5, for sections 6A and 6B (w.e.f. 16-11-1995).

2. Ins. by Act 99 of 1976, s. 21 (w.e.f. 1-8-1976).

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 (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 in relation to whom he is the employer, such amount, not being more than one per
cent. of the aggregate of the basic wages, dearness allowance and retaining allowance (if any) for the time
being payable in relation to such employee as the Central Government may, by notification in the Official
Gazette, specify.
Explanation.—For the purposes of this sub-section, the expressions “dearness allowance” and
“relating allowance” have the same meanings as in section 6.
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* * * * *
(4) (a) 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 the expenses towards the cost of any benefits provided
by or under that scheme.
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* * * * *
(5) The Insurance Fund shall vest in the Central Board and be administered by it in such manner as
may be specified in the Insurance Scheme.
(6) The Insurance Scheme may provide for all or any of the matters specified in Schedule IV.
(7) The Insurance Scheme may provide that any of its provisions shall take effect either prospectively
or retrospectively on such date as may be specified in this behalf in that Scheme.]
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[6D. Laying of schemes before Parliament.—Every scheme framed under section 5, section 6A
and section 6C shall be laid, as soon as may be after it is framed, before each House of Parliament, while
it is in session, for a total period of thirty days which may be comprised in one session or in two or more
successive sessions, and if, before the expiry of the session immediately following the session or the
successive sessions aforesaid, both Houses agree in making any modification in the scheme, or both
Houses agree that the scheme should not be framed, the scheme shall thereafter have effect only in such
modified form or be of no effect, as the case may be; so, however, that any such modification or
annulment shall be without prejudice to the validity of anything previously done under that scheme.]
7. Modification of scheme.—(1) The Central Government may, by notification in the Official
Gazette, add to 3[amend or vary, either prospectively or retrospectively, the Scheme, the 4[Family
Pension] Scheme or the Insurance Scheme, as the case may be].
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[(2) Every notification issued under sub-section (1) shall be laid, as soon as may be after it is issued,
before each House of Parliament, while it is in session, for a total period of thirty days, which may be
comprised in one session or in two or more successive sessions, and if, before the expiry of the session
immediately following the session or the successive sessions aforesaid, both Houses agree in making any
modification in the notification, or both Houses agree that the notification should not be issued, the
notification shall thereafter have effect only in such modified form or be of no effect, as the case may be;
so, however, that any such modification or annulment shall be without prejudice to the validity of
anything previously done under that notification.]

1. Omitted by Act 25 of 1996, s. 6 (w.e.f. 16-11-1995).

2. Ins. by Act 4 of 1986, s. 2 and Schedule (w.e.f. 15-5-1986).
3. Subs. by Act 99 of 1976, s. 22, for “amend or vary the Scheme or the Family Pension Scheme, as the case may be”
(w.e.f. 1-8-1976).
4. Subs. by Act 25 of 1996, s. 4, for “Family Pension” (w.e.f. 16-11-1995).
5. Subs. by Act 4 of 1986, s. 2 and Schedule, for sub-section (2) (w.e.f. 15-5-1986).

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