Concept of Wages Employees Provident Funds and Miscellaneous Provisions Act, 1952


Provident fund is the lump sum of money attributed to salaried employees at their time of exit from their respective post or office. This is administered by the Employees Provident Fund Organization (EPFO) which is backed up by the government. EPFO was constructed under the ministry of labor and employment. It was established in order to administer and regulate mandatory contribution towards the provident fund by the employers and the employees[1]. This act was passed by both houses of the parliament on 4th March 1952.

Background and definition

In this scheme of employees’ provident fund, an employee pays an already decided amount towards the scheme and the same amount is paid by the employer. The total amount is gained by the employee after the end of his job with interest in both- his own money and the employer’s money. This is only mandatory for the employees who earn less than Rs. 15000 per month under the EPF. Those who earn more than this can be eligible under this scheme by getting the assent from assistant provident funds commissioner.

The employees are mandated to provide 12% of their salary plus retaining allowance and dearness allowance and the employer has to contribute the same amount. In case that the company does not have required 20 employees in their companies then the contribution rate is fixed to 10% for both the employer and the employee. Companies that have more than 20 employees are eligible to opt for provident fund registration in due course of protecting the employees while those companies with more than 20 members have to mandatory opt for employees provident fund scheme. Even if the strength drops below 20 after registration, the company will be covered under the same. There exists another such Fund as a voluntary provident fund where the employee can pay a higher rate (12% of basic pay) meanwhile the employer doesn’t have to contribute the same.

There are three important components of the EPF Act

  1. EPF 1952 – in accordance with promoting retirement savings
  2. Employee Pension Scheme, 1995 – This scheme’s aim is to provide post-retirement funds
  3. Employee deposit linked insurance scheme (EDLI) – Provides for life insurance
  4. money to family members at the time of sudden death


  1. Giving the old and retired workers a sense of social security in monetary relevance. For example, invalidation pension, superannuation pension, family pension, and others.
  2. Payment on completion of jobs such as retirement, closure, at the age of superannuation, etc. due to the factors that render the employee incapable to work.[2]


There is always room for improvement and there were multiple amendments which occurred after the implementation of EPF and MF Act, 1952. The ministry of labor and employment brought this amendment under three schemes of EPF Act, 1952.

Under the employee’s provident fund scheme, the definition of excluded employees was revised and the members earning more than 15,000 rupees were excluded from the scheme. In addition to this, the wage limit was raised from 6,500 rupees to 15,000 rupees.

In case of death of an employee before 1st September, the assurance benefit under the scheme was raised to 20% in addition to the benefit already received.

The maximum pensionable salary was increased from 6,500 rupees to 15,000 rupees in order to determine monthly pension.

There was the establishment of the minimum salary which was supposed to be not less than 1,000 rupees per month. This was in accordance with any existing or future member joining the establishment.[3]

There were multiple amendments in relevance to EPF Act, 1952 under withdrawal rules where it was mentioned that:

  1. Complete withdrawal of funds before attaining retirement is prohibited.
  2. The individual has to continue to be under EPF membership.
  3. There was an increment in age limit to withdraw 90% of the funds
  4. Increase in retirement age

These new PF amendments were implemented from 10th February 2016.

As per the Act, accounts that lie idle for more than 36 months were considered inoperative but after the amendment, those accounts will continue to render interests. Another amendment regarding a withdrawal from the provident fund was the insertion of paragraph 68-BD which was added under the EPF Scheme, 1952. This was in relevance to purchasing dwelling houses or any kind of construction of a dwelling house and withdrawing provident funds for the same.

There was also a new scheme for provident fund defaulters’, which was initiated from 1st January 2017 by the EPFO. Under this scheme, some benefits were provided to the defaulters.

  1. No employees would share, and the employer’s share would be levied.
  2. Interest as appropriate on the employer’s part.
  3. damages will be equivalent to 1 rupee per annum

These conditions were implemented from 1st April 2009.


In 2017-2018[4], the interest rate for EPF scheme lies at 8.55%, the interest is government backed and the interest earned is Tax-Free. The benefits are certainly in a good impression, there are multiple tax benefits where the EPF account is available for exemption under Section 80C, interest even if the account is inactive for more than three years, another good thing about EPF is that the funds are not taxable after continuous work of 5 years unless the employee quits or gets terminated. Another facility under lifelong pensions, insurance benefits, where an employee who already has an EPF account is already eligible for this scheme.

There is a recommendation of maintaining continuity when it comes to EPF accounts because it should be treated the same way as one treats a bank. Hence, in order to maintain continuity and more profits, the government allows partial withdrawals proceeding 5-10 years of service. The guarantee of higher returns is made sure by the government as well by maintaining continuity and not withdrawing provident funds on a regular basis. There is an option for the employee to withdraw provident funds at the term of change of company or transfer the already earned funds to the new company. It is recommended that the employees should switch their provident funds to another company at the times of joining in order to gain profit as when the funds restart, the interest is on low earnings as compared to before[5].

[1], last accessed on 24th June’19

[2], last accessed on 24th June’19


[4], last visited on 24th June’19

[5], last visited on 24th June’19

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