Revision as of 14:23, 30 October 2017

Employees' Provident Fund

EPFO to settle death claims within 7 days

EPFO to settle death claims within 7 days, Nov 02 2016 : The Times of India

Employees' Provident Fund Organisation (EPFO) issued guidelines in Nov 2019 to its field offices to settle death claims in seven days and retirement cases before a worker superannuates from the job, a move which comes days after PM Narendra Modi slammed the labour ministry for the provident fund manager's poor service.

The central provident fund commissioner informed labour minister Bandaru Dattatreya that on the PM's directions, EPFO had issued guidelines to field offices to take “proactive action to settle death claims within seven days and reti rement cases on or before the day of retirement,“ the ministry said.

Interest rates

Dec 2016: cut to 8.65%

The Times of India, Dec 20 2016

EPFO cuts interest rate to 8.65%

Employees Provident Fund, interest rates, 2010-16; Graphic courtesy: The Times of India, Dec 20 2016

The Employees Provident Fund Organisation (EPFO) recommended a minor reduction in interest rate to 8.65% for the financial year 2016-17 compared to 8.8% in 2015-16 but it still remains the best investment bet given that there is no cap on how much you set aside and the entire corpus remains tax free.

The reduction in interest rate to a four-year low is in line with the falling regime although bank fixed deposit rates have seen a sharper decline due to demonetisation of Rs 500 and Rs 1,000 notes. State Bank of India, for instance, has lowered fixed deposit rates by 15 basis points (100 basis points equal one percentage point), while on deposits of over Rs 1 crore (known as bulk deposits) rates have been slashed by up to 190 basis points. In any case, with the RBI singalling a shift towards a low rate regime, the government was forced to pare returns on small savings schemes.

Trade unions were demanding that EPFO central board headed by labour minister Bandaru Dattatreya retain the rates at least year's level, something that did not appear feasible given the retirement agency's projections. At 8.8%, EPFO would have faced a deficit of Rs 384 crore, while at 8.65% it will have a surplus of Rs 296 crore.

“The decision was arrived at after detailed consultations with all stakeholders. With consensus we have taken this decision,“ Dattatreya said in Bengaluru after the meeting.Interest income from PF investments for 2016-17 has been estimated mainly on the basis of interest income received or receivable in this financial year, including surplus of Rs 410 crore from previous year, an official said.

“In 2015, the interest rate decided was at 8.8%. At that time, along with the income of EPFO, the surplus from the previous year was Rs 1,600 crore. This year, along with the income, the surplus available is Rs 410 crore,“ Central Provident Fund Commissioner V P Joy said.

The recommendation of the EPFO board needs to be ratified by the finance ministry , which notifies the rates. Last year, the finance ministry had suggested a reduction but was forced to go with the board's decision after public uproar.

Amnesty scheme, 2017

Lubna Kably, India Inc can enrol employees under EPF amnesty scheme, Jan 3, 2017: The Times of India

Cos Have To Pay Only Rs 1 Damages For Each Year Of Default

Companies which have not enrolled their employees as members under the Employee Provident Fund (EPF) scheme will now get a chance to do so, against payment of a minimal damage fee of Re 1per year of default.

Additionally , if the employee wasn't enrolled earlier and hisher share of contribution was not deducted from salary , the employer company had to pay this sum also in addition to the past defaults of its own contribution. Now under the amnesty scheme, only the employer's contribution has to be deposited.

The objective of the amnesty is to ensure enrolment of employees and spread the benefit of the EPF scheme.Companies having 20 or more employees are required to mandatorily enrol those employees under the EPF scheme who have a salary of up to Rs 15,000 per month.The EPF scheme is optional for those drawing a higher salary . However, once an employee opts for the scheme, he or she cannot opt out.

Both the employer and employee are required to contribute 12% per month towards EPF against the employee's basic salary plus dearness allowance. However, under the amnesty , interest at the rate of 12% on the amount due for delayed deposit of the contribution will be payable for the period of delay .This amnesty scheme, which comes into force from January 1, is open until March-end.“The main purpose of the amnesty is to expand coverage of the EPF scheme,“ said a government official.

Arrears in payment of EPF dues is rampant. More than a lakh employers had not deposited PF contributions and the arrears outstanding as of March 31, 2015 was nearly Rs 3,000 crore. “More damaging is that there is an equally large number of companies (especially micro, small & medium enterprises, or MSMs), say in the garment or auto ancillary sector, who do not enrol their employees at all,“ adds the government official.

Sonu Iyer, partner and leader people advisory services at EY India, explains, “Companies that had not enrolled employees under the EPF scheme for the period beginning April 1, 2009 to December 31, 2016 can take advantage of the amnesty scheme by making a declaration to the regional employee provident fund office.“

“The employer will be required to deposit the required sum, which denotes its share of contribution, employee's share of contribution only if deducted from employee's salary but not deposited, interest and a nominal damage charge within 15 days of making the declaration.The biggest largesse under the amnesty is that the company doesn't have to make good the share of the employee's contribution,“ adds Iyer.

After depositing the sums, adetailed return has to be filed with the Regional Provident Fund Commissioner. Employers are eligible to participate in the amnesty only if proceedings under section 7A (inquiries) have not already commenced against them.

However, it is not clear whether the amnesty scheme will cover cases where employees had been enrolled in the EPF scheme but where there was a shortfall in depositing contributions.

2017: GPF rules liberalised

GPF rules relaxed for govt staffers, March 28, 2017: The Times of India

In a major relief for government employees, the Centre recently relaxed and simplified the General Provident Fund Rules, particularly related to advances and withdrawals by the subscribers.

As per relaxed norms, employees can withdraw up to 90% of their amount for housing needs and 75% for buying vehicles. The definition of education for the purpose of withdrawal of GP Fund has now been widened to include primary, secondary and higher education, covering all streams and institutions.

The withdrawal limit has also been increased from three months' pay or half the amount at credit, to up to 12 months' pay or 34th of amount at credit, whichever is less.

Also this is now admissible to a subscriber after completion of 15 years of service.

Rules

PF a/c to be transferred automatically on change of employment

Mahendra Singh, PF a|cs to be automatically transferred on job switch, August 11, 2017: The Times of India

From next month, your PF account will be transferred automatically when you change your job, chief provident fund commissioner V P Joy has said. Joy, who is pushing a slew of initiatives in the Employees' Provident Fund Organisation (EPFO) to make it more worker-friendly , said premature closure of accounts was one of their main challenges, and they were trying to address it by improving services.

“Whenever there is change of job, a lot of accounts are closed; then they (the employees) restart their account later on,“ he added.

“Now we have made Aadhaar compulsory for enrolment. We don't want accounts to be closed. The PF account is the permanent account.The worker can retain the same account for social security,“ Joy added.

“We are trying to ensure transfer of money if one changes jobs, without any application, in three days. In future, if one has an Aadhaar ID and has verified the ID, then the account will be transferred without any application if the worker goes anywhere in the country. This system will be in place very soon,“ he added.

The EPFO has also stepped up efforts to expand coverage, and initial results have been positive. “During the campaign from January to June, more than one crore workers were enrolled. Now, we are trying to retain them by improving services,“ Joy said.

Joy said PF money should be withdrawn only for major purposes like housing, education of children, or serious hospitalisation. “...Only then will people get social security. So, we are now starting a campaign...to educate people that money must be withdrawn only for essential purposes,“ Joy said.

Private EPF trusts

They cannot declare interest lower than EPFO's

Lubna Kably, Pvt EPF trusts can't declare interest lower than EPFO's, October 10, 2017: The Times of India

Companies To Be Periodically Ranked On Six Parameters

Nearly 1,500 private employee provident fund trusts set up by companies for administration of their employee provident funds (EPFs) will have to ensure that the rate of interest declared by them is at par or higher than that declared by the Employee Provident Fund Office (EPFO).

Further, there will be periodic evaluation and monthly ranking of companies which have set up such trusts to ensure better compliance.Employees will also have to be promptly intimated within two days when their EPF account is credited.

The ministry of labour noticed that a few private EPF trusts were not able to declare the rate of interest at par with EPFO. Hence, a recent circular emphasises that any deficit in interest declared by the board of trustees is to be made good by the employer to bring it up to the statutory limit.

“About 1,500 companies have been granted exemption (ie: permission) to maintain their own EPF trusts. While declaration of the minimum interest prescribed by the EPFO and meeting of any deficit by the employer company , are conditions prescribed for running a private EPF trust, some were not following it.The recent circular on interest rate and prompt communication to employees aims to ensure parity for employees covered by such private trusts,“ said an official.

Sonu Iyer, leader and partner, People Advisory Services at EY India, illustrates: “For the financial year 2016-17, the interest rate announced by the EPFO was 8.65%. Irrespective of the earnings actually made by the private trusts, they are required to provide this minimum interest rate to their employees. These trusts have also been advised, via the circular, to constitute investment committees to ensure optimal financial management of the trust's funds.“

“Stringent action, such as cancellation of the permission given to the private EPF trust, will be taken for repeated defaults, especially for delays in remittance of money collected from employees or for reduced interest rates,“ say government sources.

Companies with private EPF trusts will be evaluated periodically on six parame ters (100 points for each), such as: full and timely monthly remittances of EPF accumulations to the private trust; transfer of funds ­­ for example on exit of employees; efficacy of making investments, the rate of return and settlement of claims and audit of the private trust's accounts.

All companies having 20 or more employees have to provide a social security net via provident fund. If a company has not opted for its own private provident fund trust, the employees are covered by the fund administered by the EPFO, which currently oversees nearly 15 crore employee accounts.

EPFO communicates remittances made to an employee's account through UMANG mobile app e-passbook.

The EPFO website has already put up the ranking of 1,552 companies for July , with 50 firms getting a perfect score of 600. Notable names include Steel Authority of India, West Bengal Power Development Corporation, Gujarat State Fertilizers, Godrej Consumer Products, Nestle India, and Mother Diary .

Public Provident Fund (PPF)

10- year bond determines PPF rates

2016-17: the yield of the 10- year bond that determines PPF rates
From The Times of India, September 25, 2017

See graphic, 2016-17- the yield of the 10- year bond that determines PPF rates

Premature closure for studies, medical expenses

The Times of India, Jun 22 2016

Premature PPF closure okayed for studies, med expenses

Subscribers of the Public Provident Fund (PPF) can now close their accounts before maturity , but after it completes five years, for reasons such as higher education or expenditure towards a medical emergency . “A subscriber shall be allowed premature closure of his account, or account of a minor of whom he is the guardian, on the ground that the amount is required for treatment of serious ailments or life-threatening diseases of the account-holder, spouse or dependent children, on production of supporting documents from the competent medical authority ,“ the finance ministry said in a notification..

Similarly , the closure of account to seek funds for higher education will require the submission of documents and fee bills confirming the account-holder's admission in a recognised institution in India or abroad.

Rules and procedures for holders

PPF account to be closed if holder becomes NRI

October 30, 2017: The Times of India

HIGHLIGHTS

Government has notified that PPF accounts would be closed prior to maturity in case of holders changing their personal status to become NRIs

NRIs are not allowed in instruments like the National Savings Certificates, Public Provident Fund, Monthly Income Schemes and other time deposits offered by the post office

Amending rules on post office savings schemes like the National Savings Certificates (NSC) and Public Provident Fund (PPF), the government has notified that such accounts would be closed prior to maturity in case of holders changing their personal status to become non-resident Indians (NRIs).

The amended rules were notified in the official gazette earlier this month.

The amendment to the PPF Scheme, 1968, says: "If a resident who opened an account under this scheme, subsequently becomes a non-resident during the currency of the maturity period, the account shall be deemed to be closed with effect from the day he becomes non-resident".

The interest payable would be up to the date of the account closure, it said.

A separate notification on NSCs said in case of a similar change of status of the certificate holder before the maturity period, "the certificate will be encashed, or deemed to be encashed on the day he becomes non-resident" and interest will be paid accordingly.

NRIs are not allowed in instruments like the National Savings Certificates, Public Provident Fund, Monthly Income Schemes and other time deposits offered by the post office.

In September 2017, the government had retained the interest rate on Public Provident Fund for October-December unchanged at 7.8%, in line with the rates for small savings schemes.

Withdrawals

For housing, health

The Times of India, Apr 19 2016

PF withdrawal allowed for housing, health

The labour ministry eased the planned restriction on withdrawal of contribution to the employees' provident fund. It said withdrawal can be allowed for housing, major medical treatment for self and family members, medical, dental and engineering educa tion of children, and for their marriage.

The relaxation has also been extended to members who have joined an establishment belonging to or under the central or state government, and become a member of contributory provident fund or old age pension.

These norms will come into effect from August.

The amendments were made after labour minister Bandaru Dattatreya received representations from trade unions. A government release said the ministry had decided to pay the full accumulations to the credit of a member, including interest up to the date of payment, if he or she fulfils any of the above-mentioned conditions. In February , the ministry had said PF subscribers would not be able to withdraw their provident fund after attaining the age of 54 years, and will have to wait till they are 58 years old.