Procedure and formalities of provident fund department: rea

This query is : Resolved

TARIQUE RIZVI (Querist)
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26 January 2016 Procedure and Formalities of Provident Fund Department:
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What is the procedure in case of any of the employees leaves the job ?

What is the procedure in case of a new employee joins the company ?

How to report to Provident Fund Department ? What are forms being filled up and submitted with the provident fund department.

Arpit Shah

Arpit Shah (Expert)
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26 January 2016 Provident Fund Registration, Withdrawal & Transfer Procedure

Brief Description
Provident Fund is a Social Security Benefit to employees. During an employee’s productive life he along with his employer contribute monthly to a PF Fund which then serves as a nest on retirement for his/her old age. This act is an important piece of Labour Welfare legislation enacted by the Parliament to provide social security benefits to the workers. At present, the Act and the Schemes framed there under provide for three types of benefits –
Contributory Provident Fund
Pensionary benefits to the employees / family members
Insurance cover to the members of the Provident Fund.
Applicability
Company which have employee strength of 20 or more are required to be registered with PF Department. The strength of 20 includes contract employees like housekeeping, security or other contractual workers in the business. Those establishments which do not have the prescribed number of employees but willing to register themselves to provide the benefits of Provident Fund to their employees can register voluntarily with the Regional Provident Fund Office. Registration has to be done within One month from the date of reaching 20 employees. Any delay may result in a penalty.
Eligibility
An employee at the time of joining the employment and getting wages up to Rs. 6,500/- is required to become a member. In this act, Wages means and includes Basic + Dearness Allowances, Cash value of food concession and retaining allowances, if any. He/she is eligible for membership of fund from the very first date of joining a covered establishment.
Employee Contribution
Provident fund contribution is recovered @ 12% of wages from employees who earn up to a maximum wage of Rs.6,500/- p.m. However, employees can contribute more than this statutory maximum which
will be considered as Voluntary Contribution.
Voluntary Contribution
– An employee can contribute voluntarily over and above the stipulated rate of PF contribution by opting for Voluntary PF scheme at any rate as he she desires i.e up to 100% of Wages.
– However, the contribution to VPF should be a certain % of wages and not a fixed amount.
– But the employer is not bound to contribute at the enhanced rate.
– It is suggested that the enhancement can be done at the beginning of the financial year for comfort level of calculation.
Employer Contribution
– Employer is also required to contribute towards provident fund; the deduction rate is same as employee’s contribution i.e. 12% of the wages.
– Of this 12%, 3.67% goes to Provident Fund and the balance of 8.33% goes to Pension Fund.
The employer is required to pay the contribution recovered from employees into the provident fund account on or before 15th of the following month, for example, if the contribution is deducted for the month of October 2008, it should be remitted on or before 15th of November 2008.
Procedure for PF registration
The following forms are to be filed for registering the establishment:
A Detailed Application for termed as “ Performa for coverage”
Form 5 A with Annexure I
Information required for filling up forms
Name of The Company
Postal Address, Telephone No and Email Address
Details of Director/ Managing Director/ Partners – Address, Ph. No, email ID
Details of Authorized Signatory (in case whose is signing in the place of Director)
Nature and Date of Commencement of Business
Date of Joining of Employees, Father Name, DOB
Salary, PF Statement and Bank Account Details of the Company
Documents required for filling up the Forms
Incorporation Certificate of Company in case of private limited company and Certificate of Registration of Firm in case of Partnership Firm.
MOA & AOA in case of Private Limited Company and Partnership Deed in case of Partnership Firm.
Rental Agreement/ Lease Agreement of Company
Company/ Firm PAN Card
Address Proof of Director/Partners – Lease / Rental Agreement
ID Proof of Director/ Partners – Pan Card / Election Card/ Passport/ Driving License
List of Directors/ Partners
Registration copies with other Departments like. VAT, PT, Labour dept.
First Invoice raised from the company/ Firm
True copy of Board resolution empowering company representatives as Authorised signatories
Once documents are filed the PF Authorities carry out a physical inspection of the premises and verify all original documents. On satisfaction, the business is granted with a PF allotment letter.
Withdrawal of Provident Fund and Pension Fund
A member is eligible to apply for withdrawing his provident fund and pension fund only after 2 months from the date of resignation, provided that he / she is not employed during the said 2 months.
The member should submit Form 19 to withdraw his provident fund dues on leaving service/retirement/termination.
To claim pension, the member is required to submit Form 10 C.
The member needs to fill in Forms 19 and 10C and get it signed from the previous employer and submit it to the provident fund office (in many cases, the employer will themselves help by submitting the forms).
Normally, it takes about 40 days to have the monies credited to the bank account of the member after submission of the relevant forms.
On many occasions, members face problems in withdrawing the provident fund monies. Some of the normal reasons for the problems are quoted here below:
Mismatch of Signature of the employer/ Member
Mismatch of Signature of the member
Mismatch of Provident Fund Account number of the member
Incorrect bank account details furnished by the member
Incorrect address given by member
Mismatch of date of joining / resignation
Communication from PF department while processing the request would not have reached the employer
Failure of employer to remit the PF amount recovered from members to PF Account
Member might have changed his / her official name and the same has not been informed to the provident fund office
Change in Authorised Signatory of the employer when the application is in process
Transfer of Provident Fund monies from previous employer to current employer
A resigned employee who joins another company is left with an option of transferring the PF monies from his previous PF account to the current PF account, by filling the Form 13.
Form 13
When an employee joins new company and he wishes to transfer his previous company provident fund amount, he should inform the HR department or Accounts department of the new company.
The employer will issue Form 13, in which the member has to fill the details of previous company like – name, address, provident fund account number and address of the provident fund office where the account was held.
On form 13, the signature of the previous employer is not required.
Once he fills the required details and submit it to the current employer, the current employer will forward it to the provident fund office for transferring process.
The time taken for transferring the fund from one account to other account normally takes about 40 days from date of submission.
Problem during Transfer of Monies
In the case of transfer and when the previous employer is an exempt establishment (which means, having own PF trust), the procedures is that the current employer should forward the transfer form (Form 13) to the previous employer who will process a cheque (after validation) in favour of PF office of the current employer and it will be sent to the current employer. It becomes the responsibility of the current employer to submit the cheque along with a request letter to the PF office for transferring the monies. Here, the normal problems that might occur are:
previous employer might have changed their address
Documents lost in transit / do not reach the concerned department
delay in processing the application for reasons like tedious internal processing procedures, processing person is on vacation / busy on some other assignments, signatory not available etc
Advances from PF Account
The members are eligible to withdraw monies as advances from their PF Account for purposes like marriage, education, medical treatment etc, subject to the prescribed conditions as mentioned here below. Note that the said advance is totally tax-free and interest-free.