Hello,
Is it Mandatory for a Company to deduct Provident Fund from employees' Salry?
When is it compulsory to deduct?
16 Replies
CA Sankalp Patwa
(CA)
(193 Points)
Replied 07 August 2012
no its not mandatory but if no of employees in your organisation exceeds 20 in number at any time during the year then u will be required to deduct it.
llllVICTORllll
(Internal Auditor)
(511 Points)
Replied 07 August 2012
But the law is so superb that, if a company had more than 20 employees even for a single day, they have to register for PF and once registered even if company has only 1 employee, it has to provide for PF... so all mid level company and not so microbial mirco companies will come under PF act one way or another(ofcourse its only if company maintains its employee records triuthfully)
llllVICTORllll
(Internal Auditor)
(511 Points)
Replied 07 August 2012
BTW neerav, you had studied PF act in PCC/IPCC right? you should have known it already... so whats the specific point in your doubt???
CA. Subhash Dangi
(Chartered Accountant)
(1784 Points)
Replied 07 August 2012
Employees' Provident Fund and Miscellaneous Provisions Act 1952 is applicable to:
Every establishment which is engaged in any one or more of the industries specified in Schedule I of the Act or any activity notified by Central Government in the Official Gazette.
and
Employing 20 or more persons .
Refer the following link :
Kishan
(Consultant)
(25 Points)
Replied 21 August 2012
Hi,
I understand that, PF Applicable to the industries/companies specified in the clause and if the number of employees 20 or more than that on any day in assessement period (Apr to Mar) one year. But my question here is, there are less than 20 or more at times, but majority are daily labour (wages are paid daily and some or season labour) and we have just six employees who muster is maintained and salaries are accounted in our Trading and P&L Account.
So, please clarify 1) is this PF Applicable to us? if so in what way?
Please note that, Some how our establishment is registerd with PF Department/Office due to our accountant poor knowledge. Now, let us say, it does not apply to us as we just have six employees and rest all daily labour and wanted to come out this Act.
2) What would be the best way? i know it cant be exited once registered. Is changing firm name would do this or do you have any better idea to deal with this situation?
Regards,
Kishan
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 22 August 2012
@ kISHAN
Once registered and accepted, establishment is covered, and now there is no exit way . you have to maintain the PF rules and formalities,
llllVICTORllll
(Internal Auditor)
(511 Points)
Replied 22 August 2012
Ok, let me just continue with Kishan's Question
Does 20 Employees include daily labourers also? or just the set of employees who are entered in muster?
Does the answer differ if daily labourers are recruited directly and if they are recruited through manpower supply agency???
Kishan
(Consultant)
(25 Points)
Replied 22 August 2012
First of thanks for your replies..
@ Sharma,
Hi Sharma,
I understand that we cant come out of this Act once registered. But there must be way, like closing this firm and opening a new one or with new properitor name or some othe way. Could you please let us know the workaround for this?
@ Victor
Hi Victor,
Sorry for not being clear in my last update. We have six (i am sure it less than 20) persons, whose muster is maintained and their wages are accounted. Rest all mainly woman labour (daily labour) and the number may vary from 5 to 50 depends on agricultural crop availibilty in our locality as our small firm is trading firm. Their daily muster is not maintained & accounted. Those come to work directly (we usually tell them today itself to come 15 or 20 people tomorrow based on work) without any recruitment agency.
Please clarify on both of the above points.
Regards,
Kishan
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 22 August 2012
@ Kishan and Victor
These all exercise had to be done before registration or enforecement of PF registration, once the PF is enforced on the establishment, its mandatory to maintain the rules of the act.
seasonal workers are neither part of master roll nor they are paid wages or salary, but it goes to direct accounting head as " repair and maintainance to building / loading -unloading or for whatsoever job they are recruited for" and in no case they would be employed for any time in the year.
even right now if you have six regular employees then wages/salary portion in your account must not cover anything otther than amount paid to these regular employees,
llllVICTORllll
(Internal Auditor)
(511 Points)
Replied 22 August 2012
“employee” means any person who is employed for wages in any kind of work, manual or otherwise, in or in connection with the work of an establishment and who gets his wages directly or indirectly from the employer, and includes any person,-
(i) employed by or through a contractor in or in connection with the work of the establishment;
(ii) engaged as an apprentice, not being an apprentice engaged under the Apprentices Act, 1961 (52 of 1961) or under the standing orders of the establishment
THis is the extract of definition of Employee from EPFO website
Now, If you read this, I come to opinion that even if you employee 5 or fifty daily laboourers, if on that day the number of people employed goes above 20 then EPF applies. These daily labourers are not paid fees(they donot raise bill and they are part of main activity of company), but daily wages. being so, doesn't EPF apply to a company employing daily laboourers( this question has nothing to do with Kishan's Query, as his query is already solved).
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 22 August 2012
@ all
if we employ daily workers for a short span, then refrain to show them in wages or salary in accounts any time, instead u can book the expense in the respective head for which they were employed and ignore the number of persons employed but amount only. this way you can be saved from many litigations and hassles from labour department viz PF/ESI etc.
once recorded as worker or employee ( temp or permanent does not matter) these department clutch the establishment and cover them with the effective day and then the formalities goes on till the life of establishment.
honey
(Compliance Executive)
(73 Points)
Replied 27 August 2012
If the employer wants to make excess contribution in the employee's fund and that to in past one month... is it possible? Kindly answer with relevant provisions. Thanks in advance
U S Sharma
(glidor@gmail.com)
(21063 Points)
Replied 28 August 2012
A model uniform practice should be adopted for contributions, whether celing of 6500 is applied or not, for the employee,
PF is not a savings bank account that you can deposit when u wish so , but its mandatory contribution based fund, so if the wages or celing effect the contribution then surely he can , provided the challan is still pending , or in current month show the amount as arrear, but you have to maintain the same in coming months, you can not increase for just one month and then reduce,
wages per month is a term of amount which is gross amount per annum divided by 12 months, so all blocks should be uniform or similer.
honey
(Compliance Executive)
(73 Points)
Replied 28 August 2012
Dear Sharma ji
Can you please tell the appropriate sections and relevant provisions regarding this matter. I apologize for the inconvenience caused.
Regards
Recent Topics
- Avoiding tax audit in case of intraday equity loss
- Form 3CEAB
- Form 3CEAA and Form 3CEAB
- DIR 3 Web KYC
- Can i declare LTCG income as business income if I
- Stock entry in new software
- I have an EMI collection shop, what is its SAC cod
- Making payment once in quarter possible under QRMP
- Master File Documentation related
- Applicability of 44AD needs clarification
Related Threads
CAclubindia
