Page 295 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

Notes down by the Government of India from time to time. The exempted establishments are required
to follow the same pattern of investments as is prescribed for the unexempted establishments.
The provident fund accumulations are invested in government securities, negotiable securities
or bonds, 7-year national saving certificates or post office time deposits schemes, if any.

13.3.1 Employer's Obligations

1. The employer is required to contribute towards Employees' Provident Fund and Pension
Fund as:
(a) In case of establishments employing less than 202 persons or a sick industrial (BIFR)
company or 'sick establishments' or any establishment in the jute, beedi, brick, coir
or gaur gum industry – 10% of the basic wages, dearness allowance and retaining
allowance, if any.
(b) In case of all other establishments employing 201 or more persons – 12% of the
wages, D.A., etc.
An amount equal to 8.33% of the employees' pay shall be remitted to the Pension Fund
and the balance of employer's contribution will continue to remain in Provident Fund
account.
Where, the pay of the employee exceeds 5,000 p.m., the contribution to Pension Fund
shall be limited to 8.33% of his pay of 5,000 only. The employee may voluntarily opt for
the employer's contribution @ 8.33% of the full wages to be credited to Pension Fund.
2. Towards Deposit-Linked Insurance Fund, he has to pay: - 0.5% of the wages, D.A., etc.
3. The employer cannot reduce the wages or other benefits such as pension, gratuity or
provident fund of an employee, on account of the employer's contribution or administrative
charges payable by him.

4. The employer is required to deduct the employee's contribution from his wages and
deposit the same into the provident fund account along with his own contribution. The
employee's contribution shall be equal to the employer's contribution, i.e. 10% or 12% as
the case may be. The employee is not required to contribute towards Deposit-linked
Insurance Fund.
5. The employer is required to pay the following administrative charges also:
(a) w.e.f. 1.8.1998 @ 1.10% (0.65% up to 31.7.98) of the employees' wages, subject to a
minimum of 5 every month, for administration of Provident Fund.
(b) 0.01% of the employee's wages, subject to a minimum of 2 every month, for
administration of Deposit-Linked Insurance Fund.
6. The employer should, within 15 days of the close of every month, deposit the total amount
of the employer's and employees' contributions and administrative charges with P.F.
Commissioner into the respective accounts maintained at the State Bank of India.

Did u know? The amounts deposited into the Provident Fund Account are invested in
specified securities and under Special Deposits Scheme. The Commissioner shall credit to
the provident fund account of each member interest at such rate as the Central Government
may determine, on the balance standing to his credit on first day of April each year. The
rate of interest notified for the year 1998-99 was 12% p.a. The rate of interest had been
reduced to 11% w.e.f. 1.4.2000 and further reduced to 9.5% w.e.f. 1.4.2001. Interest is also
earned on the Family Pension Fund and Deposit-linked Insurance Fund Accounts.

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