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10K Firms Default On PF Pay

Posted on September 30 2020


It should have taken 30 days for anyone to withdraw his provident fund money, the post-employment, rainy day retirement stash that companies should compulsorily deduct from the salaries.

Instead, more than 1,825 days have passed since Ganesh Kumar's father Krishna Shah who has expired in 2010 at an age of 55. He needs to withdraw the PF money for his money who is worried about losing her husband money in a complaint posted on an online forum.  
Over 10,000 companies including 1,195 state-owned, nationwide have defaulted on the provident-fund payments: 2,200 companies owe nearly Rs 2,200 crore-to the EPFO, the portion of employee salaries that they should have deposited.

The numbers of defaulting companies and institutions is growing day by day. There were 10,091 defaulters in 2014-15 which arose to 10,932 by December 2015.

The online consumer forums are filled with the complaints like those of Kumar's, as hundreds of employees 
who have quit or retired from a company are destitute of their provident fund. 


All-India Trade Union Congress sectary and EPFO trustee D. L. Sachdev said that they get lots of complaints from the workers who have been denied their provident fund and also complaints of collusion between EPFO officials and employers.


On 29th June, 2016 a detailed questionnaire was sent to the Central Provident Fund Commissioner and the Central Vigilance Officer of EPFO and then reminders were sent on the 1 St August, 2016 but it was unanswered.

The government decided to tax a part of the provident fund mentioned in the budget of 2015-16. But the widespread nationwide protests i.e., some violent, which forced the government to lift the decision.

The rainy day solution, shuffled by defaulting the companies

Provident funds are meant to provide financial security to the salaried employees, who should contribute 12 % of their monthly salary with the employer who contributes 13.6%.

Companies or institutions with more than 19 employees deposit the provident fund of each with the EPFO, which in turn deposits the money in an employee account that earns 8.8% interest from the government, which invests the provident fund in the government securities and corporate bonds.

While after retirement the employees can withdraw the entire amount or two months after resigning from a job, partial withdrawals are allowed by the EPFO to pay for home, education, marriage or an illness.

Establishments that deduct the contributions from the employees' salaries and do not deposit it with EPFO are termed as defaulters.

India  has the largest defaulters companies (2,644) starting with Tamil Nadu, including Pondicherry, followed by Maharashtra (1,692) and Kerala, including Lakshadweep (1,118).

There are many other regions where defaulters are Thiruvananthapuram leads with 247 defaulters, followed by Kolkata with 173 and Bhubaneswar with 115.

Companies that form their own provident-fund trusts for employees are exempt from signing up with the EPFO. In such cases, trustees are selected from company workers.

Defaulting companies must pay a penalty with an interest rate of between 17 per cent and 37 per cent, depending on the period of default.

EPFO set for a Rs 33-crore image makeover, but problems are deeper

As per the report on 5th July, 2016, the EPFO is set for a Rs 33-crore image makeover, which includes the professional social-media management and the advertisements in print and broadcast media.

But the EPFO'S role as a custodian of the employee savings faces deeper problems: it does not tell the employees that the companies are defaulting until they come to settle; cases waiting for settlement are rising; and the corruption with the organisation endures.

As per 2015-16, the number of EPF cases pending settlement has increased to 23% over the previous year. 228 police cases were registered already, 14,000 inquiries has already started against the defaulting establishments and Rs 3,240 crore was recovered in 2014-15 from the defaulters, the EPFO was short of 6,000 employees on March 31, 2015. Fewer employees affect the organisation's ability to enforce the provident-fund rules. 
There has been a four-fold increase in the cases filed by the EPFO to summon the defaulting employers over the four years ending 2015, from 317 in 2012-13 to 1491 in 2014-15.

As many as 322 corruption cases were ongoing or concluded against deviating EPFO officials between 2012-February 2015. Since then, corruption cases have dropped down to 167 in 2012, 75 in 2013, 72 in 2014 and 8 till February 2015.

An EPFO executive officer was formerly given charge of an area to make sure the employers within that jurisdiction did not default, which can be one of the reasons.
Vivek Kumar, a former EPFO director of vigilance said that now the notices are being sent from the Head Office to all the defaulters, and there is no officer who can be held responsible if the company defaults in the payment.

The reason made no difference to Ganesh Kumar.
Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.


With the help of Tax Assist and its team of income tax professionals, taxpayers can minimize their Income Tax liability, maximize their net income and create opportunities to save for current and future needs while maintaining proper accounting standards and income tax returns which are compliant with the Law

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