Epf & Gratuity Act

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    EMPLOYEE PROVIDENT FUND

    ACT1952 & THE PAYMENTOF GRATUITY ACT,1972

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    INTRODUCTION

    The Employees Provident Funds & Miscellaneous

    Provisions Act, 1952 enacted by Parliament came

    into force w.e.f. 14.3.1952 and presently the

    following three Schemes are in operation under theAct:-

    1. The Employees Provident Fund Scheme, 1952

    2. Employees Pension Scheme, 1995 and3. Employees Deposit Linked Insurance Scheme,

    1976.

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    FUNDING OF THE SCHEMESchemes Employers Employees* Central Govt. Total

    Provident Fund 3.67% 12% 0% 15.67%

    Insurance Fund

    (EDLI)

    0.5% 0% 0% 0.5%

    Pension Fund 8.33% 0% 1.16% 9.49%

    Total 12.5% 12% 1.16% 25.66%

    * Rate of contribution is 10% in respect of following

    establishments :-

    less than 20 persons are employed.

    sick unit declared by the BIFR.

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    (contd)

    Accumulated losses equal to or exceeding its

    entire network.

    Any establishment in the (a) Jute, (b) Beedi,

    (c) Brick, (d) Coir and (e) Gaurgum industry orfactories

    Administrative Charges / Inspection Charges areapplicable @ 1.10% and 0.18% respectively.

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    COVERAGE

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    APPLICATION OF THE ACT

    All establishments / factories included in the list ofnotified industries and class of establishments asin Schedule I and employing 20 or more persons.

    Any other establishment employing 20 or morepersons or class of establishments which theCentral Government may notify.

    The Act will come into force in an establishment

    from the very date of set up or commencement ofbusiness except certain class of establishments asexcluded under Section 16 of the Act

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    (contd)

    Departments or branches of an establishment,

    situated in the same place or different places shall

    be treated as parts of the same establishment for

    coverage under the Act. The Act once applied will continue to apply to the

    establishment even if the number of employees

    fall less than 20 after coverage.

    The Act is applicable to cinema theatres

    employing 5 or more workers

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    VOLUNTARY COVERAGE

    With the consent of the employer and

    majority of employees, an establishment

    otherwise not coverable can be covered under

    Section 1(4) of the Act..

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    MEMBERSHIP

    - Persons / employees including regular, casual,piece rated, part time, temporary and contractemployees.

    - Coverage from the date of joining theestablishment / factory.

    - All employees getting the wages upto Rs.

    6500/- per month.- In case of wages more than Rs. 6500/- p.m. on

    joint request by employee and employer

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    COMPLIANCE

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    ROLE OF COMPLIANCE

    Coverage of all coverable establishments .

    Extending membership to all eligibleemployees in covered establishments .

    Ensuring proper implementation of Act& Scheme provisions

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    REGISTRATION

    A registration number otherwise known as CodeNumber issued to every establishment / factoryto which the Act is applied.

    Issued by RPFC under whose jurisdiction theestablishment is located.

    In case of factory, code number is allotted byRPFC under whose jurisdiction factory is located.

    A contractor employing 20 persons and engagedin the work of different establishments mayobtain a separate Code Number

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    (contd)

    Normally Code Number is issued within 3 dayson submission of requisite documents likeproof of date of set up, Demand Draft towards

    PF dues for one month etc. All members be assigned with separate PF

    Account Number.

    The provisions of the Act applies to theestablishment suo-moto, on fulfilling theconditions for the coverage

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    COLLECTION / RECEIPT OF

    CONTRIBUTIONS

    Contributions in respect of each member as

    per specified rate received by the concerned

    RPFC.

    Maintenance of contribution card member-

    wise for each financial year.

    Deduction of employees share of PF from

    wages of the member before disbursement.

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    (contd)

    A member is required to contributecompulsorily upto Rs. 6500/- of his wages andhe may voluntarily opt to contribute beyond

    the wage ceiling of Rs. 6500/- (i.e. upto hiswages). During the course of membership, ifthe wages (Basic + Dearness Allowanceincluding cash value of food concession and

    Retaining allowances) has crossed Rs. 6500/-the member and employer are required to payPF contribution at least upto Rs. 6500/- only.

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    (contd)

    If an employee is willing he can also contribute tothe fund in excess of the statutory limit of 10% or12% of his wages, as the case may be. The

    employer need not pay in excess of the statutorylimit.

    The employers share of PF contribution shouldnot be deducted from the wage of a member or

    recovered from the member. Principal employer is liable for default by their

    contractors.

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    ASSESSMENT OF DUES / RECOVERY

    In case of default, the dues can be assessed

    under Section 7A of the Act.

    Proceedings u/s. 7A is quasi-judicial process.

    In case of belated remittance damages u/s.

    14B and interest u/s. 7Q are leviable.

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    CONSEQUENCES ON DEFAULT

    In case of non-payment of assessed dues therecovery actions as per provisions u/s. 8 of theAct read with 2nd / 3rd Schedule of I.T. Act,

    1961. Penal damages upto 25% per annum and

    interest at the rate of 12% payable on thedefaulted amount.

    Attachment of bank accounts.

    Realisation of dues from Debtors.

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    (contd)

    Attachment of movable and immovable

    properties.

    Arrest and detention.

    Action u/s. 406/409 of Indian Penal Code.

    Action u/s. 110 Criminal Procedure Code.

    Prosecution u/s. 14 of the EPF Act.

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    DUTIES OF THE EMPLOYERS

    Enrol all categories of employees including the employees

    engaged by or through contractors and also piece rated,

    hourly rated employees.

    Remit the contributions and administrative charges before the15th of the following month.

    File the initial returns of Form 9, Form 3(P.S.), form 5A.

    File the monthly returns in Form 12A, Form 5, Form 10 and

    Challans for remitting the dues.

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    (contd)

    Maintain the contribution card in respect of each employeein Form 3A and submit the annual returns in Form 3A and6A after reconciliation with Challans and form 12A.

    The employer has to ensure that statutory dues in respectof contractors employees are remitted and returns filed.

    Employer should attest the form No.2 and the claimsforms submitted by the member/ legal heirs/ nominees.

    Make available all relevant records for inspection of visitingofficials with due authorisation.

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    SERVICES TO MEMBERS

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    Payment of accumulation plus interest on

    retirement, resignation, death. Partial withdrawals permitted for specific

    purposes:o Financing life insurance policieso acquiring house or siteoAddition and substantial alterations of the dwelling houseomarriage of self and dependentsoeducation of childreno treatment of illness etc.oPurchase of equipment by physically handicapped

    employees.o Financial assistance on dismissal, discharge, closure / lock

    out.

    (i) Benefits under EPF Scheme

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    OTHERS

    (ii) Redressal of grievances at field office and HeadOffice levels.

    (iii) Disposal of grievances in Bhavishya Nidhi

    Adalats.(iv) Know Status of your Claim from EPFO Website.

    (v) Lodging the grievances on the Website underCPGRAM.

    (vi) Status of claims settlement from InformationKiosks.

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    DIFFICULTIES IN IMPLEMENTATION OF

    PROVISIONS OF THE ACT

    No voluntary compliance by employers.

    Lack of awareness among establishmentsregarding compliance and submission of returns.

    Lack of awareness among the employeesregarding social security benefits.

    Wage ceiling at Rs. 6500/-.

    Existence of Schedule Head.

    Non-issue of statement ofmembers account dueto non-submission of returns by the employer.

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    (contd)

    (vii) Outsourcing and employees engaged oncontract.

    (viii) Engaging the contract / part time employee in

    the Government Departments.(ix) Not fully computerization in EPFO.

    (x) Numerous returns submitted by theemployers.

    (xi) Delay in settlement of claims / grievances dueto heavy workload.

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    (contd)

    (xii) Delay in issue of PF statements due to non-

    submission of returns.

    (xiii) Illiteracy among members for maintaining

    their Date of Birth records.

    (xiv) Employers reluctant to submit the claim

    forms in time.

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    IMPORTANT SECTIONS OF THE ACT

    SECTION 1 APPLICABILITY OF THE ACT SECTION 6 RATE OF CONTRIBUTIONS

    SECTION 7A DECIDING APPLICABILITY AND

    ASSESSMENT OF DUES

    SECTION 7Q IMPOSING OF INTEREST

    SECTION 8 RECOVERY OF DUES FROM

    EMPLOYERS AND CONTRACTORS

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    (contd)

    SECTION 11 PRIORITY OF PAYMENT OF EPF

    CONTRIBUTIONS OVER OTHER DEBTS

    SECTION 14 PENALTIES FOR DEFAULTERS

    SECTION 14B LEVYING OF DAMAGES ON

    BELATED PAYMENTS

    SECTION 16 EXCLUSION FROM THE ACT

    SECTION 17 EXEMPTION

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    THANK YOU.

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    EMPLOYEE PROVIDENT FUND

    ACT1952BY

    BIPENDER GUPTA

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    CONTENTS

    INTRODUCTION SCOPE & EXTENT

    APPLICABILITY / ELIGIBLITY

    INTERESTS

    INVESTMENT PATTERN FOR A PF TRUST WITHDRAWL OF PF

    SETTLEMENTS

    EXEMPTION OF TDS ON SETTLEMENT

    FORMS & RETURSN BENEFITS

    CONCLUSION

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    INTRODUCTION

    Employee Provident Fund (EPF) is one of themain platforms of savings in India for nearly allpeople working in Government, Public or

    Private sector Organizations. It is implementedby the Employees Provident FundOrganization(EPFO) of India.

    It is a mandatory, tax-qualified, defined,

    contribution retiral benefit plan wherein

    equal contribution at the specified rate is

    made by the employer and the employee and

    the same is payable in lump sum on retirement.

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    SCOPE & EXTENT

    Employees Provident Funds Scheme, 1952

    Employees Deposit-Linked Insurance

    Scheme, 1976 (EDLI) and

    Employees Pension Scheme, 1995 (EPS)

    (Earlier the Employees Family Pension

    Scheme, 1971)

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    WHO IS APPLICABLE FOR EMPLOYEE

    PROVIDENT FUND ? The employee provident fund act

    1952 implies to the whole ofIndia except the state of Jammu& kashmir (section 2).This actimplies (section 3) to:

    Every establishment which is a

    factory engaged in any industryspecified in schedule I & in which20 or more persons employed;

    Any establishment employing 20or more persons of suchestablishments which central

    government may, by notificationin the official gazette specify.

    NGOS Considering the operations of

    charitable institutions theseincludes the following:

    Educational, scientific research &training institute ;

    Establishment known ashospitals;

    Establishment rendering expertservices;

    Establishments engaged inpoultry farming

    Establishment engaged in cattlefeed industry;

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    WHO IS ELIGIBLE FOR EMPLOYEE

    PROVIDENT FUND? FOR NEW ENTRANTS

    An employee is eligible for membership fromthe day he joins the company who has enrolledfor EPF Scheme

    If an Employer has equal to or more than 20employees, it is mandatory for him or to join theEmployee Provident Fund Scheme.

    If the employees emoluments exceed Rs.6,500/- per month, he has the option to join theScheme(s) with the consent of employer.

    Declare previous employment details, if any,in Form No. 11 to the employer.

    On becoming a member of the Schemes filedetails in Form No. 2 ( family particulars/nominations) through the employer.

    Rate of contribution payable by a member shallbe @ 12% of his emoluments.

    A member can contribute statutorily over andabove the prescribed rate.

    FOR EXISTING ENTRANTS Enrolment:

    Any change in the family status, such as, marriage of the member.

    additions / deletion in the family.

    Legal adoption of the children.

    Change of nominee, is to be filed in Form No. 2through the employer.

    In the event the member is holding a SchemeCertificate (under EPS, 95), he shouldsurrender the same to the concerned EPFOoffice, through his employer.

    A member is entitled to various benefits &facilities such as withdrawals, advances,pensions, death insurance etc.

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    WHAT IS THE EPF

    INTEREST RATE?

    The EPF interest rate of India is decided by the central government with the consultation ofCentral Board of trustees. In the past several decades, the interest rate has ranged from 8-1% of the balances maintained in the fund. The EPF interest rate notification is available onthe official website of EPF India on an annual basis. The same is communicated through majdailies in all cities

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    HOW MUCH ONE CAN

    SAVE BY INVESTING IN

    EPF?

    Lets say Swayam starts with a

    basic salary of Rs. 20,000. Every

    year, on an average, he gets a 5%

    increment. He started at 25 years

    and worked till 60 years so his

    working life is, 35 years. He

    contributes 12% of his basic salary

    towards PF which is matchedequally by ones company, (EPF

    contribution is 3.67%, EPS 8.67%).

    In this case, over the course of 35

    years of his working life, his total

    contribution is Rs. 26.01 Lakhs. Of

    course, his company makes a

    contribution of Rs. 7.955 Lakhs,

    total contribution ofRs 33.967 lakh. And this amount

    grows intoRs. 1.38 Crores at the

    time of his retirement.

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    HOW IS IT

    CALCULATED ?

    At the beginning of each yearthere would be opening

    balance, the

    amount accumulated till

    then. Contribution is made

    monthly but interest is

    calculated yearly. On gets

    interest on opening balance andmonthly contribution. So for

    next year the new opening

    balance would be: old opening

    balance +

    contribution throughout the

    year + interest on the (old

    opening balance + contribution)

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    HOW WOULD I KNOW

    THE AMOUNT OF

    ACCUMULATION IN MY

    PF ACCOUNT ?

    PF office sends an annualstatement through the

    employer which gives details

    about the PF accumulations.

    The statement contains details

    like, Opening balance, amount

    contributed during the year,

    withdrawal during the year,interest earned and the closing

    balance in the PF account. This

    statement is sent by the PF

    department on completion of

    the financial year.

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    CLARIFICATION ABOUT

    CONTRIBUTION AFTER REVISION IN WAGE CELLINGFROM Rs.5000 to Rs.6500 w.e.f. 1-6-2001

    PER MONTH THE GOVERNMENTCONTINUE TO CONTRIBUTE 1.16% UPTOTHE ACTUAL WAGE OF MAXIMUMRs.6500 PER MONTH TOWARDSEMPLOYEES PENSION SCHEME. THEEMPLOYERS SHARE IN THE PENSION

    SCHEME WILL BE Rs.541 w.e.f. 1-6-2001.

    UNDER EMPLOYEES DEPOSIT-LINKED INSURANCE SCHEME THECONTRIBUTION @ 0.50% IS REQUIRED TOBE PAID UPTO A MAXIMUM LIMIT OFRs.6500. THE EMPLOYER WILL PAYADMINISTRATIVE CHARGE @ 0.01% ON

    MAXIMUM LIMIT OF Rs.6500.

    THE EMPLOYER ALSO WILL PAYADMINISTRATIVE CHARGES @ 0.01% ONMAXIMUM LIMIT OF Rs.6500 WHEREASAN EXEMPTED ESTABLISHMENT WILL PAYINSPECTION CHARGES @ 0.005% ON THETOTAL WAGES PAID.

    NOTES THE ABOVE CLARIFICATION IS GIVEN

    BY TAKING WAGES UPTO AMAXIMUM OF Rs.6500 TOWARDSWAGE (BASIC+DA).

    SINCE AN EXCLUDED EMPLOYEE i.e.DRAWING WAGES MORE THANRs.6500 CAN ALSO BECOMEMEMBER OF THE FUND AND THESCHEMES ON JOINT REQUEST AND IF,FOR INSTANCE, SUCH AN EMPLOYEEIS GETTING Rs.10,000 PER MONTH,HIS SHARE TOWARDS PROVINDENT

    FUNDCONTRIBUTION WILL BERs.1200 e.g. 12% AND EMPLOYERSSHARE TOWARDS PROVIDENT FUNDCONTRIBUTION WILL BE Rs.659 ANDRs.541 TOWARDS EMPLOYEESPENSION FUND.

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    PAYMENT OF CONTRIBUTION

    THE EMPLOYER SHALL PAY THECONTRIBUTION PAYBLE TO THEEMPLOYEES PROVIDENT FUND,EMPLOYEES DEPOSITE LINKEDINSURANCE, AND EMPLOYEESPENSION FUND IN RESPECT OF THEMEMBER OF THE EMPLOYEES

    PENSION FUND BY HIM DIRECTLY BYOR THROUGH A CONTRACTOR.

    IT SHALL BE THE RESPONSIBILITY OFTHE PRINCIPAL EMPLOYER TO PAYTHE CONTRIBUTIONS PAYBLE TO THEEPF, EDLI AND EPSBY HIM SELF IN

    RESPECT OF THE EMPLOYEESDIRECTLY EMPLOYED BY HIM ANDALSO IN RESPECT OF THEEMPLOYEES EMPLOYED BY ORTHROUGH A CONTRACTOR.

    A/c 1 EPF EMPLOYERS 12% +EMPLOYEES 3.67% = 15.67 %

    A/c 2 EPF ADMIN CHARGES 1.10%

    A/c 10 EPS EMPLOYEES 8.33 %

    A/c 21 EDLI 0.50 %

    A/c 22 EDLI ADMIN CHARGES

    0.01%

    TOTAL = 25.61%

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    WITHDRAWL OF EMPLOYEE

    PROVIDENT FUND 1952WITHDRAWL BEFORERETIREMENT

    You can withdraw up to 90% of the amountin you EPF account after you attain the age of54 years, or within one year before actualretirement on superannuation whichever islater. Claim application in form 19 has to be

    submitted to the concerned Provident FundOffice.

    For other cases such as

    Shifting of Jobs

    At such times, the PF balance could betransferred from one employer to another.The existing balance would continue to stay.With fresh contributions made by the new

    employer.

    Quitting of Job

    PF could be withdrawn, if you quit your joband provide a declaration that you do notintend to work for the next six month.

    WITHDRAWL AFTERRETIREMENT

    You can withdraw full amount in thefund on retirement from service after55 years of age. You can also withdrawthe full amount due to any of thefollowing occurrences:

    1. If you have not attained the age of55 year at the time of termination ofservice.2. If you retired on account ofpermanent and total bodily or mentaldisablement

    3. If you migrated from India forpermanent settlement abroad or fortaking employment abroad.4. In the case of mass or individualretrenchment.

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    SETTLEMENT OF EMPLOYEE

    PROVIDENT FUND CLAIMIMMEDIATE SETTLEMENT WITHOUTWAITING PERIOD OF TWO MONTH

    SETTLEMENT ONLY AFTER A WAITNGPERIOD OF TWO MONTHS

    69(1)(a)Retirement after attaining 58yrs of

    age.

    69(1)(e)(i)Transfer of a non retrenched

    employee from a closed establishment to

    uncovered establishment.

    69(1)(b)Retirement on a/c of total &

    permanent incapacity due to bodily or

    mental infirmity.

    69(1)(e)(ii)Transfer of an employee from a

    covered establishment to an un-covered

    establishment under the same employer.

    69(1)(d)Termination of service on

    retrenchment.

    69(2)Other cases viz. Resignation, Leaving

    Service, etc.

    69(1)(dd) Termination on V.R.S NOTE: For female members leaving service

    for the purpose of getting married; waiting

    period not applicable.

    69(1)(c) Migration from India for permanent

    settlement abroad or taking employment

    abroad.

    69(1)(e)(iii)Members discharged &

    retrenchment compensation paid under I.D

    Act 1947.

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    EXEMPTIONS

    Head Statutory PF Recognized PF UnRecognised PF

    Employers contribution to PF Exempt from tax Exempt up to 12% of salary

    (Basic +DA)

    Exempt from tax

    Deduction under sec 80C Available Available Not available

    Interest credited on PF account Exempt from tax Exempt up to 9.5% Exempt from tax

    Lump sum payment received at

    the time of retirement or

    termination of service

    Exempt from tax Exempt from tax: Only employees share of

    contribution is exempt

    a. If the employee has worked for

    at least 5 years with the employer

    b. If the service is terminated on

    account of ill-health or bycontraction or discontinuance of

    the employers business or any

    other reason beyond control of

    employee

    c. If the employee transfers the

    balance in his PF to his new PF

    a/c maintained by his new

    employer

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    FORMS OF PF

    Form No. 2 --Nomination form

    Form No. 11Declaration of previous

    employer & PF and Pension amount

    Form No. 13PF Transfer from previous

    employer

    RETURNS IN EMPLOYEE PROVIDENT

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    RETURNS IN EMPLOYEE PROVIDENT

    FUND MONTHLY RETURNS 12 A (Employees Strength and paid)

    Form 5 - New Joining (Name, Fathers Name,DOJ, DOB, Gender.

    Form 10Left Employees (Name, FathersName, DOJ, DOL, Reason.

    COMBINED CHALLAN A/C 1,2,10,21 & 22

    Note : Above all contribution count onEmployees Basic Earnings.

    Nomination : Form 2 (Revised)

    Nominee Change : Form 8

    For Withdrawal : Form 19 (Green) & 10 c(White)

    Loan : Form 31 after 7 Years

    ANNUAL RETURNS 3 A : Employees individual detail month wise

    (Period 1st April to 31st March)

    6 A : All Employees combined detail monthwise

    ADVANCES FROM PF

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    ADVANCES FROM PF

    ACCUMULATION ?

    Purchase dwelling site

    Construction of a dwelling house

    Completing construction of the house

    Buy a dwelling house /Flat from Agency Purchasing a newly constructed/old dwelling house or flat from an individual

    Purchasing house/flat from a promoter

    Additional Loan -alterations/improvements

    Further housing withdrawal

    Repayment housing loan

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    NOMINATION

    An employee may be allowed to make a nomination conferring on one or more persons the right toreceive the provident fund amount

    If an employee nominates more than one person, he shall, in his nomination specify the amount or sharepayable to each of the nominees.

    Where an employee has a family at the time of making a nomination, the nomination shall be in favour ofone or more persons belonging to his family

    Any nomination made by an employee in favour of a person not belonging to his family shall be invalid.

    If at the time of making a nomination the employee has no family, the nomination may be in favour of any

    person or persons A nomination made by an employee may, at any time, be modified by filing Form no. 2

    g) Where the nomination is wholly or partly in favour of a minor, the Member may, appoint a major personof his Family to be the guardian of the minor nominee Provided that where there is no major person in theFamily, the Member may, at his discretion, appoint any other person to be a guardian of the minornominee.

    Family means: -

    For Provident Fund (PF): - in the case of a male member, his wife, his children, whether married or unmarried, his dependent

    parents and his deceased sons widow and children;

    In the case of a female member, her husband, her children, whether married or unmarried, her dependentparents, her husbands, dependent parents, her deceased sonss widow and children;

    PENALTY IN EMPLOYEE PROVIDENT

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    PENALTY IN EMPLOYEE PROVIDENT

    FUND ACT 1952

    LESS THAN 2 MONTHS @17% p.a.

    2 MONTHS & ABOVE BUT LESS THAN UPTO 4

    MONTHS @ 22% p.a.

    4 MONTHS & ABOVE BUT LESS THAN UPTO 6

    MONTHS @ 27% p.a.

    6 MONTHS & ABOVE @ 37 % p.a.

    PENAL PROVISION FOR EMPLOYEE

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    PENAL PROVISION FOR EMPLOYEE

    PROVIDENT FUND

    LIABLE TO BE ARRESTED WITHOUT WARRANTBEING A COGNISABLE OFFENCE.

    DEFAULTS EMPLOYER IN PAYING

    CONTRIBUTIONS OR INSPECTION-ADMINISTRATIVE CHARGES ATTRACTIMPRISONMENT UPTO 3 YEARS AND FINES UPTORs.10,000 (Sec.14).

    FOR ANY RETROSPECTIVE APPLICATION, ALLDUES HAVE TO BE PAID BY EMPLOYER WITHDAMAGES UPTO 100% OF ARREARS.

    BENEFITS OF EMPLOYEE PROVIDENT

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    BENEFITS OF EMPLOYEE PROVIDENT

    FUND ?

    EMPLOYEES COVERED ENJOY A BENEFIT OF SOCIALSECURITY IN THE FORM OF AN ATTACHABLE ANDUNWITHDRAWABLE (EXCEPT I SEVERLY RESTRICTEDCIRCUMSTANCES LIKE BUYING HOUSE, MARRIAGE,EDUCATION etc.). FINANCIAL NEST EGG TO WHICH

    EMPLOYEES AND EMPLOYERS CONTRIBUTE EQUALLYTHROUGHOUT THE COVERED PERSONS EMPLOYMENT.

    THIS SUM IS PAYBLE NORMALLY ON RETIREMENT ORDEATH. OTHER BENEFITS INCLUDE EMPLOYEES PENSION

    SCHEME AND EMPLOYEES DEPOSITE LINKED INSURANCESCHEME.

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    CONCLUSIONS

    Contribution made to EPF and PPF gets deductionunder Section 80C and the interest earned is tax

    free. That is both works under EEE (Exempt,

    Exempt and Exempt) tax regime. However, PF isbetter than PPF in two aspects -

    In the case of PF, the employer also contributes

    to the fund. There is no such contribution in case

    of PPF.

    The rate of interest on PF is also marginally higher

    (currently 8.50%) than interest on PPF (8%).

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    THE PAYMENT OF

    GRATUITY ACT,1972

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    THE GROUP

    NAME ROLL NO.

    HARSHWARDHAN SINGH RATHOOR 58

    BETTY MATHEW 01

    SHRADHA GARG 02 VISHAL VATS 03

    PREMLATA TUTI 04

    DAKSH AGRAWAL 05

    NEHA MARWAH 07

    MANSI SHARMA 08

    RAVI ROSHAN DUNGDUNG 09

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    INTRODUCTION

    Gratuity means gifts or service often in return of

    favors and services.

    In the present context, it means, a sum of money

    paid to an employee at the end of employment.

    Gratuity in case of retirement, superannuation ordeath helps family to adjust in a new situation in

    which income ceases partially or completely.

    Gratuity Schemes, serves as an important tool of

    social security.

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    HISTORICAL BACKGROUND

    3rd June,1971 introduced the

    ordinance, wherein a scheme for

    payment of gratuity was enacted

    Govt. Of Keralas Legislation

    for payment of Gratuity

    Ordinance replaced by West Bengal

    Employees payment of compulsory

    Gratuity Act,1971

    Central Legislation on gratuity

    -Discussed-

    Labour Ministers Conference

    held at New Delhi 1971

    Accordingly the Payment of Gratuity Bill was

    introduced in Parliament

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    HISTORICAL BACKGROUND

    In the earlier days gratuity schemes were introducedin some establishments either voluntarily byemployers or under agreements between employersand workers.

    However these schemes were very narrow in theirscope and were applicable only to someestablishments and therein few certain categories.

    A central act, namely, The Payment Of Gratuity Act,1972, was enacted and came into force on the 16thSeptember,1972.

    Flow of The Payment of Gratuity

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    Flow of The Payment of Gratuity

    Act,1972

    EXTENT & APPLICATION

    DEFINITIONS

    PAYMENT OF GRATUITY

    CONTINOUS SERVICE

    CONTROLLING AUTHORITY

    COMPULSORY INSURANCE

    POWER TO EXEMPT

    NOMINATION

    EXTENT & APPLICATION

    DEFINITIONS

    CONTINOUS SERVICE

    EXTENT & APPLICATION

    DEFINITIONS

    CONTINOUS SERVICE

    DEFINITIONS

    EXTENT & APPLICATION

    CONTINOUS SERVICE

    DEFINITIONS

    EXTENT & APPLICATION

    CONTINOUS SERVICE

    DEFINITIONS

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    FLOW OF THE ACT

    PROTECTION OF GRATUITY

    PROTECTION OF ACTION TAKEN IN GOOD FAITH

    COGNIZANCE OF OFFENCES

    EXEMPTION

    PENALTIES

    RECOVERY OF GRATUITY

    POWERS OF INSPECTORS

    DETERMINATION OF THE AMOUNT OF GRATUITY

    INSPECTOR

    ACT TO OVERRIDE OTHER ENACTMENTS

    POWER TO MAKE RULES

    DETERMINATION OF THE AMOUNT OF GRATUITY

    INSPECTOR

    POWERS OF INSPECTORS

    DETERMINATION OF THE AMOUNT OF GRATUITY

    INSPECTOR

    RECOVERY OF GRATUITY

    POWERS OF INSPECTORS

    DETERMINATION OF THE AMOUNT OF GRATUITY

    INSPECTOR

    PENALTIES

    RECOVERY OF GRATUITY

    POWERS OF INSPECTORS

    DETERMINATION OF THE AMOUNT OF GRATUITY

    INSPECTOR

    EXEMPTION

    PENALTIES

    RECOVERY OF GRATUITY

    POWERS OF INSPECTORS

    DETERMINATION OF THE AMOUNT OF GRATUITY

    INSPECTOR

    PROTECTION OF ACTION TAKEN IN GOOD FAITH

    COGNIZANCE OF OFFENCES

    EXEMPTION

    PENALTIES

    RECOVERY OF GRATUITY

    POWERS OF INSPECTORS

    DETERMINATION OF THE AMOUNT OF GRATUITY

    INSPECTOR

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    TO WHAT SHALL THE ACT APPLY TO

    Every factory, mine, oilfield, plantation, port

    and railway company.

    Every Shop or establishment if it employs 10

    or more person in preceding one year.

    Such other establishment in which 10 or more

    employees are employed or were employed

    on any day of preceding twelve months.

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    DEFINITIONS

    APPROPRIATE GOVERNMENT

    APPROPRIATE GOVERNMENT

    ESTABLISHMENT OTHER CASEESTABLISHMENT OTHER CASEESTABLISHMENT OTHER CASEESTABLISHMENT OTHER CASEESTABLISHMENT OTHER CASEESTABLISHMENT OTHER CASEESTABLISHMENT OTHER CASE

    Major Port, mine, oilfield or

    railway company

    Factory

    Having Branches in more

    than 1 state

    Belonging to Central Govt.In any Other Case

    State Government

    ESTABLISHMENT OTHER CASE

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    Wider Meaning of Establishments

    Establishment

    Establishments include;

    Educational Institute Schools

    Polytechnics

    Universities

    Temple

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    DEFINITIONS

    Completed year of service

    Continuous Service

    Controlling Authority

    Factory

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    Related Cases

    A college run by a societies registered underthe societies registration act is an

    establishment. Gurudeo Ayurved

    Mahavidyalaya v. Madhav,(1994) (Bombay) A temple is an establishment.Administrator,

    Shri Jagganath Temple Puri V. Jagannath

    Padhi, 1992 , Orrisa.

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    DEFINITIONS

    EMPLOYEE means any person who is employed for

    wages, whether the terms of such employment are

    expressed or implied in any kind of work, manual or

    otherwise, in or in connection with the work of the

    factory, mine, oilfields, plantation, port, railway

    companies, shop or other establishments to which

    this act applies.

    Exception Persons employed in state or centralgovernment

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    EMPLOYER

    "employer" means, in relation to any establishment, factory,mine, oilfield, plantation, port, railway company or shop

    In case of state or central govt. a person or authorityappointed by the Government for the supervision and

    control of employees, or where no person or authorityhas been so appointed, the head of the Ministry or theDepartment concerned,

    In case of any local authority, the person appointed bysuch authority for the supervision and control of

    employees or where no person has been so appointed,the chief executive office of the local authority,

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    in any other case, the person, who, or the authority which,has the ultimate control over the affairs of the

    establishment, factory, mine, oilfield, plantation, port,

    railway company or shop, and where the said affairs are

    entrusted to any other person, whether called a manager,managing director or by any other name, such person;

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    DEFINITION OF FAMILY

    In Case of MaleEmployee

    Himself

    His wife

    His children whethermarried or unmarried

    His dependant parents

    The dependant parents ofhis wife and the widow

    Children of hispredeceased son, if any

    In case of FemaleEmployee

    Herself

    Her husband

    Her children whethermarried or unmarried

    Her dependant parents

    The dependant parents of

    her husband & the widow

    Children of her

    predeceased son, if any

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    DEFINITIONS

    Wages

    means all emoluments which are earned by an

    employee while on duty or on leave in

    accordance with the terms and conditions ofhis employment and which are paid or are

    payable to him in cash and includes dearness

    allowance but does not include any bonus,

    commission, house rent allowance, overtimewages and any other allowance.

    Definitions

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    Definitions Retirement

    Superannuation

    By Superannuation is meant the act of getting relived from

    service on attaining a specified age which is prefixed, say,

    58 years of age. On the other hand, Retirement is also an

    act of relieving from service but not necessarily be due to

    attaining a prefixed age and shall include Voluntary

    Retirement or even Compulsory Retirement. Though

    superannuation is also retirement, the latter need not besuperannuation.

    What is meant by 'continuous

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    What is meant by continuous

    service'?An employee shall be said to be in continuous service for a period if he has, for

    that period, been in uninterrupted service, including service which may beinterrupted on account of

    sickness,

    accident,

    leave,

    absence from duty without leave (not being absent in respect of which anorder treating the absence as a break in service has been passed inaccordance with the standing orders, rules or regulations governing theemployees of the establishment),

    lay-off,

    strike or

    a lock-out or cessation of work not due to any fault of the employee,

    whether such uninterrupted or interrupted service was rendered before orafter the commencement of this Act;

    If the service is interrupted by causes other than those mentioned in the

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    If the service is interrupted by causes other than those mentioned in thedefinition, the service will be deemed to be interrupted & it will not fall withinthe definition of continuous service {Dalmia Magnesite corporation.salem vsR.L.commr,Madras(1982)

    Where an employee (not being an employee employed in a seasonal establishment) isnot in continuous service within the meaning of clause (1), for any period of 1 year, heshall be deemed to be in continuous service under the employer --

    for the said period of one year, if the employee during the period of twelve calendarmonths preceding the date with reference to which calculation is to be made, has

    actually worked under the employer for not less than - 190 days, in the case of an employee employed below the ground in a mine or in an

    establishment who works for less than six days in a week; and

    240 days in any other case;

    for the said period of six months, if the employee during the period of six calendar months

    preceding the date with reference to which the calculation is to be made, has actuallyworked under the employer for not less than -

    95 days, in the case of an employee employed below the ground in a mine or in anestablishment which works for less than six days in a week;and

    120 days, in any other case;

    The number of days for which an employee has actually worked under

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    y p y yan employer shall include the days on which-

    he has been laid-off under an agreement or as permitted bystanding orders made under the Industrial Employment (Standing

    Orders) Act, 1946, or under the Industrial Disputes Act, 1947, orunder any other law applicable to the establishment;

    he has been on leave with full wages, earned in the previous year;

    he has been absent due to temporary disablement caused by anaccident arising out of and in the course of employment;

    in the case of a female, she has been on maternity leave; so that thetotal period of such maternity leave does not exceed twelve weeks.

    Where an employee, employed in a seasonal establishment, is not incontinuous service within the meaning of clause (1), for any periodof one year or six months. He shall be deemed to be in continuous

    service under the employer for such period if he has actually workedfor not less than 75% of the number of days on which theestablishment was in operation during such period.

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    CONTROLLING AUTHORITY

    The appropriate Government, may, bynotification, appoint any officer to be a

    controlling authority, who shall be responsible

    for the administration of this act and differentcontrolling authorities may be appointed for

    different areas.

    P f G i

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    Payment of Gratuity

    Gratuity shall be payable to an employee on the terminationof his employment after he has rendered continuous servicefor not less than five years, -

    (a) on his superannuation, or

    (b) on his retirement or resignation, or

    (c) on his death or disablement due to accident or

    disease : Provided that the completion of continuousservice of five years shall not be necessary where thetermination of the employment of any employee is dueto death or disablement .

    P t Of G t it

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    Payment Of Gratuity

    in the case of death of the employee, gratuitypayable to him shall be paid to-

    His Nominee, or

    If no nomination has been made, to his heirs,

    and where any such nominees or heirs is a minor, theshare of such minor, shall be deposited with the

    controlling authority who shall invest the same for thebenefit of such minor in such bank or other financialinstitution, as may be prescribed, until such minor attainsmajority.

    P t f G t it

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    Payment of Gratuity

    For every completed year of service or part thereof in excessof six months, the employer shall pay gratuity to an employeeat the rate of fifteen days' wages based on the rate of wageslast drawn by the employee concerned.

    Provided that in the case of a piece-rated employee, dailywages shall be computed on the average of the total wagesreceived by him for a period of three months immediatelypreceding the termination of his employment, and, for this

    purpose, the wages paid for any overtime work shall not betaken into account.

    Provided further that in the case of an employee

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    CALCULATING FORMULA

    p y

    who is employed in a seasonal establishment and

    who is not so employed throughout the year, the

    employer shall pay the gratuity at the rate of sevendays' wages for each season.

    FIFTEEN DAYS WAGE=

    (MONTHLY RATE OF WAGES LAST DRAWN BY HIM / 26) *

    15

    P t f G t it

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    Payment of Gratuity

    Gratuity Amount payable under Payment of Gratuity Actenhanced from Rs.3.5 lakhs to Rs. 10 lakhs

    As Per

    Payment of Gratuity (Amendment) Act,2010 (No. 15 of

    2010), dated 17-5-2010

    Section 4 (4) now reads as

    The amount of gratuity payable to an employee shall not

    exceed Ten Lakh Rupees

    P t Of G t it

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    Payment Of Gratuity

    For the purpose of computing the gratuity payable to anemployee who is employed, after his disablement, on reduced

    wages, his wages for the period preceding his disablement

    shall be taken to be the wages received by him during that

    period, and his wages for the period subsequent to hisdisablement shall be taken to be the wages as so reduced.

    Nothing in this section shall affect the right of an employee to

    receive better terms of gratuity under any award oragreement or contract with the employer.

    P t Of G t it

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    Payment Of Gratuity

    Notwithstanding anything contained in sub-section (1), - (a) the gratuity of an employee,

    whose services have been terminated for any

    act, willful omission or negligence causing anydamage or loss to, or destruction of, property

    belonging to the employer, shall be forfeited

    to the extent of the damage or loss so caused.

    P t f G t it

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    Payment of Gratuity

    The gratuity payable to an employee may be whollyor partially forfeited

    if the services of such employee have been terminated

    for his riotous or disorderly conduct or any other act of

    violence on his part, or

    if the services of such employee have been terminated

    for any act which constitutes an offence involving moral

    turpitude, provided that such offence is committed by

    him in the course of his employment.

    C l I

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    Compulsory Insurance

    Every employer, other than an employer or anestablishment belonging to, or under the control of,

    the Central Government or a State Government,

    shall, subject to the provisions of sub-section (2),

    obtain an insurance in the manner prescribed, for his

    liability for payment towards the gratuity under this

    Act, from the LIC of India established under the Life

    Insurance Corporation of India Act, 1956 (31 of 1956)or any other prescribed insurer.

    C l I

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    Compulsory Insurance

    The appropriate Government may, subject tosuch conditions as may be prescribed, exemptevery employer who had already establishedan approved gratuity fund in respect of hisemployees and who desires to continue sucharrangement, and every employer employingfive hundred or more persons who establishes

    an approved gratuity fund in the mannerprescribed from the provisions of sub-section(1).

    C l I

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    Compulsory Insurance

    For the purpose of effectively implementing theprovisions of this section, every employer shall

    within such time as may be prescribed get his

    establishment registered with the controlling

    authority in the prescribed manner and no employer

    shall be registered under the provisions of this

    section unless he has taken an insurance referred to

    in sub-section (1) or has established an approvedgratuity fund referred to in sub-section (2).

    C l I

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    Compulsory Insurance

    The appropriate Government may, by notification,make rules to give effect to the provisions of thissection and such rules may provide for thecomposition of the Board of Trustees of theapproved gratuity fund and for the recovery by thecontrolling authority of the amount of the gratuitypayable to an employee from the Life InsuranceCorporation of India or any other insurer with whoman insurance has been taken under sub-section (1),

    or as the case may be, the Board of Trustees of theapproved gratuity fund.

    Comp lsor Ins rance

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    Compulsory Insurance

    Where an employer fails to make any paymentby way of premium to the insurance referred

    to in sub-section (1) or by way of contribution

    to an approved gratuity fund referred to insub-section (2), he shall be liable to pay the

    amount of gratuity due under this Act

    (including interest, if any, for delayedpayments) forthwith to the controlling

    authority.

    Compulsory Insurance

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    Compulsory Insurance

    Whoever contravenes the provisions of sub-section (5) shall be punishable with fine which

    may extend to ten thousand rupees and in the

    case of a continuing offence with a furtherfine which may extend to one thousand

    rupees for each day during which the offence

    continues.

    POWER TO EXEMPT

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    POWER TO EXEMPT

    The Govt. may, by notification, and subject to suchconditions as may be specified in the notification,exempt any establishment, factory, mine, oilfield,plantation, port, railway company or shop to whichthis Act applies from the operation of the provisionsof this Act if, in the opinion of the appropriateGovernment, the employees in such establishment,factory, mine, oilfield, plantation, port, railwaycompany or shop are in receipt of gratuity or

    pensionary benefits not less favourable than thebenefits conferred under this Act.

    POWER TO EXEMPT

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    POWER TO EXEMPT

    The appropriate Government may, by notificationand subject to such conditions as may be specified inthe notification, exempt any employee or class ofemployees employed in any establishment, factory,mine, oilfield, plantation, port, railway company orshop to which this Act applies from the operation ofthe provisions of this Act, if, in the opinion of theappropriate Government, such employee or class ofemployees are in receipt of gratuity or pensionary

    benefits not less favourable than the benefitsconferred under this Act.

    POWER TO EXEMPT

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    POWER TO EXEMPT

    A notification issued under sub-section (1) orsub-section (2) may be issued retrospectively

    a date not earlier than the date of

    commencement of this Act, but no suchnotification shall be issued so as to

    prejudicially affect the interests of any person.

    Nomination

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    Nomination

    To be made after Completion of1 yearof service. At the time of nomination the amount of gratuity payable can

    be distributed if there are more than one nominee.

    If at time of making nomination, the employee has a family,

    the nomination shall be made in favour of one or moremember of family.

    After giving notice to the employer the employee can makemodification to nomination.

    If nominee predeceases employee, the interest of nominee

    shall revert to employee who shall make fresh nomination. Every nomination shall be kept by employer in his safe

    custody.

    INSPECTORS

    andw

    andw

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    INSPECTORS

    The appropriate Government may, by notification, appoint asmany Inspectors, as it deems fit, for the purposes of this Act.

    The appropriate Government may, by general or special order,

    define the area to which the authority of an Inspector soappointed shall extend and where two or more Inspectors areappointed for the same area, also provide, by such order, forthe distribution or allocation of work to be performed bythem under this Act.

    Every Inspector shall be deemed to be a public servant withinthe meaning of section 21 of the IPC, 1860 (45 of 1860).

    heret

    woormore

    Inspectors

    areappoi

    nt

    heret

    woormore

    Inspectors

    areappoi

    nt

    POWER OF INSPECTORS

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    POWER OF INSPECTORS

    Require an employer to furnish suchinformation as he may consider

    necessary.

    Enter and inspect.

    Examine .

    Exercise such other powers as may beprescribed.

    RECOVERY OF GRATUITY

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    RECOVERY OF GRATUITY If the amount of gratuity payable is not paid by the employer,

    within the prescribed time, to the person entitled thereto, thecontrolling authority shall, on an application made to it in thisbehalf by the aggrieved person, issue a certificate for thatamount to the Collector, who shall recover the same, togetherwith compound interest thereon at such rate as the Central

    Government may, by notification, specify, from the date of expiryof the prescribed time, as arrears of land revenue and pay thesame to the person entitled thereto :Provided that thecontrolling authority shall, before issuing a certificate under thissection, give the employer a reasonable opportunity of showing

    cause against the issue of such certificate :Provided further thatthe amount of interest payable under this section shall, in nocase exceed the amount of gratuity payable under this Act.

    PENALTIES

    tthe

    pers

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    PENALTIES

    NON-PAYMENT

    OF GRATUITY

    OFFENCE PENALTY

    FALSE STATEMENT TO

    AVOID PAYMENT

    DEFAULT IN COMPLYING

    WITH THE ACT

    6 Months-2 yrs.

    Imprisonment

    3 Months 1 Year

    Imprisonment

    Fine Rs.10,000-20,000

    Or Both

    6 Months Imprisonment

    or Fine Rs.10,000 or Both

    rewith

    contained

    inanyena

    ctmentoth

    er

    onin

    respectof

    anythingw

    hichisin

    g

    EXEMPTION OF EMPLOYER FROM

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    LIABILITY IN CERTAIN CASES

    Where an employer is charged with an offencepunishable under this Act, he shall be entitled, uponcomplaint duly made by him and on giving to thecomplainant not less than three clear days' notice inwriting of his intention to do so, to have any other

    person whom he charges as the actual offenderbrought before the court at the time appointed forhearing the charge; and if, after the commission ofthe offence has been proved, the employer proves tothe satisfaction of the court (a) that he has used due diligence to enforce the execution

    of this Act, and

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    (b) that the said other person committed theoffence in question without his knowledge,

    consent or connivance, that other person shall

    be convicted of the offence and shall be liableto the like punishment as if he were the

    employer and the employer shall be

    discharged from any liability under this Act inrespect of such offence :

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    Provided that in seeking to prove as aforesaid,the employer may be examined on oath and

    his evidence and that of any witness whom he

    calls in his support shall be subject to cross-examination on behalf of the person he

    charges as the actual offender and by the

    prosecutor :

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    Provided further that, if the person charged as theactual offender by the employer cannot be broughtbefore the court at the time appointed for hearingthe charge, the court shall adjourn the hearing from

    time to time for a period not exceeding three monthsand if by the end of the said period the personcharged as the actual offender cannot still bebrought before the court, the court shall proceed to

    hear the charge against the employer and shall, if theoffence be proved, convict the employer.

    COGNIZANCE OF OFFENCE

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    COGNIZANCE OF OFFENCE

    No court shall take cognizance of any offence punishableunder this Act save on a complaint made by or under theauthority of the appropriate Government : Provided thatwhere the amount of gratuity has not been paid, orrecovered, within six months from the expiry of theprescribed time, the appropriate Government shall authorisethe controlling authority to make a complaint against theemployer, whereupon the controlling authority shall, withinfifteen days from the date of such authorisation, make suchcomplaint to a Magistrate having jurisdiction to try theoffence.(2) No court inferior to that of a Metropolitan

    Magistrate or a Judicial Magistrate of the first class shall tryany offence punishable under this Act.

    PROTECTION OF ACTION TAKEN

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    IN GOOD FAITH

    No suit or other legal proceeding shall lieagainst the controlling authority or any other

    person in respect of anything which is in good

    faith done or intended to be done under thisAct or any rule or order made thereunder.

    PROTECTION OF GRATUITY

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    PROTECTION OF GRATUITY

    No gratuity payable under this Act and nogratuity payable to an employee employed in

    any establishment, factory, mine, oilfield,

    plantation, port, railway company or shopexempted under section 5 shall be liable to

    attachment in execution of any decree or

    order of any civil, revenue or criminal court.

    ACT TO OVERRIDE OTHER

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    ENACTMENTS ETC.

    The provisions of this Act or any rule madethere under shall have effect notwithstanding

    anything inconsistent therewith contained in

    any enactment other than this Act or in anyinstrument or contract having effect by virtue

    of any enactment other than this Act.

    POWER TO MAKE RULES

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    POWER TO MAKE RULES

    (1) The appropriate Government may, by notification make rules for thepurpose of carrying out the provisions of this Act. (2) Every rule made bythe Central Government under this Act shall be laid, as soon as may beafter it is made, before each House of Parliament while it is in session, fora total period of thirty days which may be comprised in one session or intwo or more successive sessions, and if, before the expiry of the sessionimmediately following the session or the successive sessions aforesaid,

    both Houses agree in making any modification in the rule or both Housesagree that the rule should not be made, the rule shall, thereafter, haveeffect only in such modified form or be of no effect as the case may be; so,however, that any such modification or annulment shall be withoutprejudice to the validity of anything previously done under that rule.

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    THANK YOU