Record Provident Fund Trust Definition - A summary of the activity
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Through this activity, you can record the details of a Provident Fund trust. The Provident Fund (PF) trust holds the responsibility of managing the Provident Fund. The different types of PF trusts are:
Un-exempted Trust:This is an establishment maintaining the Provident Fund account with Regional Provident Fund Commission (RPFC).
Exempted Trust:This is a PF Trust duly recognized by the Income Tax department and exempted by the RPFC. However, the RPFC is the regulatory body and the trust has to comply with all the applicable rules and regulations.
Excluded Trust: This is a PF Trust duly recognized by the Income Tax Department. It is regulated by the Income Tax Act. Provisions of the PF Act are not applicable.
Recording Provident Fund trust details: Initially you can record the Provident Fund trust details, such as
The code and description of the Provident Fund trust.
The establishment code of the Provident Fund trust.
You can record the Provident Fund trust and the Provident Fund for each Provident Fund type. The Provident Fund type could be:
Unexempted fund type
Exempted fund type
Excluded fund type
Recording Provident Fund details: You can record the details, such as
The percentage of emoluments that the employer and the employee can contribute towards the Provident Fund account.
Maximum Voluntary Contribution: During the joining period, you have the privilege of contributing voluntarily for the Provident Fund. You can record the maximum voluntary contribution in percentage.
The percentage of emoluments of each employee that the employer could contribute towards “Employee Deposit Link Insurance (EDLI)” scheme 1976.
Indicate whether “Employee Pension Scheme (EPS)” is applicable or not. If EPS is applicable, you require to record the percentage of contribution made towards EPS every year.
The interest rate in percentage and the rule applied for computing the interest for Provident Fund.
You can record more information on trust details, such as the contact address and the telephone number of the Provident Fund trust.
Further, you can modify or delete the Provident Fund trust details.
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Record Provident Fund Trust Details |
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Recording Provident Fund trust details
“Provident Fund” is an account opened by an organization for every employee to save money as a precautionary measure, which will be useful for the employees after retirement. Generally, 12% of the basic salary contributed by the employer and employee every month accounts for the Provident Fund. The fund that is accumulated is given to the employee on instances like resignation/retirement/death. The scheme of Provident Fund is governed by the “Employees' Provident Fund and Miscellaneous Provisions Act”, 1952. The “Ministry of Labour Welfare” administers the Provident Fund Scheme.
If the employee desires to contribute more than 12% towards the Provident Fund account, it is called “Voluntary Contribution”. It is possible to change the voluntary contribution Provident Fund percentage in the month of February or March for the next financial year but you cannot change the voluntary Provident Fund percentage in between the financial year.
Employee's Deposit Linked Insurance (EDLI) Scheme
If the Provident Fund and Miscellaneous Provision Act, 1952 is applicable to the employees’, the employee will have a statutory liability to subscribe for the “Employee's Deposit Linked Insurance (EDLI)” scheme, 1976. The benefit of the scheme is to provide life insurance for all the employees. This scheme was amended with effect from 24th June, 2000.
This insurance scheme is only beneficial if the employee’s Provident Fund balance exceeds Rs 35,000. This implies that if the service of the employee in the organization is not adequate or the salary is low, the average Provident Fund balance may be substantially less. In such instances, the insurance benefit to the employee's family is either inadequate or non-existent.
The insurance is computed by adding the average balance in the Provident Fund of the deceased employee during the 12 months preceding his death and 25% of the amount in excess of Rs 35,000 subject to Rs 60,0000.
Under this scheme, the employer may require to make a contribution @ 0.50% of each employee’s salary to the Provident Fund authorities. However, under Sec.17 (2A) of the Act, the employer may be exempted from contributing to this scheme if the employees’ were provided better insurance benefits through an alternative scheme.
Pension amount is taken from the exempted and unexempted Provident Fund of the employer. The employer and employee contributes 12% of salary and one half of the amount is taken for the Provident Fund and other half is taken by the Employee Pension Scheme -1995, which is derived as follows:
8.33% of Provident Fund amount or Rs 541, which is 8 1/3rd of Rs 6,500.
In the above computation, you have to take the lesser value for pension and ignore the greater value. For excluded Provident Fund, the Employees Pension Scheme -1995 is not applicable and the entire Employer's contribution of 12% is taken for the Provident Fund accumulation.