Dear All,
Regarding appended write-up, from a reliable source based on Madras & Calcutta High Court Judgement.
"CONCLUSION REGARDING ISSUE OF ‘DUE DATE’:
Due date for payment of Provident Fund contributions is 15 days from the end of month in which wages are paid (plus grace period of 5 days). Thus, if wages pertaining to April’ 2012 is paid on, say, 7th May’ 2012, due date for payment of Provident Fund contribution is 20th June’ 2012 [i.e. 15th June' 2012 as increased by grace period of 5 days]."
It is very clear that the PF officials have not accepted the above mentioned procedure, which is further substantiated by the following point.
• In the online system there are two columns named wage month and contribution month. If we select the wage month as November it would automatically show the contribution month as December, hence the system would calculate the interest for the respective period by default.
• In our case, the company pays the salary on the 5th of every month (wages pertaining to April’ 2012 is paid on, say, 5th May’ 2012) and subsequently we pay the PF contribution on the 15th of the same month (May 15, 2012), in this cycle the amount realized date had crossed 20th of that particular month (realized date after May 20, 2012) then the PF office sent a show-cause notice to pay the interest for the non contribution period, for the days after 15th with damages, more so the interest and the damages was calculated up to the date of the show-cause notice (for example it could be 1 year, 2years etc).
Looking forward for your exert opinion in this regard.
Regards.
Shanmuganand
Asst Mgr-HR & Admin
From India, Madras
1Regarding appended write-up, from a reliable source based on Madras & Calcutta High Court Judgement.
"CONCLUSION REGARDING ISSUE OF ‘DUE DATE’:
Due date for payment of Provident Fund contributions is 15 days from the end of month in which wages are paid (plus grace period of 5 days). Thus, if wages pertaining to April’ 2012 is paid on, say, 7th May’ 2012, due date for payment of Provident Fund contribution is 20th June’ 2012 [i.e. 15th June' 2012 as increased by grace period of 5 days]."
It is very clear that the PF officials have not accepted the above mentioned procedure, which is further substantiated by the following point.
• In the online system there are two columns named wage month and contribution month. If we select the wage month as November it would automatically show the contribution month as December, hence the system would calculate the interest for the respective period by default.
• In our case, the company pays the salary on the 5th of every month (wages pertaining to April’ 2012 is paid on, say, 5th May’ 2012) and subsequently we pay the PF contribution on the 15th of the same month (May 15, 2012), in this cycle the amount realized date had crossed 20th of that particular month (realized date after May 20, 2012) then the PF office sent a show-cause notice to pay the interest for the non contribution period, for the days after 15th with damages, more so the interest and the damages was calculated up to the date of the show-cause notice (for example it could be 1 year, 2years etc).
Looking forward for your exert opinion in this regard.
Regards.
Shanmuganand
Asst Mgr-HR & Admin
From India, Madras
dear member, in this regards, you may contact respective pf department for better sollution. regards shivnendra kr
From India, New Delhi
From India, New Delhi
Dear Shanmuganand ji,
I have not come across up till now such kind of calculation of interest by default through online system and as well Show Cause Notices issued by PF department. I do not intent to say that it is untruth.
But you mention about the conclusion regarding the issue of “due date” is not pertaining to EPF & MP Act 1952 but it is pertaining to Deductibility of Provident Fund Contributions Under Income Tax Act, to my view.
If PF department is taking a stand as you mentioned, then, to my view it is wrong.
To determine "Due Date" for payment of Provident Fund contributions under EPF & MP Act 1952, clause (1) of Paragraph 38 of Employees' Provident Fund Scheme, 1952 is relevant. It reads as follows:-
(1) The employer shall, before paying the Member his wages in respect of any period or part of period for which contributions are payable, deduct the employee’s contribution from his wages which together with his own contribution as well as an administrative charge of such percentage of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee and in respect of which provident fund contributions are payable as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the Fund by separate bank drafts or cheques on account of contribution and administrative charge.
I hope there should not be any confusion as regards to “Due Date” for payment of Provident Fund contributions under EPF&MP Act 1952.
The provision of Deductibility of Provident Fund Contributions under Income Tax Act is as under:
As regards to Employer’s contribution:
Under Section 36(1)(iv) read with Section 43B, Employer's contribution to Provident Fund is deductible subject to prescribed limits if the same is paid on or before the "due date" by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act or rule or otherwise, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the “due date”.
As regards to Employees contribution:
i) Any sum received by the assessee from its employees as contributions to Provident Fund is treated as an income u/s. 2(24)(x).
ii) The deduction for payment of employees' contribution can be claimed by virtue of Section 36(1)(va) according to which it is deductible if such sum is credited by the assessee to employee's account in the relevant fund under any Act or rule or otherwise on or before the "due date".
Thus, it is clear that both employer's and employees' contributions are deductible if paid by the assessee on or before "due date" under relevant Act or rule i.e. EPF & MP Act 1952.
There is an ambiguity regarding interpretation of the words "fifteen days from the close of month" appearing in Paragraph 38 of Employees' Provident Fund Scheme as to whether it should be reckoned from the month in which such contributions are received by the assessee from its employees or from the month in respect of which such contributions are received by the assessee, in cases where wages are paid in subsequent month(s), and this ambiguity should be resolved in favour of assessee, i.e. fifteen days are to be reckoned from close of the month in which employees contributions are recovered i.e. the month of payment of wages.
But this all pertaining to Deductibility of Provident Fund Contributions under Income Tax Act and not pertaining to provisions under EPF & MP Act 1952.
Experts are requested to make comments on this.
From India, Mumbai
I have not come across up till now such kind of calculation of interest by default through online system and as well Show Cause Notices issued by PF department. I do not intent to say that it is untruth.
But you mention about the conclusion regarding the issue of “due date” is not pertaining to EPF & MP Act 1952 but it is pertaining to Deductibility of Provident Fund Contributions Under Income Tax Act, to my view.
If PF department is taking a stand as you mentioned, then, to my view it is wrong.
To determine "Due Date" for payment of Provident Fund contributions under EPF & MP Act 1952, clause (1) of Paragraph 38 of Employees' Provident Fund Scheme, 1952 is relevant. It reads as follows:-
(1) The employer shall, before paying the Member his wages in respect of any period or part of period for which contributions are payable, deduct the employee’s contribution from his wages which together with his own contribution as well as an administrative charge of such percentage of the pay (basic wages, dearness allowance, retaining allowance, if any, and cash value of food concessions admissible thereon) for the time being payable to the employees other than an excluded employee and in respect of which provident fund contributions are payable as the Central Government may fix. He shall within fifteen days of the close of every month pay the same to the Fund by separate bank drafts or cheques on account of contribution and administrative charge.
I hope there should not be any confusion as regards to “Due Date” for payment of Provident Fund contributions under EPF&MP Act 1952.
The provision of Deductibility of Provident Fund Contributions under Income Tax Act is as under:
As regards to Employer’s contribution:
Under Section 36(1)(iv) read with Section 43B, Employer's contribution to Provident Fund is deductible subject to prescribed limits if the same is paid on or before the "due date" by which the assessee is required as an employer to credit an employee's contribution to the employee's account in the relevant fund under any Act or rule or otherwise, and where such payment has been made otherwise than in cash, the sum has been realised within fifteen days from the “due date”.
As regards to Employees contribution:
i) Any sum received by the assessee from its employees as contributions to Provident Fund is treated as an income u/s. 2(24)(x).
ii) The deduction for payment of employees' contribution can be claimed by virtue of Section 36(1)(va) according to which it is deductible if such sum is credited by the assessee to employee's account in the relevant fund under any Act or rule or otherwise on or before the "due date".
Thus, it is clear that both employer's and employees' contributions are deductible if paid by the assessee on or before "due date" under relevant Act or rule i.e. EPF & MP Act 1952.
There is an ambiguity regarding interpretation of the words "fifteen days from the close of month" appearing in Paragraph 38 of Employees' Provident Fund Scheme as to whether it should be reckoned from the month in which such contributions are received by the assessee from its employees or from the month in respect of which such contributions are received by the assessee, in cases where wages are paid in subsequent month(s), and this ambiguity should be resolved in favour of assessee, i.e. fifteen days are to be reckoned from close of the month in which employees contributions are recovered i.e. the month of payment of wages.
But this all pertaining to Deductibility of Provident Fund Contributions under Income Tax Act and not pertaining to provisions under EPF & MP Act 1952.
Experts are requested to make comments on this.
From India, Mumbai
Dear Shivendra ji, The PF department or any Government department will not have any solution to your query. The departments are concerned with GANDHI BAPU with you.
From India, Mumbai
From India, Mumbai
Dear friends
PFA an old circular dated 28th April 1964 issued by the PF Commissioner regarding grace period of five days for the payment of PF contribution. I am sure that this may be useful for all the members. Regards N Nataraajhan, Sakthi Management Services
From India, Bangalore
PFA an old circular dated 28th April 1964 issued by the PF Commissioner regarding grace period of five days for the payment of PF contribution. I am sure that this may be useful for all the members. Regards N Nataraajhan, Sakthi Management Services
From India, Bangalore
Dear Natraj ji,
Thank you very much for sharing this old & very important circular. I was in search of this circular since quite long time. There is one more circular of 1976 amending this one. If you or any one else member of this forum find out and share it, I will be highly obliged. Those two circulars, to my knowledge, many of HR Professionals are not aware of.
I could not open the attachment in my iPhone. I will make my comments on it after reading it.
Thanks once again.
From India, Mumbai
Thank you very much for sharing this old & very important circular. I was in search of this circular since quite long time. There is one more circular of 1976 amending this one. If you or any one else member of this forum find out and share it, I will be highly obliged. Those two circulars, to my knowledge, many of HR Professionals are not aware of.
I could not open the attachment in my iPhone. I will make my comments on it after reading it.
Thanks once again.
From India, Mumbai
Dear Shanmuganand Here I am attaching some Important file which will helpful to you regarding 14B & 7Q of the EPF act. Regards, Arihant
From India, Surat
From India, Surat
Dear Arihant ji,
Thank you very much for sharing the information in this forum. Your attachment PF UPDATE May 2011 is very informative. I request all the members to read it.
As regards to interest and damages, I am sharing herewith a Full Bench Judgement of Delhi High Court dated 12/09/2012 “Quashing Interest charged under Sec.7Q by EPF Authority" which is very very important to know by us.
From India, Mumbai
Thank you very much for sharing the information in this forum. Your attachment PF UPDATE May 2011 is very informative. I request all the members to read it.
As regards to interest and damages, I am sharing herewith a Full Bench Judgement of Delhi High Court dated 12/09/2012 “Quashing Interest charged under Sec.7Q by EPF Authority" which is very very important to know by us.
From India, Mumbai
It is an interesting discussion. The P.F & M.P.Act 1952 is a self contained code and if any dispute arises with regard to imlementation or interpretation of any provision of the P.F Act, it needs to be resolved within the frame work of the provisions of the P.F Act only and for this purpose the P.F Act has itslef created a machinery under Sections.7A, 7B,7C and 7D of the P.F Act. I therefore do not conern myself with the provisions of the Income Tax Act to decide what is due date under the P.F Act.
The P.F Act does refer to due date when it mandates under Para 38 of the P.F Scheme 1952 that the employer's and the employee's contribution shall be remitted within 15 days of the close of every month. Now the question is whether 'every month' refers to the month to which the wages pertain or to the month in which the wages shall be deducted.
The commencing words of Para 38 of the P.F.Scheme 1952which read as " the employer shall before paying the member his wages in respect of 'any period or part period' .................." will abundantly clarify that though the wages are paid in May and contribution is deducted in May, the wages pertain to the period of April and the words "close of every month" thus refer to close of the month to which the wages pertain but not to the month in which the wages are paid and contribution is deducted. Therefore the due date for payment of wages of April will expire within 15 days + 5 days grace period and P.F Department is right in demanding interest for the dealy in payment of contribution.
B.Saikumar
HR & labour Law advisor
Mumbai
From India, Mumbai
The P.F Act does refer to due date when it mandates under Para 38 of the P.F Scheme 1952 that the employer's and the employee's contribution shall be remitted within 15 days of the close of every month. Now the question is whether 'every month' refers to the month to which the wages pertain or to the month in which the wages shall be deducted.
The commencing words of Para 38 of the P.F.Scheme 1952which read as " the employer shall before paying the member his wages in respect of 'any period or part period' .................." will abundantly clarify that though the wages are paid in May and contribution is deducted in May, the wages pertain to the period of April and the words "close of every month" thus refer to close of the month to which the wages pertain but not to the month in which the wages are paid and contribution is deducted. Therefore the due date for payment of wages of April will expire within 15 days + 5 days grace period and P.F Department is right in demanding interest for the dealy in payment of contribution.
B.Saikumar
HR & labour Law advisor
Mumbai
From India, Mumbai
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