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New EPFO circular: Guidelines on utilising reserves and surplus by exempted establishments
The Employees Provident Fund Organisation (‘EPFO’) has issued a circular dated 7 October 2024 (No. E.III/10(122)/ 2024/Circular/Exemption/5435) regarding the manner of utilisation of reserves and surplus by private Provident Fund Trusts of exempted establishments, for distribution of interest among members.
The circular addresses the management of reserves and surplus by private Provident Fund Trusts of exempted establishments. This guidance comes in response to observed practices where some establishments sought to credit interest to beneficiaries at rates significantly higher than those declared by the EPFO, particularly around the time of surrendering their exemption status.
Date of Issue: October 7, 2024
Key principles set out in the circular:
- Reserves and surplus: The EPFO highlighted that inflated reserves and surplus often indicate a failure to distribute earnings among beneficiaries in previous years. This raises concerns about the fairness of interest allocation, suggesting that higher interest rates should have been credited to members.
- Interest crediting rules: Interest is to be credited on monthly running balances and cannot be credited for broken periods of a year.
- Earnings-based interest rates: The circular stresses that the interest rate credited to exempted trusts should align with the actual earnings of the fund. This is crucial for maintaining equity among members.
- Strict prohibition on overdrawing: Overdrawing from reserves and surplus is not permitted. This rule is in place to prevent unjust enrichment, where certain beneficiaries might receive undue advantage at the expense of others. Certain provisions of the Employees’ Provident Funds Scheme and the Indian Trusts Act have been cited in support of this, by the said circular.
The said circular supersedes previous guidelines issued in 2010 and 2011, which are now withdrawn.
Source – EPFO Circulars:
EPFO Circular 2010
EPFO Circular 2011
EPFO Circular 2024
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Modification in Table B under Employees’ Pension Scheme, 1995 (“EPS”) for purpose of calculation of past service benefit
Ministry of Labour and Employment in their Notification dated June 14, 2024, have amended the EPS by laying down corresponding factor for calculation of past service benefit for period up from 34 to 42 years.
Note: Weightage to number of years is increased up to factors running until 42 years of employment (as compared to 34 years, earlier), while calculating past service pension of an exiting employee.
Date of issue: June 24, 2024
Source: Circular on Pension Table B
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Modification in Table D under EPS for purpose of calculation of withdrawal benefit
Ministry of Labour and Employment in their Notification dated June 14, 2024, have amended the EPS by modifying the Table D which is used to calculate the withdrawal benefit under EPS for employees who are not eligible for pensionary benefit under EPS.
As per the said notification, the basis of calculation of withdrawal benefit will be as per the months of contributory service instead of number of years of service.
Date of issue: June 24, 2024
Source: Circular on Pension Table D
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Discontinuation of partial withdrawal/ non-refundable advance during outbreak of COVID-19 pandemic under paragraph 68 L (3) of Employees Provident Fund Scheme, 1952 (“EPF Scheme”)
Employees Provident Fund Organisation in their circular dated June 12, 2024, have decided to discontinue the non-refundable advance with respect to the outbreak of COVID-19 pandemic with immediate effect, as COVID-19 is no longer a pandemic. This will be applicable to Exempted establishments as well.
Date of issue: June 12, 2024
Source: Circular on Covid-19
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Rate of interest for FY 2023 – 2024 applicable to members of EPF scheme
EPFO in their circular dated May 31, 2024, conveyed that the Central Government has approved the interest rate of 8.25% for financial year 2023 -2024 to members of the EPF Scheme.
Date of issue: May 31, 2024
Source: Circular on Declaration of Rate of Interest
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Removal of mandatory uploading of image of cheque / attested bank passbook for claims settlement in certain cases
To facilitate speedy settlement of claims filed online, EPFO has decided to relax the requirement of mandatory uploading of image of cheque leaf / attested bank passbook for certain cases. This relaxation will be applicable based on certain validations which include online verification of the bank KYC by concerned bank / NCPI, verification of bank KYC by employer using DSC, seeded Aadhaar number verified by UIDAI.
Date of issue: May 28, 2024
Source: Circular on mandatory uploading of image of cheque
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Implementation of Digital Joint Request under Para 26(6) of EPF Scheme, 1952
EPFO in its circular dated January 30, 2024 emphasised on the need for a member-employee to furnish a joint request and permission, for him to contribute on actual / higher pay. The said circular, segregates requirements for members, as indicated in the table below:
Requirements for members
| Type of employee |
Joint application required |
Conditions for PF contribution on higher pay |
| (1) Left employment or died on or before October 31, 2023 |
No |
Contributions were made on higher pay, and admin/ inspection charges were on paid on higher pay. |
| (2) Existing employees who joined on/ before October 31, 2023 |
Yes – no timeline specified |
Contributions were and are being made on higher pay, and admin/ inspection charges were and are being paid on higher pay. |
| (3) Employees joining employment from October 31, 2023 onwards |
Yes – immediately |
Contributions were and are being made on higher pay, and admin/ inspection charges were and are being paid on higher pay. |
We are given to understand that EPFO may launch an online facility, where the employer and employee can sign a document in this regard. However, until such time, we recommend priority be given to the joint requests of:
- New joiners coming into employment on or after November 1, 2023 – since the requirement is immediately triggered; and
- Existing employees in the descending order of age – to prevent hassles with EPFO on retirement.
For more information, please see our article on Joint request for Provident Fund contribution on higher pay.
Date of issue: January 30, 2024
Source: Circular on the Implementation of the Digital Joint Request
