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Accounting Treatment of Provident Fund - Part 1

>> December 19, 2008

Before knowing the accounting treatment of provident fund , we must know the basic detail of Provident fund in India and what is its important from accounting point of view. This will be the helpful for fresher accountants in the field of accounting .

Employees Provident Fund

Employees provident fund is the fund which is created for the social security and retirement benefits for the employees. Different Countries organizations are created this for the benefits of employees.

Employees' Provident Fund Organisation of India

EPFO , India Established in 1952 consequent to the enactment of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The head office of the Organisation is in New Delhi. [1].

Presently, the following three schemes are in operation under the Act:

Enrolment: An employee is eligible for membership from the day he joins the covered establishment.
  • If the employee’s emoluments exceed Rs. 6,500/- per month, he has the option to join the Scheme(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 file details in Form No. 2 ( family particulars/ nominations) through the employer.

  • Rate of contribution payable by a member shall be @ 12% of his emoluments.
    A member can contribute statutorily over and above the prescribed rate.

  • In provident fund includes three scheme
    • The Employees Provident Fund Scheme, 1952

    • The Employees Family Pension Scheme, 1971

    • The Employees Deposit-Linked Insurance Scheme, 1976

    6. Calculation of Provident Fund from Basic Salary


    Both Employer and employee give their share in this fund . Currently employee gives 12% of his basic salary in this employee provident fund .


    Employer is also responsible for contribution in employees provident fund for the benefit of employees .

    • The rate are given following on basic salary .

      3.67% Provident Fund (A/c 1) + 8.33% Pension (A/c 10) + 1.10% Admin Charges onPF (A/c 2) + 0.50% EDLI (A/c 21) + 0.01% Admin Charges on EDLI (A/c 22)

      Total employee’s provident fund

      Now total is equal to = Employee’s contribution + Employer’s contribution
      Total provident fund = 13.61% on basic salary

      Pension (8.33% or 541/- which ever less)

      7. Regular activities:

      employer is responsible for given information and following forms

    • Time of joining:- Form

    • Employee should fill, at the time of joining, nomination & Declaration form.

    • Form 2, includes the following· Name of the employee· Parent/spouse name· Date of Birth· Sex· Marital Status· AC No· Address· Names, address, relation, Share for each etc Also for changing nominee names Form 2 is used. His eligibility begins on the date of joining the firm.
      Submitted along with form-5. Withdrawers/Dead :

    • Form 10c (pension) &

    • 19 PFForm 19 is used for withdrawing PF amount. Employee and parent/spouse name, name of the establishment, Ac no, Reasons for leaving service, Contribution for current financial year etc.

    • Form 10 is used for pension withdrawal.

    • Form 19: Employee should fill, all information like Bank a/c, name, DOJ…with signature and then Employer like present year contributions, DOR…for PF Fund – Due date: After 60 Daysof Resignation)

    • Transfer :- Form 13Form 13 is used for transferring an employee AC from one company to another. Both employer and employee have to specify his name, PF AC no, Position etc and submitted with a covering letter (consolidated list of employees). Photocopy of the above is kept in PF file for transfer.4. Employee register 3A, 65. For advance : Form 316. In case of employee expired / dead :

    • Process detailsForm 10 D (For claiming benefits under Pension)Employee should fill like Expired/late employee name, nomination name, details, Nomination Bank a/c…for monthly Pension

    • Form 20 (For Claiming EPF Contributions)Employee should fill like Expired/late employee name, nomination name, details,Nomination Bank a/c…for withdrawal of PF Fund (Incase of Death of a member

    • Form 5 IF (For Claiming EDLI benefits, nominee will get benefit)EDLI for death case, nominee will get benefit.7.

    • Form 9 (Register of employers - Application for review filed under)Monthly Remittance / Challans:1. Challans every month before 15th (4 copies/ quadruplicate)2. All A/c (A/c Nos-1,2,10,21&22)3. To Bank4. both employer & employee contribution· Account group no eg Ma mu 1246 (state-first two alphabets /city/acc no: of the company)· Month· Total number of subscribers· Total wages due for each account (wages on which calculations are done)· Each accounts totals (consolidated amount with employer and employee share)· Name of the establishment and address· Name and signature of the depositor· Name of the bank, mode and date of remittance etc

    • Challan is submitted tp PF office along with form-12A every month.Monthly returns:1. Form 12 A, with all information and employees list of contribution before 25th2. With Form 5 (new joiners list) , form 10 (resigned employees list), challans copy3. Information about last month employees, new & resigned employees & this month staff.Form 5· Name of the establishment and address· Month· Code no: of the factory· A c no:· Name of new employees· Fathers or Husband name in case of married women· Date of birth· Sex· Date of joining the fund· Total period of previous services as on the date of joining the fund Form 10· Name of the establishment and address· Month· Code no: of the establishment· A c no:· Name of member who is leaving· Fathers or Husband name in case of married women· Date of leaving service· Reasons for leaving service· Signature of authorized officer and stamp of the establishment Cross checking the above is done with the salary statement which includes the number and name all current employees.Form 12 A:· Name of the establishment and address· Currency period and month (April yr to march yr)· Statutory rate of contribution (12%)· Group code (NA for unexampled establishment. Establishment having more than 1000 have to keep a PF trust and have to specify the group code)· Total wages due for each account (wages on which calculations are done)· Amount of contribution and amount remitted (consolidated amount with employer and employee share)· Date of remittance· Total number of subscribers for the current month.· Name and address of the bank in which the amount is remitted.· Details of subscribers for E.P.F, PF, EDLI--No of subscribers as per last month--No of new subscribers (vide Form 5)--No of subscribers left service (vide Form 10)--Total no of subscribers (After adding and subtracting the new and retired employees with,the number should tally with monthly list of employees)Cross checking the above is done with the salary statement.

    Annul returns:

    • Form 3 A (Individual Computation sheet)

    • 2. Form 6 A (Consolidated Annual Contribution Statement)

    • 3. before 30th April every yearForm 6A:· Currency period and month (April yr to march yr)· Name of the establishment and address· Code no: of the establishment· No: of member voluntary contributing at a higher rate· AC No of each employee followed by their name, annual salary, annual contribution, employer contribution, refund of advance, rate of voluntary contribution.· This grand total should tally with all form 12 A and challans totals.

    • Form 3A: RegisterThis form is filled up for each employee stating his each monthly salary, contribution, Employer share, Refund of advance, No of days/period of non contributing service, if any (eg. unauthorised leave). If the employee is resigned during that financial year then the date of leaving service and reasons for leaving service should be specified in this form. Using Form 3A, form 6 A is filled up and crosschecking is done with all challans and 12 A forms.* Muster Roll * Wage Register * Inspection Book * Cash Book, Voucher & Ledger * PF work sheet Forms:Form 3: Contribution Cards - Individual Computation sheet contains all PF amts month-wise.

    • Form 3 A: Contribution Cards – Form

    • Form 4: Contribution card for employees other than monthly paid employees - Form Form 5 A: Return of Ownership to be sent to the Regional Commissioner - Form Form 6: Return of the Contribution Cards sent to the Commissioner on the expiry of the period of currency – FormForm 6 A: Consolidated Annual Contribution Statement - Consolidated Computation Sheet,contains total employees list, there total half yearly information.

    • Form 6 is top sheet and 6A is attachments.

    • Form 9: Register of employees - Application for review filed under.Register 3: Individual Computation, there Gross salary, Basic, DA, attendance, PF, Pension Information maintains month-wise.

    • Form 3 is top sheet and 3A is attachments

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    Anonymous,  June 30, 2011 at 12:33 PM  

    I m very new on this bt the things i m learning here are really appreciative......if the people will keep contributing like day knowledge will penetrate the illiteracy....keep doing....."splendid"

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