Do you qualify for higher pension under employees’ provident fund?
3 min read 14 Feb 2023, 11:25 PM ISTAs a member of the EPF scheme, an employee is entitled to receive a lump sum amount at the time of retirement (provident fund), pension after attaining the age of 58 years (pension fund) and insurance benefits in case of death while in service.
PremiumThe Employees Pension Scheme was introduced by the government in 1995. Since its inception, the scheme has gone through multiple amendments and has been riddled with countless litigations. One such battle lasted for more than two decades and was finally put to rest on 4 November by the Supreme Court. The apex court’s judgment was soon followed by a circular from the government on 29 December, outlining what eligible employees should do.
Before going into the details of the circular, let us first understand the root of the discontent.
The employee provident fund (EPF), popularly known as the retirement fund, is a scheme under which employees and employers make monthly matching contributions of 12% of basic salary and dearness allowance.
As a member of the EPF scheme, an employee is entitled to receive a lump sum amount at the time of retirement (provident fund), pension after attaining the age of 58 years (pension fund) and insurance benefits in case of death while in service.
As per the EPF scheme, the entire 12% of the employee’s contribution has to be deposited in the provident fund. However, 8.33% of the employer’s contribution goes into the pension fund but with an upper cap of ₹1,250. It is pertinent to note here that individuals who were members of EPF prior to 2014 had an option to allocate the entire 8.33% of the employer’s contribution amount towards pension fund—without any upper ceiling by exercising what was commonly called “dual option". Exercising a higher contribution towards the pension fund was financially more advantageous to the employees. However, the application of the dual option is where much of the debate started. First, a majority of the employees were never made aware of the existence of this option. Second, where applications were filed to that effect, the authorities, on some pretext, rejected the applications.
In a judgment in the case of R.C. Gupta and others, delivered on 4 October 2016, a division bench of the Supreme Court repealed the contention of the provident fund authorities that the said provision contemplated exercise of option within a specified time. Pursuant to this judgment, the government issued a new circular, providing an opportunity to employees whose dual application option was rejected hitherto to reapply for the same, entitling them to receive pension without the ceiling limit.
Those who are eligible to apply digitally for validating their options include: Pensioners, who, as employees, had contributed under the EPF scheme on a salary exceeding the prevalent wage ceiling of ₹5,000 or ₹6,500; those who had exercised dual/joint option under the EPF scheme; and those whose applications were rejected by the authorities concerned.
With this circular, the government aims to alleviate the struggles of pensioners. It seeks to ensure that higher pensions are received by those who had allocated such higher sums to pension during the course of their employment. Such pensioners may submit their applications at www.epfindia.gov.in in the prescribed form.
The application form for validation will contain the disclaimer in case of share requiring adjustment from provident fund to pension fund and re-deposit of the fund. The application must contain the following specified documents for evidence and for further processing: Proof of dual/joint option of the EPF scheme duly verified by the employer; and proof of remittance in provident fund on higher wages exceeding the prevalent wage ceiling of ₹5,000 or ₹6,500; and proof of remittance in pension fund on higher wages exceeding the prevalent wage ceiling ; and a written refusal of the assistant provident fund commissioner or any other higher authority of the employees’ provident fund organization to such request/remittance.
It is also pertinent to note that the Supreme Court in its decision dated 4 November has also provided members who were registered before 1 September 2014, and have not yet retired, an additional period of four months to request for dual option and avail of higher pension. While the circular is silent about these applications, it is likely that the authorities may issue a different circular to provide instructions.
Neeraj Agarwala is partner at Nangia Andersen LLP. Neetu Brahma, manager, Nangia Andersen India, contributed to this article.
"Exciting news! Mint is now on WhatsApp Channels 🚀 Subscribe today by clicking the link and stay updated with the latest financial insights!" Click here!
