What you can do to get your employer to deposit PF, TDS

What to do when your organisation doesn't deposit the PF with EPFO? (Mint)
What to do when your organisation doesn't deposit the PF with EPFO? (Mint)

Summary

  • Complaints should be submitted to the provident fund organisation with necessary proof

Contributions towards employee provident fund (EPF) is an important component of your salary. Companies are mandated as per law to deduct the contribution from your salary and deposit it with the Employee Provident Fund Organisation (EPFO). That, though, need not happen always. There have been several instances when errant companies deduct this amount from the salaries of their employees but fail to deposit it with the EPFO.

Delhi-based Bansal (39), a start-up employee, realized that his PF contribution data was missing while filling his income tax return (ITR). Bansal, who declined to give his full name because of legal issues, raised the matter about the missing PF dues with his then employer but no action was forthcoming. His mails to the company’s chief executive officer also remained unanswered. Bansal finally reached out to the EPFO and lodged a formal complaint. “The EPFO took immediate action, but I had to complain twice because the company ignored the organization’s first call thinking it was a hoax," he says.

Graphic: Paras Jain
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Graphic: Paras Jain

Interestingly, Bansal says, the company cleared the deposits of only those who raised complaints with the EPFO but not other employees. The EPFO is yet to make the company accountable for repeated delays in crediting the PF amount and also the increase in number of employee complaints. It has thus far only addressed complaints of individual employees, says Bansal, who quit the firm shortly after. Mint has accessed a copy of the complaint that Bansal filed with the EPFO.

“The company is still delaying PF deposits of existing employees," says Bansal, adding it also did not deposit with the government the tax deducted at source (TDS) on his income. Bansal, has since moved the labour court against the company to recover his full and final (F&F) dues.

Many startups have fallen foul of the EPFO for failing to deposit the PF on time. That includes a popular edtech firm which was facing a funding crunch in the start-up ecosystem. In most such cases, employees of these companies have had issues pertaining to delays in salary payments, PF contributions, TDS deposits or F&F settlements.

Delay in PF deposits

In case of delays by a company in depositing the PF contributions, an employee can send a written complaint to the EPFO. The employee can furnish the PF statement that confirms whether the employer has credited the contribution in their PF accounts, along with the copy of salary slips in which such recoveries are affected.

“The regional PF commissioner will vet the complaint and, if satisfied with the proof that has been submitted, will depute EO (Enforcement Officer) to verify the facts from the employer," says Adarsh Vir Singh, founder, Nidhi Niyojan Inc, a social security consulting firm.

Employees can also register their grievances on the EPF Integrated Grievance Management System (EPFiGMS) portal. For all such complaints, they are issued with a reference number “If the grievance is not redressed within 15 days or if the employee is not satisfied with the quality of grievance redressal, they can send an email to the higher authorities with the reference number." says Singh.

Notably, EPFO also provides a WhatsApp helpline number on its portal for raising complaints.

If the company continues to be unresponsive to complaints, Singh suggests employees can lodge a complaint via the Centralised Public Grievance Redress and Monitoring System (CPGRAMS). It is an online platform, linked to all Central and state ministries/departments, where citizens can lodge their grievances with public authorities on any subject.

“If a complaint goes via this portal, the designated officials are supposed to resolve the matter within 24 hours" , says Singh.

Notably, for non-deposit of PF money, companies will have to bear interest (i.e. simple interest at 12% per annum, p.a.) and damages (ranging from 5~25% p.a., depending on the period of default) and these are bound to have implications for the company promoters or founders, says Anurag Jain, Cofounder/Partner at ByTheBook Consulting LLP, a tax consultancy firm. In extreme cases, EPFO can also initiate prosecution and recovery proceedings against the company and its officials.

Here, it is interesting to note that while the EPFO collects damages and interest from the employer on delayed PF contributions, employees are not compensated for the delays. Moreover, some of them lose out on interest income on delayed deposits in case a company clears all its arrears in one go in the ongoing month instead of updating the books in the correct order in past dates when deposits were actually due. “To ensure that the complainant gets due interest on past PF dues which the employer hadn’t deposited, ECR (Electronic Challan cum Return) needs to be generated for the specific month in which the employer had defaulted, says Singh. All EPFO-registered employers have to submit ECR on a monthly basis which consists of member-wise details of the contributions.

That said, the receipt of delayed PF deposits alone is not enough. One must verify the timeline. “Settling arrears in one go also affects EPS (employee’s pension scheme) contribution of employees," he adds.

Delay in TDS, F&F

Section 205 of the Income-tax Act prohibits recovery of tax from an individual if tax has already been deducted from his income by the deductor, says Naveen Wadhwa, vice president, research and advisory division, at Taxmann. It means an employee cannot be called upon to pay taxes if the employer has deducted the tax on his income but has not deposited it with the government. However, Section 191 provides that a salaried person will have to make direct payment of the tax if it has not been deducted from his salary.

What can an employee do if there is a discrepancy in Form 26AS due to non-deposit of TDS or non-filing of TDS return by the employer? “The taxpayer should contact the deductor to correct the mismatch. It must be done before filing the ITR. However, a taxpayer has no legal right to force the deductor to deposit TDS or make any corrections in the TDS Statement. If the deductor refuses to entertain the taxpayer’s request, he can submit TDS proof to the Income-tax department," suggests Wadhwa.

It means if an employee receives a tax demand notice, he should file a reply on the e-filing portal with supporting documents of TDS deducted from his income. “The taxpayer can submit the salary slips and bank statement showing credit of net salary after deduction of TDS. The tax assessing officer is bound to allow TDS credit to the taxpayer if the documents submitted are found correct. However, if he still doesn’t allow the credit, the only option left is to file an appeal before CIT(A)," he adds. CIT(A) is short for Commissioner of Income Tax (Appeals).

Due to rising litigations on the matter, Wadhwa says, the CBDT has issued instructions in the past, where it has clearly stated that “in cases where TDS is deducted by the employer or deductor and the same has not been deposited with the government, the tax assessing officer cannot raise tax demands upon the payees," he says.

So far as delays in F&F settlement are concerned, employees have no option but to take legal action against the employer by filing a complaint with the labour department or by sending a legal notice or filing a case in the labour court.

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