Labour Laws and Practice · Social Security Legislations

Employees' Provident Fund and Pension Schemes under the Social Security Code

Updated 11 October 2026 · Fact-checked

Under the Code on Social Security, 2020, the Central Government frames provident fund, pension and insurance schemes for employees, run by the EPFO under the Central Board of Trustees. Employer and employee contribute on wages, and an establishment may be exempted only if its employees get substantially similar or better benefits. Answer by stating the provision, applying the facts, and concluding.

Understand Employees' Provident Fund and Pension Schemes

A provident fund is a compulsory saving scheme. A part of the employee's wages and a matching part from the employer go into a fund. The money is credited with interest and paid to the employee on retirement or on other events the scheme allows. A pension scheme gives regular income after retirement, and an insurance scheme gives a lump sum on death in service.

Under the Code on Social Security, 2020, these three schemes sit in Chapter III. The Central Government frames them for employees. The Code replaces the older Employees' Provident Funds and Miscellaneous Provisions Act, 1952, so in answers use the Code and its schemes, not the old Act, unless you are contrasting them.

The schemes are run through the Employees' Provident Fund Organisation (EPFO). The Central Board of Trustees (the Central Board) supervises the funds and is consulted by the Government before an exemption is granted in respect of these schemes. Treat the Central Board as the trustee body and the EPFO as the administrative arm.

The rate of contribution, the wage ceiling and the establishments covered are fixed by the Code, its schemes and rules and notifications under them. Check the exact figure in your study material before you write a number. The supplied provisions you must know in detail are the exemption rules in section 143, because they decide when an employer can run its own trust instead of joining the statutory fund.

The core idea of exemption is simple. The law lets a well-run establishment keep its own provident fund trust, but only if its employees are no worse off, the Government and the Central Board are involved, and the employer stays accountable.

Key rules to remember

Who may grant exemption: Appropriate Government, by notification, may exempt an establishment or class of establishments, or employees or class of employees, from any or all provisions of the Code or the scheme (section 143(1)); Exemption can be partial or full. It can be renewed by like notification.
Prior consultation: PF, Pension and Insurance Schemes: prior consultation with the Central Board. Chapter IV (ESI): prior consultation with the Corporation (section 143(1) provisos); No grant or renewal without consultation. The body forwards its view within the time the Government prescribes.
Initial period of exemption: Initial period = 3 years from the date of publication of the notification (section 143(3)); It may be extended for the period prescribed by the Central Government. For the PF, Pension and Insurance Schemes, the extension period is as specified in those schemes.
Benefit test: Exemption only if employees get benefits substantially similar or superior to those under the Code or scheme (section 143(4)); This is the key condition. Quote it in every exemption answer.
Board of trustees: Employer constitutes a board of trustees, a legal entity that can sue and be sued (section 143(5)); It administers the fund, manages investments, keeps accounts, credits contributions and interest.
Returns and inspection: Exempted employer furnishes electronic returns, gives inspection facilities and pays inspection charges as directed by the Central Government (section 143(6)); Returns cover persons employed, accounts, and investments from the fund.
Cancellation and transfer: Failure to comply: appropriate Government may cancel. On cancellation, surplus, reserves and each employee's accumulations go to the statutory fund (section 143(7) and (8)); For PF, Pension and Insurance Schemes, time, form and manner of transfer are as in the respective schemes.
Surrender of exemption: Board of trustees' resolution, then employer applies to the appropriate Government to surrender from a specified date (section 143(9)); Accumulations, surplus and reserves are then transferred to the statutory funds.

How to solve Employees' Provident Fund and Pension Schemes questions

Use this method for any written question on provident fund, pension or the exemption of an establishment.

1Identify what is asked: coverage, contribution, exemption, cancellation or surrender. Name the Code and the scheme involved.
2State the rule in plain words. Give the section number only if you are sure, as for section 143 on exemption.
3List the facts that matter: type of establishment, whether benefits are better, whether the Central Board was consulted, whether conditions were met.
4Apply each condition to the facts one by one: notification, consultation, three-year period, benefit test, trust board.
5For contribution questions, use the rate and wage ceiling given in the question. If none is given, state the rule and the assumption you make.
6For cancellation or surrender, trace what happens to employees' accumulations, surplus and reserves.
7Write a clear conclusion in one or two lines, then add a practical point such as filing returns, trust board records or the role of the Company Secretary.

Quickest way: Five-point exemption check

When to use it: Use when a case asks whether an establishment can run its own provident fund trust or lose that status.

Notification: has the appropriate Government issued one?
Consultation: was the Central Board consulted first for PF, Pension or Insurance Schemes?
Benefit test: are employees' benefits substantially similar or superior?
Trust: is there a board of trustees as a legal entity, with returns filed electronically?
Consequence: if conditions fail, cancellation and transfer of funds to the statutory fund.

Common mistakes in Employees' Provident Fund and Pension Schemes

Writing the Employees' Provident Funds Act, 1952 as the governing law.
Older notes and workplace habits still use the 1952 Act.
Fix: Base answers on the Code on Social Security, 2020 and its schemes. Mention the 1952 Act only to contrast.
Saying exemption is permanent.
Students remember the grant but not the time limit.
Fix: State that exemption is initially for three years from publication of the notification and can be extended.
Forgetting the Central Board consultation.
Students confuse the Central Board with the Corporation.
Fix: Remember the pair: PF, Pension and Insurance Schemes go with the Central Board; Chapter IV (ESI) goes with the Corporation.
Leaving out the benefit test.
Students focus on procedure and miss the substantive condition.
Fix: Always state that employees must receive benefits substantially similar or superior to the Code or scheme.
Not saying what happens on cancellation or surrender.
Students stop at cancellation.
Fix: Add that surplus, reserves and each employee's accumulations are transferred to the respective statutory fund within the time and manner specified.
Quoting contribution rates from memory without a source.
Rates are widely quoted and often confused with other schemes.
Fix: Use the rate given in the question or study material and say it is as notified.

Worked examples

Example 1

Sunrise Textiles Ltd., Coimbatore, runs its own provident fund trust for its employees under an exemption notified by the appropriate Government. The employer has stopped filing returns. Advise whether the exemption can be withdrawn and what follows.

Show the solution

Rule: an exempted employer must furnish electronic returns on persons employed, accounts and investments made from the fund, allow inspection and pay inspection charges (section 143(6)).
Rule on failure: if the employer fails to comply with any condition under section 143, the appropriate Government may cancel the exemption (section 143(7)).
Application: failure to file returns is a breach of the compliance duty, so the Government has power to cancel.
Consequence: on cancellation, the entire surplus, reserves and accumulations to the credit of every employee in the exempted fund must be transferred to the respective statutory fund within the time and manner specified. For the PF Scheme, this is as set out in the scheme (section 143(8)).
Practical point: the Company Secretary should regularise the returns at once and keep the trust's accounts ready for inspection.

Answer: Yes. The appropriate Government may cancel the exemption for non-compliance. The fund's surplus, reserves and each employee's accumulations then move to the statutory fund as specified.

Example 2

Bharat Engineering Pvt. Ltd. has been exempt from the PF Scheme for three years from the date of notification. Its board of trustees now wants to return to the statutory fund. Explain the procedure.

Show the solution

Rule: an exempted employer may surrender the exemption (section 143(9)).
Step 1: the board of trustees passes a resolution to surrender.
Step 2: the employer applies to the appropriate Government, specifying the date from which the surrender should take effect.
Step 3: the Government may allow the employer to remit contributions to the statutory funds from that date and processes the cancellation of the exemption.
Step 4: on cancellation, the employer and the board of trustees transfer each employee's accumulation and the surplus and reserves to the concerned statutory funds. For the PF Scheme, the time, form and manner are as in the scheme.
Conclusion: the surrender is by trustee resolution and application, not by the employer's unilateral act.

Answer: The board passes a resolution, the employer applies to the appropriate Government with the effective date, and on cancellation all accumulations, surplus and reserves are transferred to the statutory funds as the scheme specifies.

Exam tips

Learn section 143 as a flow: grant, consultation, period, benefit test, trust, returns, cancellation, surrender.
In case questions, cite the benefit test and the three-year period by name. Examiners look for them.
Do not state contribution rates or wage ceilings unless the question gives them or you are sure they are as notified.
End with a practical point: trust board records, electronic returns and the Company Secretary's compliance role.
Use the Code, not the repealed 1952 Act, unless the question asks for a contrast.

Practice questions from Social Security Legislations

Employees' Provident Fund and Pension Schemes in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Employees' Provident Fund and Pension Schemes: frequently asked questions

Which law governs the employees' provident fund now?

The Code on Social Security, 2020 governs provident fund, pension and insurance schemes for employees. Chapter III covers these schemes. It replaces the older provident fund Act of 1952.

Who is consulted before an establishment is exempted from the provident fund scheme?

The Central Board must be consulted first for the Provident Fund, Pension and Insurance Schemes. The appropriate Government cannot grant or renew the exemption without it. The Board forwards its view within the time the Government prescribes.

For how long does an exemption last?

It is initially for three years from the date the notification is published. The appropriate Government may extend it for the period prescribed by the Central Government. For the PF, Pension and Insurance Schemes, the extension period is as specified in those schemes.

What happens to the money if an exemption is cancelled?

The surplus, reserves and each employee's accumulations in the exempted fund go to the respective statutory fund. The time, form and manner are set out in the conditions of exemption or the scheme. This protects employees' savings.