This year’s budget, has come up with a way to ensure that companies and employers deposit their contributions to the provident fund on time. If they not make the deposit within the stipulated time, the contribution will not be considered as an expense. This means a delay on their part will mean foregoing deduction. This will not only ensure that employers deposit on time, but will also see to it that they don’t use that money elsewhere. In addition, employees can be sure of not losing any interest or income on such contributions.
This move is in favour of the employees as they are assured of security, as their employers will be forced to prioritise payment of PF or social security dues or else they will lose out in terms of corporate tax deduction. An amendment to this effect is suggested in the Finance Bill 2021
As per the rules, the employer’s contribution towards PF for a particular month should be deposited by the 15th of the following month, so that the interest accrual begins with effect from the first of the month after that.
However, if the employer does not deposit the contribution at all, that is, if the employer defaults, then the employees do not get any interest for that period as there is no money in their accounts. It does not affect the interest on the accumulated balance.
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