PROVIDENT FUNDS ACT, 1925

PREAMBLE

What is the long title of the Provident Funds Act, 1925?

An Act to amend and consolidate the law relating to Government and other Provident Funds.

What is the Act number of the Provident Funds Act, 1925?

Act No. 19 of 1925.

When was the Provident Funds Act, 1925 enacted?

27th August, 1925.

What is the object of the Provident Funds Act, 1925 as stated in the Preamble?

To amend and consolidate the law relating to Government and other Provident Funds.

What is the subject matter of Section 1?

Short title, extent and commencement.

What is the short title of the Act under Section 1(1)?

The Provident Funds Act, 1925.

What is the extent of the Provident Funds Act, 1925 under Section 1(2)?

It extends to the whole of India.

How does the Provident Funds Act, 1925 come into force under Section 1(3)?

On such date as the Central Government may appoint by notification in the Official Gazette. (1st April, 1926)

What is the subject matter of Section 2?

Definitions.

What is a "compulsory deposit" under Section 2(a)?

A subscription to or deposit in a Provident Fund which, under the rules of the Fund, is not repayable on demand until the happening of a specified contingency, except for payment of life insurance premia or subscriptions/premia to a family pension fund.

What is included in a "compulsory deposit" under Section 2(a)?

Contributions, interest or increments accrued under the rules, and such amounts remaining to the credit of the subscriber after the specified contingency.

What is "contribution" under Section 2(b)?

Any amount credited in a Provident Fund by the authority administering the Fund by way of addition to a subscription, deposit or balance in an individual account.

What is a "contributory Provident Fund" under Section 2(b)?

A Provident Fund whose rules provide for crediting contributions.

Who are "dependants" under Section 2(c)?

The wife, husband, parent, child, minor brother, unmarried sister, deceased son's widow and child, and where no parent is alive, the paternal grandparent of a deceased subscriber or depositor.

What is a "Government Provident Fund" under Section 2(d)?

A Provident Fund, other than a Railway Provident Fund, constituted by the authority of the Central or State Government for specified classes of Government servants or persons employed in educational institutions or bodies existing solely for educational purposes.

What is a "Provident Fund" under Section 2(e)?

A fund in which subscriptions or deposits of employees are received and held in their individual accounts, including contributions, interest and increments.

What is a "Railway administration" under Section 2(f)?

A company administering a railway or tramway under law or contract with the Government, or the manager of a railway or tramway administered by the Central or State Government, including the concerned Government.

What is a "Railway Provident Fund" under Section 2(g)?

A Provident Fund constituted by the authority of a Railway administration for any class or classes of its employees.

What is the subject matter of Section 3?

Protection of compulsory deposits.

Can a compulsory deposit in a Government or Railway Provident Fund be assigned or charged under Section 3(1)?

No.

Is a compulsory deposit in a Government or Railway Provident Fund liable to attachment under any decree or order of a Civil, Revenue or Criminal Court under Section 3(1)?

No.

Against what liabilities is a compulsory deposit protected under Section 3(1)?

Any debt or liability incurred by the subscriber or depositor.

Can the Official Assignee or a receiver appointed under the Provincial Insolvency Act, 1920 claim a compulsory deposit under Section 3(1)?

No.

In whom does the amount standing to the credit of a deceased subscriber or depositor vest under Section 3(2)?

In the dependant or the person authorised by law to receive payment on the dependant's behalf.

To what is the vesting under Section 3(2) subject?

Deductions authorised by the Act and, except where the dependant is the widow or child, the rights of an assignee under an assignment made before the commencement of the Act.

Is the amount payable to a dependant under Section 3(2) free from the debts of the deceased subscriber or depositor?

Yes.

Is the amount payable to a dependant under Section 3(2) free from liabilities incurred by the dependant before the death of the subscriber or depositor?

Yes.

What is the subject matter of Section 4?

Provisions regarding repayments.

To whom shall the amount standing to the credit of a subscriber or depositor be paid under Section 4(1)?

To the subscriber or depositor, or if dead, in accordance with clauses (a), (b) and (c).

To whom shall payment be made under Section 4(1)(a)?

To the dependant in whom the amount vests under Section 3 or to the person authorised by law to receive payment on the dependant's behalf.

What is the monetary limit under Section 4(1)(b)?

₹5,000.

To whom may payment be made under Section 4(1)(b)?

To the nominated person under the rules of the Fund or, if there is no nominee, to any person appearing to be otherwise entitled.

When does Section 4(1)(c) apply?

Where the amount or part thereof is not payable under Section 4(1)(a) or Section 4(1)(b).

What documents must a nominated person produce under Section 4(1)(c)(i)?

Probate, letters of administration, or a succession certificate entitling the holder to receive the amount.

What documents must a person produce where there is no nominee under Section 4(1)(c)(ii)?

Probate, letters of administration, or a succession certificate.

What must the officer do where there is a pre-Act assignment and written notice has been received from the assignee under the Proviso to Section 4(1)?

After authorised deductions and payment to the widow or children, pay the assignee with written consent of the person entitled, or withhold payment pending the decision of a competent Civil Court.

When may the officer pay the assignee under the Proviso to Section 4(1)(i)?

When the subscriber or depositor, or the person otherwise entitled, gives written consent.

What must the officer do if such written consent is not given under the Proviso to Section 4(1)(ii)?

Withhold payment until a competent Civil Court decides the person entitled.

What is the effect of payment made under Section 4(2)?

It is a full discharge of the Government or Railway Administration from liability to the extent of the amount paid.

What is the subject matter of Section 5?

Rights of nominees.

When does a nominee become entitled to receive the amount under Section 5(1)?

On the death of the subscriber or depositor before the amount becomes payable or before payment is made.

Does a valid nominee have priority over other claimants under Section 5(1)?

Yes, the nominee is entitled to the exclusion of all other persons.

When may a nomination be varied or cancelled under Section 5(1)(a)?

By another nomination made in accordance with the rules or by express cancellation in the prescribed manner.

When does a nomination become invalid under Section 5(1)(b)?

On the happening of a contingency specified in the nomination.

What is the effect if the nominee predeceases the subscriber or depositor under Section 5(1)?

The nomination, so far as it relates to that nominee, becomes void.

What is the effect of the Proviso to Section 5(1)?

If an alternate nominee is validly provided in accordance with the rules, the right passes to that alternate nominee.

Can a nominee obtain a succession certificate under Section 5(2)?

Yes.

Is the nominee's succession certificate invalidated by a later grant of probate or letters of administration under Section 5(2)?

No.

Do the amendments made by the Provident Funds (Amendment) Act, 1946 apply to nominations made before its commencement under Section 5(3)?

Yes.

What is the limitation under the Proviso to Section 5(3)?

The amendment does not affect cases where payment had already been made or had become payable before the commencement of the 1946 Amendment Act.

What is the subject matter of Section 6?

Power to make deductions.

When does the power to make deductions under Section 6 arise?

When the amount standing to the credit of a subscriber or depositor in a contributory Government or Railway Provident Fund becomes payable.

Who may direct deductions under Section 6?

The authority specified in the rules of the Fund.

To whom are deductions under Section 6 paid?

The Government or the Railway Administration, as the case may be.

What may be deducted under Section 6(a)?

Any amount due under a liability incurred by the subscriber or depositor to the Government or Railway Administration.

What is the maximum deduction permissible under Section 6(a)?

It shall not exceed the total amount of contributions credited to the subscriber's account together with the interest or increment accrued on those contributions.

When may deductions be made under Section 6(b)?

Where the subscriber is dismissed for reasons specified in the rules of the Fund or resigns within five years of commencement of employment.

What may be deducted under Section 6(b)?

The whole or any part of the contributions, interest and increments credited to the subscriber's account.

What is the subject matter of Section 6A?

Withholding or recovery of Government contributions in case of Central Government officers taking up, without prior permission, commercial employment within two years of retirement.

Who is a "Central Government officer" under Section 6A(1)(a)?

A subscriber or depositor in a contributory provident fund constituted by the Central Government who, immediately before retirement, is a member of a Central Service Class I, excluding an officer appointed on a fixed-term contract.

What is "commercial employment" under Section 6A(1)(b)?

Employment in any capacity under a company, co-operative society, firm or individual engaged in trading, commercial, industrial, financial or professional business.

Does "commercial employment" include the directorship of a company under Section 6A(1)(b)(i)?

Yes.

Does "commercial employment" include holding an office in a co-operative society under Section 6A(1)(b)(ii)?

Yes, including offices such as president, chairman, manager, secretary or treasurer.

When does independent practice amount to "commercial employment" under Section 6A(1)(b)(iii)(A)?

When the retired officer has no professional qualifications and the practice relates to his official knowledge or experience.

When does independent practice amount to "commercial employment" under Section 6A(1)(b)(iii)(B)?

When the retired officer has professional qualifications but the practice is likely to give clients an unfair advantage because of the posts previously held.

When does independent practice amount to "commercial employment" under Section 6A(1)(b)(iii)(C)?

When the work involves liaison or contact with offices or officers of the Central Government.

What is excluded from "commercial employment" under Section 6A(1)(b)?

Employment in or under a corporation, company or body wholly or substantially owned, controlled or financed by the Government.

What are "Government contributions" under Section 6A(1)(c)?

Contributions made after the commencement of the Provident Funds (Amendment) Act, 1975 by the Central Government, State Government or a local authority in respect of periods after such commencement.

What does "prescribed" mean under Section 6A(1)(d)?

Prescribed by rules made by the Central Government by notification in the Official Gazette.

What is the effect of Section 6A(2)?

A Central Government officer loses the right to Government contributions if he takes up commercial employment within two years of retirement without prior permission of the Central Government.

Within what period after retirement does Section 6A(2) prohibit taking commercial employment without prior permission?

Two years from the date of retirement.

What is the meaning of "date of retirement" under Explanation 1 to Section 6A(2)?

In the case of a re-employed Class I officer without break in Government service, it means the date on which he finally ceases to be re-employed in Government service.

What is the effect of Explanation 2 to Section 6A(2)?

A Central Government officer permitted to take up commercial employment during leave preparatory to retirement is deemed to have obtained prior permission for continuing such employment after retirement.

How is permission sought under Section 6A(3)?

By an application in the prescribed form to the Central Government.

Can the Central Government impose conditions while granting permission under Section 6A(3)?

Yes.

What must the Central Government do if it refuses permission under Section 6A(3)?

Record the reasons in writing.

What factors must the Central Government consider under Section 6A(4)(a)?

The nature of the proposed employment and the antecedents of the employer.

What factor relating to conflict of interest is considered under Section 6A(4)(b)?

Whether the proposed duties may bring the officer into conflict with the Government.

What factor relating to previous official dealings is considered under Section 6A(4)(c)?

Whether the officer had official dealings with the employer that could reasonably give rise to suspicion of favouritism.

What additional factor may be considered under Section 6A(4)(d)?

Any other relevant factor prescribed by the rules.

What is the effect of Section 6A(5)?

If the Central Government neither refuses nor communicates refusal within sixty days of receiving the application, permission is deemed to have been granted.

Within what period must the Central Government act on an application under Section 6A(5)?

Sixty days from the date of receipt of the application.

Within what period may an applicant make a representation under Section 6A(6)?

Within thirty days from the receipt of the order imposing conditions or refusing permission.

Against what orders can a representation be made under Section 6A(6)?

An order granting permission subject to conditions or refusing permission.

What power does the Central Government have on a representation under Section 6A(6)?

It may pass such order as it deems fit.

What safeguard is provided in the Proviso to Section 6A(6)?

No adverse order, other than cancelling conditions or granting unconditional permission, shall be made without giving the applicant an opportunity to show cause.

When may the Central Government pass an order under Section 6A(7)?

When a Central Government officer takes up commercial employment within two years of retirement without prior permission or breaches a condition of the permission granted.

What may the Central Government declare under Section 6A(7)?

That the officer shall not be entitled to such part of the Government contributions as specified in the order.

What may the Central Government direct if the officer has already received the Government contributions under Section 6A(7)?

Refund to the Central Government an amount equivalent to the specified part of the Government contributions.

Can an order under Section 6A(7) be passed without hearing the officer?

No.

What financial factor must the Central Government consider under the second Proviso to Section 6A(7)(i)?

The financial circumstances of the officer.

What employment-related factor must the Central Government consider under the second Proviso to Section 6A(7)(ii)?

The nature of, and the emoluments from, the commercial employment.

What additional factor may be considered under the second Proviso to Section 6A(7)(iii)?

Any other relevant factor prescribed by the rules.

What is the effect of Section 6A(8)?

An amount directed to be refunded under Section 6A(7), if not refunded within the prescribed period, may be recovered as arrears of land revenue.

How may the amount be recovered under Section 6A(8)?

As arrears of land revenue.

What is the subject matter of Section 6A(9)?

Communication of orders.

To whom must every order under Section 6A be communicated under Section 6A(9)?

The officer concerned.

What is the effect of Section 6A(10)?

Section 6A overrides anything inconsistent contained in any other provision of the Act or the rules applicable to any contributory provident fund.

What is the subject matter of Section 6A(11)?

Laying of rules before Parliament.

What is the parliamentary procedure for rules made under Section 6A(11)?

Every rule shall be laid before each House of Parliament for a total period of thirty days, which may be comprised in one session or two or more successive sessions.

What is the effect if both Houses agree to modify or annul a rule under Section 6A(11)?

The rule shall thereafter have effect only in the modified form or shall cease to have effect, as the case may be.

Does modification or annulment under Section 6A(11) affect actions already taken under the rule?

No.

What is the subject matter of Section 7?

Protection for acts done in good faith.

What protection is provided under Section 7?

No suit or other legal proceeding shall lie against any person for anything done or intended to be done in good faith under the Act.

What is the essential condition for protection under Section 7?

The act must have been done or intended to be done in good faith under the Act.

What is the subject matter of Section 8?

Power to apply the Act to other Provident Funds.

Who may apply the provisions of the Act to Provident Funds of local authorities under Section 8(1)?

The appropriate Government.

Which provision is excluded when the Act is applied under Section 8(1)?

Section 6A.

What is the effect of a notification under Section 8(1)?

The Provident Fund is deemed to be a Government Provident Fund and the local authority is deemed to be the Government.

To which Provident Funds may the Act be applied under Section 8(2)?

Provident Funds established for employees of institutions specified in the Schedule or any group of such institutions.

What is the effect of a notification under Section 8(2)?

The Provident Fund is deemed to be a Government Provident Fund and the authority having custody of the Fund is deemed to be the Government.

How does Section 6 apply under the Proviso to Section 8(2)?

As if the authority making the contributions were the Government.

Who may add a public institution to the Schedule under Section 8(3)?

The appropriate Government by notification in the Official Gazette.

What is the effect of adding an institution to the Schedule under Section 8(3)?

The addition takes effect as if it had been made by the Act itself.

Who is the "appropriate Government" under Section 8(4)(a)?

The Central Government in relation to cantonment authorities, major port authorities and institutions falling within List I of the Seventh Schedule to the Constitution.

Who is the "appropriate Government" under Section 8(4)(b)?

The State Government in all other cases.

Which State Government is the "appropriate Government" for a society registered under the Societies Registration Act, 1860?

The State Government of the State in which the society is registered.

What is the subject matter of Section 9?

Savings as to estates of soldiers.

To what does Section 9 provide an exception?

Sections 4 and 5 of the Provident Funds Act, 1925.

To which estates does Section 9 apply?

Estates administered under the Regimental Debts Act, 1893.

What is the subject matter of Section 10?

Repeals.

What is the status of Section 10?

Repealed by the Repealing Act, 1927 (Act 12 of 1927).