The Provident Funds Act, 1925

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The Provident Funds Act, 1925 was enacted on 27th August, 1925. The act was enacted with a purpose to consolidate and amend the laws relating to provident funds in India. The term Provident Fund under sub clause (e) of section 2 is defined as an account maintained on behalf of an employee wherein the contribution made by employee or employees shall be maintained. The contribution shall be made to government or railway administration.

The compulsory deposit made in the provident fund as per the provisions of the Act shall not be given until happening of an event or contingency including death of such employee. The contribution so made shall not be attached in any decree or order passed by any judicial court whether in civil or criminal case. On death of the employee the fund accumulated shall be given to the dependants of employee as per clause (b) of section 3.

In case the employee has to pay certain sum standing to his credit, which has become payable, the same shall be deducted from provident fund where after the remaining sum shall be paid to such an employee. In case of death of such employee the remaining sum shall be paid to his dependants. Where no such dependant is nominated by the employee the provident fund shall be transferred to such person who produces probates, letters or certificates.

The Act also provides right of nomination. Incase a nomination is made in compliance of provisions of the act, wherein such nominee is entitled to receive the whole or part of the sum of provident fund, the provident fund to that extent shall be transferred to such nominee to the exclusion of the dependants. If an employee has to pay an outstanding amount to government or railway administration it shall be paid after making deductions from provident fund.

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The act also ensures that no Central government employee shall have any right to government contributions made by him to his credit in case he takes upon a commercial employment at any time before expiry of 2 years from the date of his retirement without prior permission of central government. Before the central government grants permission to an employee to take up commercial employment, the central government shall take care of nature of employment which the employees seeks to engage, antecedents of employer and that the duties assigned to central government employee in commercial employment shall not be in conflict with the government.

Once the central government employee makes an application for commercial employment it is mandated under the Act that the government shall respond within 60 days of such application in absence of any such response on behalf of the government, the application shall deemed to be accepted.  When the Central Government refuses the application made by the employee, he has a right to appeal within 30 days of such refusal. While accepting the application of employment the Central Government shall take into consideration financial circumstance of the employee.

Any act done in good faith is protected under provisions of the Act. Rules made by Central Government under the Act shall be laid before Parliament while both houses are in session and shall come into force once assented by both houses of Parliament.

The provident Funds Act, 1925 is legislated to protect the interest of government employees. Under the Act it is mandatory for all the employees’ weather state or central government that they shall contribute into a compulsory fund which is termed as provident fund. Provident fund shall accumulate the money which the employee contributes and on happening of any contingency or death of employee the same shall be forwarded to employee in case of former and dependants in case of latter. The money so contributed can be termed as insurance which is held by government for benefit of employee who in times of need can withdraw the same without incurring any financial burden.

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by Vibhuti Nakta.