For millions of Indians whose EPF contributions from their monthly salaries are intended for their retirement savings, Finance Minister Arun Jaitley’s proposal to appropriate unclaimed deposits from the EPF and PPF scheme is a certain cause for concern.
In his first full Budget Arun Jaitley has proposed to commandeer as much as Rs. 6,000 crores arising from EPF’s unclaimed deposits and Rs. 3,000 crores from PPF and in doing so intends to amend the Indian Trusts Act and EPF India Act. The purpose being is to accommodate a new social security scheme for aged pensioners, small farmers and the likes. Jaitley’s move however has met with stiff opposition from the Central Board of Trustees of EPFO. According to Virjesh Upadhyay, national secretary of Bharatiya Mazdoor Sangh (BMS), the law doesn’t allow appropriation and any decisions in handling EPFO deposits is strictly the Central Board’s to make, headed by the minister of labour, BJP’s Bandaru Dattatreya.
The EPF Act which calls for only account holders, their legal heirs or nominees to be entitled to money accumulated in the Employees Provident Fund account has no set time limit for the money to be claimed. Updated accounts by the EPFO for the financial year 2015-16 alone show unclaimed deposits amounting to Rs. 8 crores. All unclaimed deposits are duly to be returned to claimants whenever they demand. As a rule, unclaimed deposits are supposed to go into a temporary state of suspension with the severance of interest credits, a rule only just implemented seriously by the EPFO in view of the Finance Minister’s recent proposal.
Arun Jaitley’s proposal calls for all unclaimed deposits idling away in accounts for 25 years to be taken over by the government. His plan of action requires such accounts to become inoperative after seven years instead of the present three years.
This move however will require intense political pressure on the labour ministry for the employees provident fund is rightfully seen as money belonging to EPF account holders which the EPFO holds in trust.
This seemingly innocuous proposal will have serious ramifications if the government is successful in altering the purpose of the EPF India Act to make way for its social security scheme. As such India protects PF and other superannuation funds from appropriation. Should the proposed 25-year time limit come into being, it would see many account holders deprived of money accumulated during their many years of service. Some like Inder Mohan Singh, partner, Amarchand Mangaldas are of the opinion that if there is to be a time limit, it should be 40-45 years before legal heirs or account holders forfeit their money.
With as much as Rs. 27,000 crores sitting in unclaimed accounts and the EPFO unable to trace large number of account holders owing to workers changing jobs and with it a new EPF account, companies closing, forgotten accounts or simply neglecting to claim amounts that are seemingly insignificant, the problem is a glaring one. One which the government can easily capitalize on if they are to have their way!
