Savings that remain unclaimed in Employees’ Provident Fund and Public Provident Fund accounts and other small savings schemes for seven years will be diverted to finance a Senior Citizens’ Welfare Fund, according to new rules notified by the Finance Ministry.
The Senior Citizens’ Welfare Fund was announced in the last Budget. Trustees of the Employees’ Provident Fund Organisation termed the move as unconstitutional. Three officials — two from the EPFO and one from the Labour Ministry — told The Hindu that unclaimed deposits of PF contributors cannot be diverted for any other purposes, as per the EPF Scheme, 1952.
“This is unconstitutional. The Central Board of Trustees (CBT) of EPFO is the highest point of authority, as per the Employees’ Pension Scheme of 1995, and government has no role to play in PF deposits. The unclaimed money has to be only diverted towards EPFO subscribers. If no claim is made for more than seven years, would it mean that you hijack the money?” said Raman Pandey, president of the Indian National Trade Union Congress and a CBT member.
The CBT is chaired by Union Labour Minister Bandaru Dattatreya and has representatives from the government, employers and employees.
“The EPF Scheme, notified by the Centre, clearly states that PF money, including unclaimed amount, cannot be expended for any other purpose other than payment of PF accumulations. This is a criminal action,” a senior EPFO official said.
Govt. to divert unclaimed PF, small savings deposits for Sr. Citizen’s fund
According to a Finance Ministry notification on March 18, deposits, unclaimed for over seven years, of EPF, PPF and small saving schemes such as Post Office Savings Accounts, Post Office Recurring Deposit Accounts and National Savings Certificates subscribers will be diverted towards setting up a Senior Citizens’ Welfare Fund. According to the rules, the concerned government office “shall try to contact” every account holder of the unclaimed deposits through written notice, e-mail or telephone at least two times in 60 days before transferring the amount to the Senior Citizens’ Welfare Fund.
The EPF board had, earlier this week, rolled back a 2011 decision to stop interest credits on inoperative PF accounts. Now, while such accounts will continue to get interest credits, the entire balance could be lost to the Senior Citizens' Fund after seven years of inactivity, though it's not clear how this will be implemented.
Legal experts are also skeptical. “The rules, notified on March 16, by the Finance Ministry need to be placed before both Houses of the Parliament. Also, there will be no immediate danger (to people's savings) as the rule says a list of unclaimed inoperative accounts has to be prepared by the ministries concerned by September 30 and prior intimation of at least 60 days is required. Anyway, the EPF Act doesn't contemplate any diversion of PF dues for other purposes,” said labour law advocate and International Labour Organisation consultant Ramapriya Gopalakrishnan.
However, a Finance Ministry official said no amendment in any other Act will be required to transfer unclaimed money towards the Senior Citizens’ Welfare Fund. “The Finance Act says that money unclaimed for a period of seven years after it has been declared inoperative will be transferred towards the Fund,” the official said. The Finance Act, however, doesn’t specifically mention EPF scheme and only talks about inoperative accounts of Small Savings schemes, PPF and “such other amounts, in any accounts or schemes as may be prescribed.”
“Section 5 of the EPF Act 1952 says any decision related to EPF deposits has to be taken up with the CBT. The provisions of Finance Ministry’s notification and the EPF Scheme contradict each other,” another EPFO official said. In the last three years, dues paid out of inoperative EPF accounts have gone up drastically from Rs. 900 crore in 2012-13 to Rs. 2650 crore in 2013-14 to Rs 6400 crore in 2014-15.
Trade unions have demanded a roll back of the notification. “This fund, or even a part of it, can in no way be appropriated by the government for any other purpose without the consensual concurrence by CBT…,” Tapan Sen, general secretary of CITU and a CPI(M) MP said in a letter to Finance Minister Arun Jaitley on Friday.
