Section 6 of The Provident Funds Act, 1925
Power to make deductions.
When the sum standing to the credit of any subscriber or depositor in any Government or Railway Provident Fund which is a contributory Provident Fund becomes payable, there may, if the authority 1[specified in this behalf in. the rules of the fund] so directs, be deducted therefrom and paid to 2[Government or the Railway administation, as the case may bed],--
- (a)any amount due under a liability incurred by the subscriber or depositor to 2[Government or the Railway administration], but not exceeding in any case the total amount of any contributions credited to the account of the subscriber or depositor and of any interest or increment which has accrued on such contributions; or
- (b)where the subscriber or depositor has been dismissed from 3[his employment] for any reasons specified in this behalf in the rules of the Fund, or where he has resigned such employment within five years of the commencement thereof, the whole or any part of the amount of any such contributions, interest and increment.
Summary
- Deductions can only be made from a contributory Provident Fund (a savings fund where the rules allow the employer to add extra contributions to the employee's account) when the balance becomes payable, and must be directed by the specified authority.
- The deducted amount is paid back to the Government or the Railway administration.
- Deductions for an employee's debt to the employer cannot exceed the total amount of employer contributions and any accrued interest.
- If an employee is dismissed for reasons specified in the fund rules, the employer can deduct and take back all or part of their contributions and interest.
- If an employee resigns within five years of starting their employment, the employer can deduct and take back all or part of their contributions and interest.
Practical examples
FAQ
1. Can deductions be made from any type of Provident Fund under Section 6?
No, deductions can only be made from a contributory Provident Fund, which is a fund that includes contributions from the employer.
2. What is the maximum limit for recovering an employee's debt to their employer from the fund?
The deduction cannot exceed the total amount of contributions credited by the employer and any interest or increment earned on those contributions.
3. Can an employer take back contributions if an employee is dismissed?
Yes, if the employee is dismissed for reasons specified in the fund rules, the authority can deduct the employer's contributions and interest.
4. What happens if an employee resigns early?
If an employee resigns within five years of starting their employment, the authority can deduct and recover the employer's contributions and interest.
Test yourself
1.Deductions under Section 6 are permitted only from which type of Provident Fund?
2.What is the maximum limit on deductions to recover an employee's debt to the Government or Railway administration?
3.Within how many years of starting employment must a resignation occur to allow the deduction of contributions?
4.Who must direct the deductions to be made under Section 6?
5.For what reason other than early resignation can employer contributions be deducted under Section 6?