Section 16: Funds

Finin2min analysis — what the section actually does

Full statutory text — Section 16

16. Funds.—(1) The Central Government may, for the purposes of—
        (a) the Provident Fund Scheme, establish a Provident Fund where the contributions paid by the
    employer to the fund shall be ten per cent. of the wages for the time being payable to each of the
    employees (whether employed by him directly or by or through a contactor), and the employee's
    contribution shall be equal to the contribution payable by the employer in respect of him and may, if
    any employee so desires, be an amount exceeding ten per cent. of the wages, subject to the condition
    that the employer shall not be under an obligation to pay any contribution over and above his
    contribution payable under this section:
        Provided that in its application to any establishment or class of establishments which the Central
    Government, after making such inquiry as it deems fit, may, by notification, specify, this section shall
    be subject to the modification that for the words “ten per cent.” at both the places where they occur, the
    words “twelve per cent.” shall be substituted:
        Provided further that the Central Government, after making such inquiry as it deems fit, may, by
    notification, specify rates of employees’ contributions and the period for which such rates shall apply
    for any class of employee;
       (b) the Pension Scheme, establish a Pension Fund in the manner specified in that scheme by that
    Government into which there shall be paid, from time to time, in respect of every employee who is a
    member of the Pension Scheme,—
          (i) such sums from the employer's contribution under clause (a) not exceeding eight and one-
      third per cent. of the wages or such per cent. of wages as may be notified by the Central Government;
          (ii) such sums payable as contribution to the Pension Fund, as may be specified in the Pension
      Scheme, by the employers of the exempted establishments under section 143 to which the pension
      scheme applies;
         (iii) such sums as the Central Government after due appropriation by Parliament by law in this
      behalf, specify;
         (c) the Insurance Scheme, establish a Deposit-Linked Insurance Fund in the manner specified in
    that scheme by that Government into which there shall be paid by the employer from time to time in
    respect of every such employee in relation to whom he is the employer, such amount, not being more
    than one per cent. of the wages or such per cent. of wages as may be notified by the Central Government
    for the time being payable in relation to such employee:
        Provided that the employer shall pay into the Insurance Fund such further sums of money, not
    exceeding one-fourth of the contribution which he is required to make under this clause, as the Central
    Government may, from time to time, determine to meet all the expenses in connection with the
    administration of the Insurance Scheme other than the expenses towards the cost of any benefits
    provided by or under the Insurance Scheme.
    (2) The Provident Fund, the Pension Fund and the Insurance Fund shall vest in, and be administered
by, the Central Board in such manner as may be specified in the respective schemes.

How to apply this provision

1. Primary statutory test — (1) The Central Government may, for the purposes of— (a) the Provident Fund Scheme, establish a Provident Fund where the contributions paid by the employer to the fund shall be ten per cent. of the wages for the time being payable to each of the employees (whether employed by him directly or by or through a contactor), and the employee's contribution shall be equal to the contribution payable by the employer in…
2. Additional operative limb — Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may, by notification, specify, this section shall be subject to the modification that for the words “ten per cent.” at both the places where they occur, the words “twelve per cent.” shall be substituted:
3. Qualification / exception to test — Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may, by notification, specify, this section shall be subject to the modification that for the words “ten per cent.” at both the places where they occur, the words “twelve per cent.” shall be substituted:
4. Numerical or timing control — Funds.—(1) The Central Government may, for the purposes of— (a) the Provident Fund Scheme, establish a Provident Fund where the contributions paid by the employer to the fund shall be ten per cent. of the wages for the time being payable to each of the employees (whether employed by him directly or by or through a contactor), and the employee's…
5. Central Rule mapping — 6. Read the mapped provision together with this text rather than treating the concordance as a substitute for it.
6. Evidence file — retain facts and records proving the role/status of: Employer, Employee / worker, Central Government.

Rules, forms and cross-references

A direct concordance is not exhaustive. Central/State jurisdiction, schemes, authority appointments, saved instruments and later notifications may change the practical route without changing the section wording.

Worked example

Q&A — Section 16

Source & verification trail