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Employees Deposit Linked Insurance Scheme And Its Benefit

In most of the Indian families, it has been noticed that only male members are earning. And if there is only one adult male then he will be the only source of income. So, after the retirement of that person family survives through pension given by the government. But there was a serious problem noticed if death of the earning member takes place before retirement. So, government introduced Employees’ Deposit Linked Insurance (EDLI) Scheme for all employees in 1976.

There has been many amendments in the scheme. Here the details of the schemes and the latest liability to invest and repayment guidelines are mentioned. Initially, the government introduced it as a compulsory scheme to be opted by all employees. But now a days many insurance companies provide different flexible options as compared to EDLI. So, the employer can opt for EDLI or others for himself and its employees as well. So, the exemption from the scheme can be taken under section 17.

Introduction of Employees’ Deposit Linked Insurance:

EDLI is a life insurance plan under which the employees makes a very less contribution along with the contribution to the employee provident fund. The fund is contributed towards the Central Board. It is applicable to all the factories and other bodies which are covered under EPF&MA Act, 1952. The nominee of the decreased here will be at a benefit as they will receive the amount in PF account alongwith the additional amount of life insurance.


Liability to contribute:

Earlier there was combined contribution of employees and government towards the fund. But now it is only contributed by the employees. The employee have to invest 0.5% of their basic pay + dearness allowance. The employer have to make the contribution within fifteen days of the close of every month. If there is any delay or default in the payment by the employer then the penalty is to be paid as follows:

Less than 2 months 17%
Between 2 to 4 months 22%
Between 4 to 6 months 27%
More than 6 months 37%

Payment to the nominee:

Last year the payment status or calculation was amended. So, according to current rules the nominee of decreased will be paid the higher of two:

  • The average balance in the PF account of the decreased during last 12 months or his period of membership whichever is less. But if the average balance exceeds INR 50,000 then the amount payable is INR 50,000 plus 40% of amount exceeding with the ceiling of INR 1,00,000.
  • The amount paid will be higher if the average monthly wages drawn (with the ceiling of INR 6,500) during last 12 months when he/she died is multiplied by twenty.

In any case the maximum amount paid to the nominee of decreased is INR 1,30,000. The payment based on the average monthly wages has been added to help the poor when the monthly income was very low.

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