Employer Contribution Based on Actual Salary - The employer is required to deposit provident fund contributions on the basis of actual salary if both employer and employee opt for it, as per paragraph 26 of the EPF Scheme. Contributions on higher salaries exceeding statutory limits are only required if such an option is exercised jointly. In the absence of this exercise, contributions are made only on statutory wage ceilings (Rs.5,000 or Rs.6,500). The employer's contribution was often limited to statutory wages, and contributions on actual salaries were not made unless explicitly opted for ["Jose V. Thomas, S/o M J Thomas VS Employees Provident Fund Organization - Kerala"].
Employer’s Retrospective Deposit of Arrears - Employers can request permission to deposit arrears based on actual salary retrospectively, but such requests are generally rejected by EPFO if contributions were made only on statutory limits. Contributions made on statutory wages do not entitle employees to higher pension benefits based on actual salaries, especially if the option to contribute on actual salary was not exercised at the time ["Employees Provident Fund Organization vs A.Chandrakumaran Nair, S/o.Appukuttanpillai - Kerala"].
Shortfall in Deposit and Timing - If the employer fails to deposit the full contributions on or before the due date, it results in a shortfall. The contributions deducted from employees’ wages are their contribution, and the employer’s contribution must be paid separately. Delays or shortfalls can attract interest and penalties, and the employer is liable to deposit contributions on the date wages are paid, not retrospectively for months wages were unpaid ["Checkmate Services Pvt. Ltd. VS Commissioner of Income Tax - Supreme Court"], ["Mahantesh H vs DCIT, Circe 4(1)(1) - Income Tax Appellate Tribunal"].
Non-Deposit of Contributions on Actual Salary - Employers who do not deposit contributions on actual salary or fail to apportion contributions correctly for each month are not eligible for higher pension benefits based on actual wages. The contributions are legally required to be remitted in the respective months, and contributions made only on statutory wages do not support claims for benefits based on actual salaries ["JOSE V. THOMAS vs THE EMPLOYEES PROVIDENT FUND ORGANIZATION - Kerala"], ["00449223"].
Legal and Procedural Aspects - The law mandates that contributions be deducted from wages and deposited in the month the wages are paid. Employers cannot benefit from delaying deposits or making bulk payments without proper apportionment. Deposit mode restrictions (e.g., internet banking) are also stipulated, and contributions for months when wages are unpaid cannot be shifted to later periods ["LUCIDA TECHNOLOGIES PVT. LTD. BENGALURU vs DEPUTY COMMISSIONER OF INCOME TAX CIRCLE - 4(1)(1) BENGALURU - Income Tax Appellate Tribunal"].
Analysis and Conclusion:Employers are legally obliged to deposit provident fund contributions based on actual salaries only if they exercise the joint option under paragraph 26 of the EPF Scheme. In cases where contributions were made only on statutory wage ceilings over two years, employees are generally not entitled to benefits based on actual salary. Retrospective deposit requests are typically rejected if contributions were not initially made on actual wages. Delays and shortfalls in deposit can lead to penalties, and contributions must be remitted in the month wages are paid, not retrospectively. Therefore, employer failure to deposit contributions according to actual salary for two years results in non-eligibility for higher pension benefits and potential legal penalties.
