Assistant Provident Fund Commissioner (APFC) 2016 recruitment test, advertisement 170. Transcribed from the Commission's own booklet (series A, B-CRHE-O-PAPA); answer as per the official UPSC final answer key. This question is in Part B. Answer last reviewed 24 August 2026.

Which of the following are the instruments of providing social security in India ? 1. Income Tax 2. Employees' Provident Fund 3. General Sales Tax 4. LIC 5. National Pension Scheme 6. Postal Provident Fund Select the correct answer using the codes given below :

(a)1, 2, 3 and 4
(b)2, 3, 4 and 5
(c)2, 4, 5 and 6
(d)3, 4, 5 and 6

Answer

Why

Correct — C, (c) 2, 4, 5 and 6.

Six items are offered and every option names exactly four of them, so the whole task is to decide which TWO are excluded. They are items 1 and 3, Income Tax and General Sales Tax, and the reason is one distinction worth learning properly.

A TAX IS A WAY OF RAISING MONEY. A SOCIAL-SECURITY INSTRUMENT IS A WAY OF PAYING A BENEFIT ON A CONTINGENCY. Income tax and a general sales tax are compulsory imposts that go into the Consolidated Fund and are not earmarked to any beneficiary or to any risk. They may FINANCE social security — a non-contributory old-age pension paid out of general revenue is financed exactly that way — but the tax is not the thing that delivers the protection. It has no member, no account, no contingency and no entitlement attached to it. Notice too that the paper's item 3 says GENERAL SALES TAX, a State tax on the sale of goods as it then existed; it is not the Goods and Services Tax, which came later.

The other four are instruments in the proper sense: each one builds a fund on an identified person's behalf and pays out when a defined event occurs.

ITEM 2 — EMPLOYEES' PROVIDENT FUND. The statutory contributory provident fund under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The member and the employer each contribute a percentage of wages into an individual account, and the accumulation with interest is payable on retirement and in the other circumstances the scheme allows. Two further schemes are framed under the same Act: the Employees' Deposit Linked Insurance Scheme, 1976 for death in service, and the Employees' Pension Scheme, 1995 for superannuation, widow's, children's and disablement pensions. This is the instrument the recruiting organisation itself administers.

ITEM 4 — LIC. The Life Insurance Corporation, set up under the Life Insurance Corporation Act, 1956 when life insurance was nationalised. Life insurance is the classic instrument for the survivors' contingency: a premium is paid, and on death the sum assured goes to the family. LIC is also the insurer through which several government social-security schemes are actually run, so it is an instrument in both the ordinary and the programme sense.

ITEM 5 — NATIONAL PENSION SCHEME. A defined-contribution pension arrangement, introduced for central government employees joining service on or after 1 January 2004 and opened to all citizens from 2009, regulated by the Pension Fund Regulatory and Development Authority under the PFRDA Act, 2013. Contributions accumulate in an individual pension account and are converted partly into an annuity at exit. Its official name is the National Pension System; the paper prints "Scheme".

ITEM 6 — POSTAL PROVIDENT FUND. The provident-fund facility available through the post office network, in practice the Public Provident Fund, a voluntary long-term contractual savings instrument with a statutory term, open to any individual and not tied to employment. It performs the same old-age function as the EPF for people outside organised employment.

So the four instruments are items 2, 4, 5 and 6, and the answer is option (c).

Why the others are wrong

(a)1, 2, 3 and 4 — This set keeps Income Tax and General Sales Tax — both of the items that had to go — and drops the National Pension Scheme and the Postal Provident Fund, which are exactly the instruments that extend old-age protection beyond the organised-sector employee. It is the choice of a candidate who reads the question as "which of these are connected with the government's social-security effort" rather than as "which of these ARE instruments of it". Taxes are connected with everything the state does; that is what makes the test useless if it is applied loosely. The discipline is to ask of each item whether it has a beneficiary, a contribution or a premium, and a contingency on which something is paid. Income tax has none of the three. A general sales tax has none of the three, and in 2016 it was in any case a State levy on the sale of goods, with no relationship to any worker or any risk.
(b)2, 3, 4 and 5 — This set correctly admits the Employees' Provident Fund, LIC and the National Pension Scheme, and then spoils itself by keeping General Sales Tax at item 3 while dropping the Postal Provident Fund at item 6. It is the near miss of the four options, and the single decision that separates it from the answer is whether a consumption tax can be called an instrument of social security. It cannot. A sales tax is levied on a transaction, not on a person; nobody accumulates a right under it; nothing is payable out of it to anyone on the occurrence of sickness, old age, death or unemployment. The Postal Provident Fund that this option discards, by contrast, is a genuine contractual savings instrument with a subscriber, a term and a maturity, available to precisely those people whom employment-linked schemes cannot reach.
(d)3, 4, 5 and 6 — This set commits the same error as the last by keeping General Sales Tax, and adds a worse one: it drops the Employees' Provident Fund. The EPF is the least deniable item on the list. It is a statutory scheme framed under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 whose entire purpose is to provide for the old age and the dependants of an employee, with a defined membership, defined contributions and defined benefits, and it is administered by the very organisation whose recruitment paper this is. An answer that excludes it while including a tax on the sale of goods has inverted the test the question is asking the candidate to apply. If only one item on this list can be recognised without hesitation, it is item 2 — which is why the fastest route through the question is to eliminate this option first and then look for the tax in the remaining three.

Concept

WHAT MAKES SOMETHING AN INSTRUMENT OF SOCIAL SECURITY. The subject is usually taught through its instruments rather than its definitions, and it helps to have the families straight, because a list question like this one is really asking whether a candidate can place each item in a family.

SOCIAL INSURANCE — contributory, and the contributions are POOLED. The benefit is defined by the contingency and by wages, not by what the individual has accumulated, so risk is shared across the membership. The Employees' State Insurance scheme under the Act of 1948 is the Indian example: sickness, maternity, disablement, dependants' and medical benefits, financed by employer and employee contributions.

PROVIDENT FUNDS — contributory, but with INDIVIDUAL ACCOUNTS and no pooling. The benefit is the accumulation with interest. The Employees' Provident Fund is the compulsory, employment-linked version; the Public Provident Fund available through post offices and banks is the voluntary, universal version. A provident fund can smooth income across a lifetime but cannot transfer risk between people, which is why insurance and pension elements were later added on top of the EPF.

PENSIONS — instruments that convert accumulated savings into a periodical income in old age. The Employees' Pension Scheme, 1995 does this inside the EPF framework; the National Pension System does it as a defined-contribution arrangement regulated by the PFRDA; the Atal Pension Yojana does it for the unorganised sector with a guaranteed pension.

LIFE INSURANCE AND ANNUITIES — instruments for the survivors' contingency and for longevity, sold against a premium. LIC has been the principal public vehicle since the nationalisation of life insurance in 1956.

SOCIAL ASSISTANCE — non-contributory benefits financed from general revenue and paid on a means or category test, such as the old-age, widow and disability pensions of the National Social Assistance Programme. This is the one family where taxation is directly involved, and it is worth noticing that even here the TAX is the source of finance while the PENSION is the instrument.

TAXES SIT OUTSIDE ALL FIVE. They are the fiscal input, not the protective output. The only place the distinction blurs is a social-security CONTRIBUTION, which is economically a payroll tax earmarked to a fund — and the earmarking is precisely what makes it an instrument.

This is a definition question wearing the clothes of a list question, and EPFO sets it because an Assistant Provident Fund Commissioner is expected to know what the machinery of social security consists of before he knows the sections of any one statute. Nothing here needs to be looked up; a candidate who can say what social security IS can sort six familiar names in half a minute.

The construction repays study. Six numbered items are printed — this is the only six-item list in the whole paper, against eighteen items with four statements and seven with three — and every option names exactly four of them. That shape carries a hidden gift: because the options are all four-element sets, the candidate does not have to judge all six items independently. Finding ONE item that must be in and ONE that must be out is usually enough to leave a single option standing. Here item 2 must be in, which removes one option, and item 3 must be out, which removes two more.

The habit rewarded is a two-question test applied to each item in turn: does it identify a beneficiary, and does it pay on a contingency ? An income tax and a sales tax fail both. A provident fund, a pension scheme and a life insurer pass both. That test is far more durable than trying to remember a list of instruments, because it will handle items the candidate has never seen — a crop insurance scheme, an unemployment allowance, a gratuity fund — on the day it matters.

Key facts

Social-security instruments identify a beneficiary and pay on a defined contingency; taxes raise general revenue and are not earmarked to any beneficiary or risk, which is why Income Tax and a General Sales Tax are excluded here.
The Employees' Provident Fund is the statutory contributory provident fund under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, with individual accounts funded by employer and employee contributions.
Two further schemes run under the same Act — the Employees' Deposit Linked Insurance Scheme, 1976 for death in service and the Employees' Pension Scheme, 1995 for superannuation, widow's, children's and disablement pensions.
The Life Insurance Corporation was established under the Life Insurance Corporation Act, 1956 on the nationalisation of life insurance, and life insurance is the classic instrument for the survivors' contingency.
The National Pension System is a defined-contribution pension arrangement, made applicable to central government employees joining on or after 1 January 2004 and opened to all citizens in 2009, regulated by the PFRDA under the PFRDA Act, 2013.
The Public Provident Fund, available through post offices and banks, is the voluntary universal counterpart of the EPF — a long-term contractual savings instrument not tied to employment.
Social insurance pools contributions and defines the benefit by the contingency; a provident fund keeps individual accounts and pays only what has accumulated, so it cannot transfer risk between members.
Social assistance — the old-age, widow and disability pensions of the National Social Assistance Programme — is non-contributory and financed from general revenue; there the tax is the source of finance and the pension is the instrument.
The General Sales Tax named in item 3 was a State levy on the sale of goods as the tax system then stood, and is not the same thing as the later Goods and Services Tax.

Study next

The families of social-security instruments — social insurance, provident funds, pensions, life insurance and annuities, and social assistance — with the Indian example of each.The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 and the three schemes framed under it, with the contingency each one covers.The National Pension System: the 2004 switch for central government employees, the 2009 extension to all citizens, Tier I and Tier II accounts and the role of the PFRDA.The National Social Assistance Programme — IGNOAPS, IGNWPS, IGNDPS, the National Family Benefit Scheme and Annapurna — as India's social-assistance arm.The Public Provident Fund and the small savings schemes operated through the post office network, and how they reach workers outside organised employment.How social security is financed: contributions, general revenue and earmarked levies, and why an earmarked contribution behaves differently from an ordinary tax.

Common traps

Treating anything the government collects or spends as an instrument of social security. A tax finances protection; it does not provide it.
Reading item 3's General Sales Tax as the Goods and Services Tax. In either case it is a tax on transactions and fails the test, but the two are different levies from different periods.
Judging all six items independently when every option names exactly four. One certain inclusion and one certain exclusion usually leave a single option standing.
Dropping the Employees' Provident Fund, the least deniable instrument on the list and the one the recruiting organisation administers.
Assuming LIC belongs only to commercial insurance. Life insurance covers the survivors' contingency and is a standard social-security instrument.
Confusing the National Pension System with the old defined-benefit government pension. The NPS is a defined-contribution arrangement with an individual account.

Social security as a subject — as distinct from the sections of any one statute — appears on every EPFO paper, and it is asked in three recognisable shapes. The first is the classification question, as here: a list of names is offered and the candidate has to sort them into instruments and non-instruments, or into contributory and non-contributory, or into organised and unorganised sector. The second is the contingency question: which risks a scheme covers, or which risks a named framework identified, which is where the international lists and the Beveridge scheme come in. The third is the scheme-detail question: the eligible age band, the premium, the pension amount, the regulator.

For the first shape the two-part test — is there a beneficiary, and is there a contingency — does almost all the work, and it is worth practising on names that have not appeared on a paper yet. For the second, learn the nine branches recognised in the international minimum-standards framework and keep them in a fixed order, because a list question is much easier to answer against a remembered list than against a general impression. For the third, keep a single table of the government's flagship schemes with their age bands, premiums and benefit amounts, and note the year each figure belongs to, since several of them have been revised.

Related PYQs

EPFO_APFC_2016_Q44

What are the disadvantages of Provident Fund Scheme ? 1. Money is inadequate for risks occurring early in working life. 2. Inflation erodes the real value of savings. 3. It generates forced saving that can be used to finance national development plans. Select the correct answer using the codes given below :

(a) 1 and 2 only
(b) 1 and 3 only
(c) 2 and 3 only
(d) 1, 2 and 3

Answer(a) 1 and 2 only

The provident fund model examined for its weaknesses on this same paper — the companion item that explains why a provident fund alone cannot do everything social security is asked to do.

EPFO_APFC_2016_Q111

Social Security may provide cash benefits to persons faced with 1. Sickness and disability 2. Unemployment 3. Crop failure 4. Loss of the marital partner Select the correct answer using the codes given below :

(a) 1, 2 and 3 only
(b) 1, 2 and 4 only
(c) 3 and 4 only
(d) 1, 2, 3 and 4

Answer(d) 1, 2, 3 and 4

The contingencies for which social security may provide cash benefits, the other half of the same definition tested here.

EPFO_EOAO_2017_Q88

Which one of the following is the correct set of contingencies identified by William Beveridge in his comprehensive social security scheme?

(a) Want, disease, ignorance, squalor and idleness
(b) Want, sickness, disability, squalor and idleness
(c) Want, disease, old age, squalor and unemployment
(d) Disease, invalidity, old age, unemployment and ignorance

Answer(a) Want, disease, ignorance, squalor and idleness

The set of contingencies identified by William Beveridge, the classification that stands behind most modern lists of social-security branches.

Practice

practice — not a real PYQ
Which one of the following is best described as a source of FINANCE for social security rather than as an instrument of social security itself ?
- (a)The Employees' Deposit Linked Insurance Scheme
- (b)A general tax on income
- (c)The Employees' Pension Scheme
- (d)A contributory provident fund
Answer(b) A general tax on income — it raises revenue for the state at large and is not earmarked to any beneficiary or contingency. The other three each identify a member, take contributions and pay a defined benefit when a stated event occurs, which is what makes them instruments.
practice — not a real PYQ
The Employees' Deposit Linked Insurance Scheme and the Employees' Pension Scheme are both framed under which one of the following enactments ?
- (a)The Employees' State Insurance Act, 1948
- (b)The Life Insurance Corporation Act, 1956
- (c)The Employees' Provident Funds and Miscellaneous Provisions Act, 1952
- (d)The Payment of Gratuity Act, 1972
Answer(c) The Employees' Provident Funds and Miscellaneous Provisions Act, 1952 — the Act carries three schemes: the Employees' Provident Fund Scheme, 1952, the Employees' Deposit Linked Insurance Scheme, 1976 and the Employees' Pension Scheme, 1995.

Why