You have to deduct PF for everyone and add with employer contribution and Admin Charges and same to be deposited with PF Office. Please think in that way that you are doing service for his family too. If an employee died means surely his wife will get some amount in the name of Pension till their life time or till remarriage or till the daughters get married or son get a job or upto 21 years whatever it may be.
You have to issue the experience certificate to terminated employee with all the benefits (Notice Pay, Retrenchment Compensation, Leave pay) and in experience certificate you must mention the reason for release as terminated from service due to _______ (Reason).
Hope you could have kept your record from the employee for asking exemption from deducting PF.
Eventhough your organisation is small enough please start making all the documents and records proper.
All the best
8th July 2011 From India, Kumbakonam
labour law consultant
11th July 2011 From India , New Delhi
12th March 2016 From India, Kakinada