EPF contribution rate cut from 12 pct to 10 pct
NEW DELHI : The Centre has announced several measures for employees on Wednesday giving them some relief during the coronavirus crisis. Probably, the most important announcement came in the form of benefits announced for members of Employees’ Provident Fund (EPF).
The finance minister Nirmala Sitharaman informed that those earning a basic salary of more than Rs 15,000 a month can opt to pay 10 per cent instead of the mandatory 12 per cent contribution towards PF for the next 3 months.
Currently, all the employees are required to pay 12 per cent of the monthly pay towards provident fund, with an option to enhance it to up to 100 per cent of the basic pay. The contribution above the designated 12 per cent is called voluntary provident fund (VPF).
EPF contribution is calculated at 12% of basic wages + dearness allowance + retaining allowance. The announcement on provident fund reliefs is a positive one. The percentage of PF contribution has been reduced to 10%, rate was applicable to establishments with less than 20 employees, sick industries, establishments where losses exceed net worth, jute, beedi, brick, coir and gum industries.
This will amount to a liquidity support of Rs 6,750 crore, said the government, in the first of many tranches of the economic package announced by PM Narendra Modi yesterday to tackle the economic impact of coronavirus and weeks of lockdown.
Therefore, statutory PF contribution of both employer and employee will be reduced to 10 per cent each from the existing 12 per cent for all establishments covered by EPFO for the next three months,” said the minister. State-run firms will however continue to pay 12 per cent as employer contribution.
This, according to the government, will provide relief to about 6.5 lakh establishments covered under EPFO and about 4.3 crore such employees.
The government also said it would pay the EPF contribution for employees of businesses to help them recover from the virus crisis.
To ease financial stress as businesses get back to work, the government will continue EPF support for business and workers for three more months, providing a liquidity relief of Rs 2,500 crore. This will benefit 72.22 lakh employees.
The purpose of an provident fund is to help employees save a percentage of their month salary. Under an employee provident fund scheme, an employee pays a certain contribution towards the scheme and an equal contribution is paid by the employer. The employee receives a lump sum amount on retirement.
(With Agency Inputs ).