ALERT! EPF contribution by employee, employer to get back to old rate tomorrow

The Government had announced a big relief for the salaried class under its Aatmanirbhar Bharat package with regards to the Employees Provident Fund (PF). In the wake of coronavirus pandemic across the country, the Finance Minister Nirmala Sitharaman reduced the monthly contribution from earlier 24 per cent to 20 per cent.  

Sitharaman had said that the employee contribution for the months of May, June and July will be 10 per cent with a similar contribution by the company. As the month of July ends today, the in hand salary of the employees are likely to get reduced from August month onwards.    

12 per cent deduction towards PF contribution from 1 August: From 1 August, the usual deduction rules will apply i.e. the contribution towards EPF will become 24 per cent. The employee contribution will be 12 per cent while an equal contribution will be contributed by the company. This will reduce the in-hand salary to some extent. 

What happens to the 24 per cent contribution? 

Out of the 12 per cent contributed towards the PF account by employee and employer, 3.67 per cent each goes towards the EPF while the remaining 8.33 per cent goes towards Employees’ Pension Fund. 

Know Government’s contribution: 

The government is also contributing for EPF of those employees whose salary is less than Rs 15,000. The amount will be contributed by the goverment till August. The contributions are being made on behalf of the employee and the employers. 

72.22 lakh employees registered with the EPFO benefitted: As per the government estimates, around 72.22 lakh employees and 3.67 lakh companies have benefited from this decision. The government has spent around Rs 2500 cr on this. 

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Why the government reduced the EPF contribution?  

The government decided to reduce the EPF contribution to put more money in the hands of the people. The nationwide lockdown was imposed to prevent the spread of the virus. As a result of the lockdown, people were facing financial problems.