EPFO or Employees Provident Fund Organisation may soon allow Employees Provident Fund or EPF account holders to decrease their Provident Fund or PF contribution below 12 per cent. The interesting angle in this Modi Government proposal is to continue getting 12 per cent contribution from their employers, even when their PF contribution is less than 12 per cent. If an employee does that, he or she would get a higher salary per month and at the same time, they will enjoy 12 per cent PF contribution from their employer. The Modi cabinet has cleared the proposal and it may be tabled in Parliament in this Winter Session under the Social Security Code 2019.

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This change in EPFO rule may get tabled in Parliament in the coming week and the changed EPFO rule may get to be a part of Social Security Code 2019. In this code,  PF account holders will have the luxury to choose their PF contribution, but the employers will be bound to contribute making 12 per cent payment of the basic salary of the PF or EPF subscriber. 

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The Modi Cabinet has already approved this EPF proposal and once it gets cleared by Parliament, EPFO will notify the changed norms in regard to the Provident Fund contribution.

While the PF and EPF account holders are hailing the Modi Government's proposal to allow employees to decide their PF contribution, tax and investment experts have a warning for them. According to them, PF contribution is related to one's retirement fund and if employees decide to decrease their provident fund contribution, their retirement fund will also get affected by it - it will get reduced. 

Apart from this, experts were of the opinion that higher salary leads to income tax outgo while having higher EPF contribution leads to income tax exemption on EPF contribution up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act 1961.