EPF calculator 2020: Opting for 10 pct contribution? This is how much you will take home now
EPF calculator 2020: One of the major announcements made by Finance Minister Nirmala Sitharaman as part of her Rs 20 cr economic relief package, was the option to go for a reduced EPF rate.
EPF calculator 2020: One of the major announcements made by Finance Minister Nirmala Sitharaman as part of her Rs 20 cr economic relief package, was the option to go for a reduced EPF rate. The Ministry of Labour and Employment has notified the reduced rate of provident fund contribution for employers and employees from existing 12 per cent of monthly basic pay and dearness allowance to 10 per cent for the months of May, June and July 2020.
The move will allow salaried employees to take home a bigger salary which, it is believed, will help boost the economy as well as provide greater amounts of money in the hands of cash-strapped individuals during the Covid-19 crisis. The new rule applies to all classes of establishments covered under the Provident Fund Act barring central and state public sector enterprises or any other establishment owned or controlled by or under control of the central government or state government.
Should you opt for reduced EPF?
While the move will provide immediate liquidity and give you more cash in hand, it can lead to net loss in a longer time period.
WATCH | Redmi Note 9 Pro Max review
“EPF acts as a saving tool for employees. Currently, the employees contribute 12 percent of their salaries, and an equal amount is contributed by the employers in an EPF account. The reduction of 10 percent ideally means employee's portion of 2 percent will be paid out as salary to all employees in the next three months. Hence, employees will get slightly higher payout,” Yogita Tulsiani, MD, iXceed Solutions explained.
What will be the difference in your take home salary?
The FAQs issued by EPFO explain that in cost to company (CTC) model, if Rs 10,000 is monthly EPF wages, then the employee will get Rs 200 more directly from employer as employer’s EPF/EPS contribution is reduced and Rs 200 less is also deducted from the employee’s wages.
Both the parts will be added to the take home salary, eventually increasing the amount by Rs 400. However, the additional payout will be taxable at the hands of the employee. This will also reduce the benefit that can be claimed under Section 80C of the income tax.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Senior Citizen Latest FD Rates: Know what major banks like SBI, PNB, Canara Bank, HDFC Bank, ICICI Bank are providing on fixed deposits
Gratuity Calculator: Rs 38,000 as last-drawn basic salary, 5 years and 5 months of service; what will be gratuity amount?
Retirement Planning: In how many years your Rs 25K monthly SIP investment will grow to Rs 8.8 cr | See calculations
Top 5 Small Cap Mutual Funds with best SIP returns in 1 year: See how Rs 25,000 monthly investment has grown in each scheme
Top 7 SBI Mutual Funds With Best SIP Returns in 1 Year: Rs 25,000 monthly SIP investment in No.1 fund has jumped to Rs 3,58,404
SBI 5-Year FD vs MIS: Which can offer higher returns on a Rs 2,00,000 investment over 5 years? See calculations
01:52 PM IST