What is Employee Provident Fund and the latest amendment.
Employees’ Provident Fund or EPF is a popular savings scheme that has been introduced by the EPFO under the supervision of the Government of India.
This is focused mainly on the salaried class of India to inbuilt their habit of saving money to build a substantial retirement corpus.
The EPF scheme is directed by three different Acts, namely,
- The Employees’ Provident Fund Scheme Act, 1952,
- The Employees’ Deposit Linked Insurance Scheme Act, 1976 and
- The Employees’ Pension Scheme Act, 1995.
The fund is built with monetary contribution extended by employees and their employer each month. Both parties extend 12% each of the employees’ monthly salary, as their share of contribution towards EPF.
The money invested in this fund accrues a pre-fixed rate of interest that has been pre decided by the Employees Provident Fund Organization (EPFO).
The said amount including the pre fixed rate of interest is tax-free and can be withdrawn without paying for the same..
At the time of retirement of the employee he/she is eligible for the lump-sum amount, which is inclusive of the accrued interest.
Individuals can apply to avail various online services of EPF India by accessing the official portal of EPFO. The portal is a user-friendly platform that ensures to keep the flow of services transparent, efficient and hassle-free.
Recent amendment
Until the pandemic (COVID-19) hit worldwide and the economy was running at a constant pace, The Employee Provident Fund which both the employee and the employer are required to set aside was an amount equal to 12% of Basic Wages plus Dearness Allowances each month.
However taking into consideration the current economic and financial scenario the Finance minister of India – Nirmala Sitharaman gave a temporarily relief to the employees by announcing the reduction of statutory provident fund contribution by both employers and employees for the next three months to 10 per cent of basic wages from 12 per cent.
Employer contributions to the social security scheme run by the EPFO shall be 10 per cent of the wages of May, June and July which would stand due in June, July and August, respectively.
As a result of reduction in statutory rate of contributions to 10% –
- Employee shall have a higher take home pay due to reduction in deduction from his pay on account of EPF contributions
- Employer shall also have his liability reduced by 2 per cent of basic wages of his employees.
Author Bio
