An Overview of announcement by honorable finance minister Nirmala Sitharaman on Wednesday 13/05/2020 regarding EPF contribution by which EPF Contribution was reduced for Employers and Employees for 3 months to 10% from 12% for all establishments covered by EPFO for next 3 months i.e. May 20, June 20 & July 20.

Union finance minister Nirmala Sitharaman on 13.05.2020 announced the statutory provident fund or PF contribution of both employer and employee will be reduced to 10% each from existing 12% each for all establishments covered by EPFO for the next three months i.e. May 2020, June 2020 & July 2020.

Let’s understand with charts:- 

Account Head Upto wage month April 2020 From wages months May 2020 to July 2020
Employee’s PF Contribution – A/c No: 1 12% 10%
Employer’s PF Contribution – A/c No: 1 3.67% (12%-8.33%) 1.67% (10%-8.33%)
Employer’s EPS Contribution – A/c No: 10 8.33% 8.33%
EDLI Contribution – A/c No: 21 0.50% 0.50%
Administrative Charges –  A/c No: 2 0.50% (Minimum Rs. 500/-) 0.50% (Minimum Rs. 500/-)
No change in inspection charges in A/c No. 22 in respect of EDLI exempted establishments.

Example for PF Wage Rs.10,000/-

Account Head April 20 May to July 20
EE PF (A/c # 1) 1,200/- 1,000/-
ER PF (A/c # 2) 367/- (1200-833) 167/- (1000-833)
ER EPS (A/c 10) 833/- 833/-
ER EDLI (A/c 21)* 50/- 50/-
ER ADMIN (A/c 21)* 50/- 50/-
Effective CTC 11,300/- 11,100/-
Effective % 25% 21%

*EDLI & Admin are notional only as they are calculated on overall challan value.

*Take Home Salary increase for employee but CTC reduces.

Some Frequently Ask Questions (FAQ):-

Q 1. Applicability of the announcement?

Ans: Applicable on all establishment except

a) Central and State Public Sector enterprises

b) Establishments owned or controlled of Central Government or State Government.

c) Establishments eligible for PMGKY benefits i.e. Where employees and employers contribution to be paid by Government

Q 2. Applicable in the months of?

Ans:

a) May 2020 paid in June 2020

b) June 2020 paid in July 2020

c) July 2020 paid in August 2020

Q 3. For Fixed CTC what needs to be done?

Ans: The difference in employer share (2%) needs to be paid to employees.

Q 4. Can Employer / Employee pay at higher rate?

Ans: Yes

Q 5. Will it impact pension?

Ans: No, Pension remains 8.33%

Q 6. What if ECR not submitted on time?

Ans: No Problem

Also Read-

Atma Nirbhar Bharat: Part-1: Businesses including MSMEs Text of Press Release by FM on 13th May 2020
Atma Nirbhar Bharat: Part-2: Poor, including migrants and farmers Text of Press Release by FM on 14th May 2020
Atma Nirbhar Bharat: Part-3 – Agriculture Text of Press Release by FM on 15th May 2020
Atma Nirbhar Bharat Part-4: New Horizons of Growth Text of Press Release by FM on 16th May 2020
Atma Nirbhar Bharat- Part-5: Government Reforms and Enablers Text of Press Release by FM on 17th May 2020

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Specializes in Labour Laws, Tax advisory, Audit & Assurance and Business Management having an experience of 7+ years. In practice for more than 5+ years as a consultant for Labour Laws and Tax. Along with 5+ years of Audit, Tax, and Account experience with, holds a Master degree in Comm View Full Profile

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30 Comments

  1. Kamlesh Prasad Gupta says:

    Dear Sir,
    I want to know if our All Employees PF admin charges is Rs. 499, How much wil be pad the same.
    If our All Employees PF Admin charges is Rs. 4034,How much will be paid.
    Plz answer the earliest.
    Thanks

    1. AGRAJ1991 says:

      Hi, Rajbahadur
      Calculate pf either on Rs.15000/- i.e. PF contribution will be 1,800/- employer and employee each or calculate as per employee agree for voluntary contribution.

  2. rahul says:

    for Administrative charges AC-2 which is 0.5% (minimum Rs. 500) – my question is our adm. charges doesn’t go above Rs.300.. so what to do now??? can anybody help me in this matter?? i am not able to generate challan.

  3. Jayant says:

    I want to know that whether I mayane clea I have being paid by firm salary more that 21000 but the firm is not disbursing ER – EPF SUBSCRIPTION into my account and insisting for form11 from me, so that the firm may exempted for ER SHARE, however the same

    PLEASE CLARIFY WHETHER I BE ELLIGBE
    For exemption of my villahe

  4. anil tiwari says:

    sir. pl. send my mail id pf contribution march-2020 to august – 2020 march to may 12×2=24% and jun to august 10×2 =20% passed by gov. approved copy pdf file cercullar send my mail id pl.. sir

  5. AGRAJ1991 says:

    Let’s understand with charts:-

    Employee’s PF Contribution – A/c No: 1 – 12%
    Employer’s PF Contribution – A/c No: 1 – 3.67% (12%-8.33%)
    Employer’s EPS Contribution – A/c No: 10 – 8.33%
    EDLI Contribution – A/c No: 21 – 0.50%
    Administrative Charges – A/c No: 2 – 0.50% (Minimum Rs. 500/-)
    No change in inspection charges in A/c No. 22 in respect of EDLI exempted establishments.

  6. AGRAJ1991 says:

    Hi……
    Babasaheb…Pls read carefully from the starting.

    Let’s understand with charts:-

    Account Head Upto wage month April 2020 From wages months May 2020 to July 2020
    Employee’s PF Contribution – A/c No: 1 12% 10%
    Employer’s PF Contribution – A/c No: 1 3.67% (12%-8.33%) 1.67% (10%-8.33%)
    Employer’s EPS Contribution – A/c No: 10 8.33% 8.33%
    EDLI Contribution – A/c No: 21 0.50% 0.50%
    Administrative Charges – A/c No: 2 0.50% (Minimum Rs. 500/-) 0.50% (Minimum Rs. 500/-)
    No change in inspection charges in A/c No. 22 in respect of EDLI exempted establishments.

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