Employee Provident Fund (EPF) refers to the scheme which provides monetary benefits to the salaried class people upon retirement. It is governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF & MP Act 1952). The Act extends to the whole of India except the State of Jammu and Kashmir. It is applicable to every establishment which employs 20 or more employees and to such other establishments which the Central Government may notify.
Under EPF scheme, an employee has to contribute a certain amount towards the scheme and an equal amount is paid by the employer. The employee gets a lump sum amount including self and employer’s contribution with interest on both, on retirement. The existing contribution rate was 12% (in some cases – 10%, as maybe notified by Government) which has been reduced to 10% by the Government.
Reduction in statutory rate contribution was announced on 13.05.2020 by the Central Govt. as a part of Atma-Nirbhar Bharat package which has been notified vide SO 1513 (E) dated 18.05.2020 published in the Gazette of India. The details of the same are as follows:
1. New Rate : 10%
2. Applicability : To all establishments covered under EPF & Mp Act, 1952 for wage months May, 2020, June, 2020 and July, 2020
Note: The above reduction is not applicable to the following:
3. Beneficiaries: It is intended to benefit 3 Crore employees/members and employers of 6.5 lakhs establishments to tide over the immediate liquidity crisis to some extent as the employee shall be able to take home higher pay due to reduction in deduction from his pay on account of EPF contributions and employer shall also have his liability reduced by 2% of wages of his employees.
4. Are exempted establishments eligible for reduced rate of contribution?
5. What will be rate of contribution for administrative charges and insurance?
There is no change in the EPF administrative charges (0.5% of EPF wages subject to minimum prescribed) and EDLI contributions (0.5% of wages) both payable by employers.
6. How is benefit availed? One has to pay at full rate and claim reimbursement later or direct payment at reduced rate can be made.
Establishment has to remit dues at reduced rate through the Electronic-Challan cum Return (ECR) itself.
7. Can the employer or employee pay at higher rate or the contribution rate of 10% is mandatory?
The reduced rate of contribution (10%) is minimum rate of contribution during period of the package. The employer, employee or both can contribute at higher rate also.
8. If an establishment is not be able to remit dues timely during the scheme period, Is it still eligible for reduced rate of contribution?
Yes, the rate of contributions is 10% for the three wage months- May, 2020, June, 2020 and July, 2020 irrespective of date of payment.
Note: The establishments, which were already entitled to reduced rate of contribution (10%) through the SO 320 (E) dated 09.04.1997 are not eligible for any further reduction in rate of contribution.
(Disclaimer: The entire contents of this document have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation. Though utmost efforts has made to provide authentic information, it is suggested that to have better understanding kindly cross-check the relevant sections and rules. The observations of the author are personal view and the author do not take responsibility of the same.)