Employees working in the private sector will now receive a greater amount of "take-home" salary for three months – May, June, and July – as the central government has notified a reduction in the Employee Provident Fund (EPF) contribution for these three months of May, June, and July.
In the 'Atmanirbhar Bharat' fiscal package, Union Finance Minister Nirmala Sitharman had on part of the central government announced that the contribution provided to the EPF would be curtailed to 10% (from the pre-existing 12%) to give more money in the hands of employees. The move is aimed at giving relief to employers in the payment of provident fund.
Now the company will also pay less for your EPF account and you will also need to deposit a lesser amount, thereby increasing the effective "take-home" salary.
However, in government companies, it will still be deposited at 12%-12%, i.e., this exemption is for private companies and their employees only.
Altogether 6.5 lakh companies will benefit and 4.3 crore employees will benefit from cash companies and employees worth Rs 6,750 crore in 3 months. This money will provide relief in eliminating liquidity crunch between lockdown.
However, the scheme will not benefit the companies for which the government itself is contributing 24% to EPF. In these companies, the government itself is filling the EPF contribution (12% + 12%) of the companies and employees with their treasury.
It may be noted that last week, the Employees' Provident Fund Organisation (EPFO) on Friday announced major relief to the companies stating that no penalty will be levied upon them for a penalty for delayed deposit of dues during the lockdown.
The move is aimed to ease the compliance norms for 6.5 lakhs EPF covered establishments and save them from liability on account of penal damages.
“Due to prolonged lockdown announced by the Govt. to control the spread of COVID-19 and other disruptions due to pandemic, establishments covered under EPF & MP Act, 1952 are distressed and unable to function normally and pay the statutory contributions in time,” an official release said.
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