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EPFO Contribution reduced from 12% to 10%

15 Jun 2021 13:50:46 Comment(s) By TAXAJ

Reduced EPF contribution: 16 questions answered by EPFO

The EPFO, via its official Twitter, handle released a set of FAQs related to the announcement slashing of PF Contribution from 12 to 10 % for both employers and employees.


Finance Minister Nirmala Sitharaman announced this measure as part of the Atmanirbhar Bharat Package to provide relief to the employers and increase the monthly take-home pay of employees.

Here are 16 questions answered by the EPFO itself related to reduction in EPF contribution for the months of May, June and July, 2020.

Q.1 What's the revised rate of provident fund contribution announced by the Central Government ?


In this Atmanirbhar package, the employer and employee's statutory rate of PF contribution has been reduced to 10% of basic wages and DA from 12% for all class of establishments covered under the EPF & MP Act, 1952.



Q.2 What's the objective of reduction in the rate of contributions?


Reduction in EPF contributions from 12% to 10% of basic wages and Dearness allowances will benefit both the employees/members and employers establishments to tide over the immediate liquidity crisis to some extent during the pandemic situation.



Q.3 Whether any notification has issued under the EPF & MP Act, 1952, for reducing the rate of contributions? If so, how can I access the information?


The slashed rate from 12% to 10% for wage months May 2020, June 2020, and July 2020 notified vide SO 1513(E) dated 18.0.2020 published in Gazette of India.



Q.4 Untill when the slashed contribution rate applies?


Slashed rates will be 10% for wage months - May to July 2020.



Q.5 Who are eligible for the slashed rate of contributions?


It applies to all classes of establishments covered under the EPF & MP Act, 1952 except PSU's. The slashed rate is also not applicable to establishments eligible for PMGKY benefits since the entire employees' EPF contributions (12% of wages) and employers' EPF & EPS contribution (12% of salary), totaling 24% of the salaries, is being contributed by the Central govt.



Q.6 Exempted establishments eligible for a reduced rate of contribution?


Yes. The reduced rate applies to all the exempted establishments as well.



Q.7 How does the slashed rate of contributions help the employees and employer?


As a result of slashing in contribution rate from 12% to 10%, an employee shall have a higher take-home pay due to a drop in a deduction from his salary on account of PF contributions. The employer shall also have his liability reduced by 2% wages.


If INR 10,000/- is monthly EPF wages, only Rs 1000/- instead of Rs 1,200/- will now be deducted from employee's wages, and the employer pays INR 1000/- in place of Rs 1,200/- towards the PF contributions.



Q.8 I get a paid under the CTC model. Will the slashed rate of contributions from 12% to 10% still benefit me?


In the CTC model, if Rs 10,000 is monthly EPF wages in CTC Model, the employee gets Rs 200 more directly from the employer. The employer's EPF/EPS contribution is reduced 200 lesser is deducted from wages.



Q.9 Is the 10% contribution rate applicable to establishments that get registered with EPFO during wage months May to July 2020?


Yes. Establishments covered during May-July 2020 will be eligible for a reduced rate for the suitable remaining period from the coverage date.




Q.10 Are there any changes in rates for administrative charges and insurance?


EPF administrative charges and EDLI contributions, both payable by employers are still the same and remains unchanged




Q. 11 How is the benefit availed? 


One has to pay at the total rate and claim reimbursement later or make direct payment at a reduced rate. The establishment has to remit payment at a slashed rate through the ECR itself on the portal.




Q. 12 Can the employer/employee pay their contribution at a higher rate, or the combined rate of 10% is mandatory?


The reduced rate of contribution is the minimum contribution rate during the period of the package. The employer, employee, or both can voluntarily contribute at a higher rate.



Q. 13 How the new rate of contribution will impact the amount of pension in the long run?


The EPS contribution of 8.33% of wages (Subject to the ceiling of 15,000) is diverted from the employer's share of PF contributions. The reduced PF contributions to 10% will not reduce the contributions to pension or its benefits.




Q. 14 My establishments is unable to remit dues timely during the scheme period. Is it still eligible for a slashed rate of contribution?


Yes, the contribution rate is 10% for the three wage months- May 2020, June 2020, and July 2020 irrespective of the payment date.




Q. 15 Does the option to contribute at a slashed rate available to establishments availing of PMRPY benefits?


Yes, the establishment availing of PMRPY benefits can remit contributions at a reduced rate.




Q.16 The contribution rate for my establishment is 10% as it is engaged in guar gum manufacturing. Will the contribution rate be further reduced for my establishment?


Those establishments, that were already entitled to a reduced contribution rate (10%) through the SO 320 (E) dated 09.04.1997, are not eligible for any further contribution rate.

TAXAJ

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