The government is likely to lower the provident fund contribution under the new code of Social Security Bill, 2019. The contribution could be lowered by 2-3% in case of women, persons with disabilities or men of the age group 25-35 years.
The rules governing the lower contribution are likely to be notified after the passing of the Social Security Bill. The said bill is already in the Lok Sabha. It proposes new rules for contribution to labour welfare schemes. The provisions of the bill would apply after it is passed by both the houses of the Parliament and assented by the President. Presently, the bill is before the standing committee on labour.
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At present, under the Employees’ Provident Funds Act, 1952, both the employer and the employee contribute 12% each of the basic salary plus dearness allowance. Out of the employer’s contribution, 8.33% goes to the Employee Pension Scheme (EPS). However, the maximum EPS contribution is 8.33% of Rs 15,000 in case basic pay is higher than Rs 15,000.
The labour ministry is likely to allow lower contribution only for a select category of workers, and not for all employees covered under the present PF Act.
The government is analysing the options looking at the need for retirement funds, the need for funds for the wedding, housing and other purposes in the initial career years of workers. Thus, the government intends to increase the take-home salary of certain workers.
For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in
I am a Chartered Accountant by profession. I specialise in personal taxes and corporate income tax matters. I am an avid reader and track developments in financial markets, economy and other market developments.
