In what comes as a respite for the cash-crunched employers, the Union Cabinet on Wednesday approved to make Employees’ Provident Fund (EPF) contributions (both employee and employer) for another three months. Now, the government will continue to pay the EPF contributions until August 2020.
The twitter handle of the Press Information Bureau (PIB) informed the nation about the decision made in today’s cabinet meeting. The extension of making EPF contributions for the duration between June and August under Aatmanirbhar Bharat Abhiyan and Pradhan Mantri Garib Kalyan Yojana (PMGKY) will cost the government Rs 4,860 crore. The move is beneficial to more than 72 lakh employees.
This decision of extending the EPF contributions for another three months is aimed at giving further relief to small businesses that are impacted by the cash crunch due to the ongoing novel coronavirus crisis. The government decided to make EPF contributions back in March 2020 under the Pradhan Mantri Garib Kalyan Yojana.
As announced earlier, the EPF contributions would be made by the government only to those organisations that have less than 100 employees and out of which up to 90% of them are earning less than Rs 15,000 a month. The government had decided to make EPF contributions to ensure that no one is affected due to discontinuation in their EPF contributions.
Also Read: IT rules specify allowances for employees choosing new tax regime
The Employees’ Provident Fund Organisation (EPFO) mandates employees with a monthly wage of up to Rs 15,000 to subscribe under the EPF scheme mandatorily. All eligible employees should mandatorily contribute 12% of their basic pay plus dearness allowance (DA) every month. Employers make the matching contribution.
Of the employee’s 12% contribution, 3.76% goes towards their EPF account while the remaining 8.33% goes towards Employee’s Pensions Scheme (EPS). This move by the government to make EPF contributions for the next three months is beneficial for both employees and employers.
The Finance Minister in March 2020, as a part of COVID-19 relief measures, announced that the employees whose employment is affected by the COVID-19 pandemic could withdraw from their respective EPF accounts without any paperwork. This was announced to ensure that employees don’t face financial hardship.
For any clarifications/feedback on the topic, please contact the writer at vineeth.nc@cleartax.in
Engineer by qualification, financial writer by choice. I am always open to learning new things.
