How New EPF Rules Reduction Contribution Will Impact A salaried person.The Finance Minister Nirmala Sitharaman announced a reduction of EPF contribution from 12 per cent to 10 per cent for both employer and employees.
Key Highlights Of EPF :
- Due date for all income tax returns extended to 30 November
- Statutory PF contribution by employer reduced to 10% from 12% earlier; to provide ₹6,750 CR liquidity relief.
- EPF Contribution has been cut by a total of 4% for 3 months to help the salaried class tide over the current coronavirus crisis.
Nirmala Sitaram told it is a part of the Atmanirbhar Bharat (self-reliant India ) Package as a means to provide relief to employers and also to increase the take-home pay of employees.
The Employees’ Provident Fund Organization (EPFO) also recently came out with detailed FAQs (frequently asked questions) to provide clarity on the statutory reduction on PF contributions.
As per the clarification provided, it is not mandatory for the organisation to go for lower contributions, if they are comfortable they can continue contributing at higher levels.
“The reduced rate of contribution of 10 per cent is the minimum rate of contributing during the period of the package. The employer and employee or both can contribute at a higher rate also.”
As a consequence of this decision, the PF will not have any impact on the in-hand salary of the employee. Since, PF is a part of the CTC of employee, so it will bring it down.
EPFO further clarified that the employer will have to compensate the employee for the drop in CTC if the employer decides to contribute at a lesser rate.
Clarifying further about the impact of this move on the pensions, EPFO further clarified that a reduced rate of EPF contributions to 10 per cent will not reduce the pension contributions or benefit.
Five Announcements On EPF You Must Know
1. Due Dates for all income tax returns has been extended to 30 November from 31 July.
2.The EPF decision will provide relief to 6.5 lakh establishments covered under EPF and about 4.3 crore such employees, said Sitharaman, adding that it will provide liquidity of ₹6,750 crore to employees and and employers over next three months.
3.To increase take-home salary for employees and to give relief to employers in payment of provident fund , FM Nirmala Sitharaman today said that for next three months EPF or employee provident fund contribution will be 10% each for employees and employers as compared to the statutory obligation of 12%. CPSEs and state PSUs will, however, continue to contribute 12% as employer contribution.
4.The finance minister today also announced an extension by another three months a scheme under which the government pays the EPF contribution of employees and employers. Under this scheme, the central government pays 24% of the monthly wages into EPF accounts below ₹15,000 per month, who are employed in establishments having up to one hundred employees, with 90% or more of such employees earning monthly wages less than ₹15,000. This scheme will be now available till August.
5.TDS, TCS rate for non-salaried payments for period up to March 31, 2021 has been slashed by 25%, a move that will release ₹50,000 crore into the system, said Sitharaman.
“In order to provide more funds at the disposal of taxpayers, the rates of Tax Deduction at Source (TDS) for non-salaried specified payments made to residents and rates of Tax Collection at Source (TCS) for the specified receipts shall be reduced by 25% of the existing rates,” the Finance Minister said.
Payment for contract, professional fees, interest, rent, dividend, commission, brokerage, etc shall be eligible for this reduced rate of TDS.