FM announced relief to businesses to fight against COVID-19
EPF Contribution Latest News by SA News Channel: Today the readers will know about the Finance Minister’s announcement of measures for relief and credit support related to businesses, especially EPF to support the Indian Economy’s fight against COVID-19. It includes Extending the EPF support for business and organized workers for another 3 months and EPF Contribution reduced for Employers and Employees for 3 months to 10% from 12% for all establishments covered by EPFO for the next 3 months.
- EPF contribution cut to raise employees take-home pay
- The government bears the entire 24% contribution for SME employees earning less than Rs 15,000 a month
- EPF Contribution reduced for Employers and Employees to 10% from 12%
- Total Rs 9,250-crore liquidity support over three months
- Special economic package of Rs 20 lakh crores, 10% of India’s GDP
- India is leading towards “Aatmanirbhar Bharat Abhiyan”
- Self-reliant India with a focus on land, labor, liquidity and law
- Responsive attitude under PM’s leadership
- Lowering contribution towards EPF proposed
- Employees take-home pay to rise
Rs 20 lakh crores Mega Package by PM Modi – 10 percent of GDP
EPF Contribution Latest News: On Tuesday, Prime Minister Narendra Modi announced a Special economic and comprehensive package of Rs 20 lakh crores that is equivalent to 10% of India’s GDP. PM gave a clarion call for “Aatmanirbhar Bharat Abhiyan” or the Self-Reliant India Movement. PM Modi outlined five pillars as Economy, Infrastructure, System, Vibrant Demography, and Demand.
FM self-reliant India focus on land, labor, liquidity, and law
As a follow-up of The Prime Minister’s address to the Nation, The Finance Minister Nirmala Sitharaman, on Wednesday, elaborated the comprehensive vision and economic package in the fight against COVID-19. She said the Economic Package called Aatmanirbhar Bharat Abhiyaan is essentially launched with a goal to build a self-reliant India with a focus on land, labor, liquidity, and law.
■ Also Read: What is PPE Kit & Who approves PPE Kit in India?
EPF Contribution Latest News: The FM stressed about listening and responsive attitude of Government under the leadership of Prime Minister Shri Narendra Modi and hence it is fitting to recall some reforms undertaken since 2014. She further said, it is evident soon after the hours of the announcement of Coronavirus Lockdown 1.0, Pradhan Mantri Garib Kalyan Yojna (PMGKY) was announced and that we are going to build on this package.
Relief in EPF to fight COVID-19
EPF Contribution Latest News: FM Nirmala Sitharaman said It is necessary to provide more take-home salary to employees and to give relief to employers in payment of provident fund dues. Therefore, the statutory PF contribution of both employers and the employees will be reduced to 10% each from the existing 12% each for all establishments covered by EPFO for the next three months. It will provide Rs.2250 Crore per month’s liquidity.
■ EPF support for business and organized workers
The Government of India contributes 12% of salary each on behalf of both employer and employee to EPF under the scheme introduced as a part of PMGKP. This will be extended by another 3 months for salary months of June, July, and August 2020. 72.22 lakh employees will be benefited for an accrued amount of Rs 2500 crores.
What is new in EPF amid COVID-19?
- Both employers and employees to get a total Rs 9,250-crore liquidity support over three months
- For entities having less than 100 employees, the statutory monthly rate of contribution towards the EPF reduced from 12% each employer and employees now to 10% of an employees’ basic wage and dearness allowance,
- Extended the period of waiving off the contribution until the wage month of August
- Rs 6,750-crore liquidity relief both to the employers, and the employees over three months by lowering the rate statutory contribution.
- As per the government’s estimate, all 6.5 lakh establishments and their 4.3 crore employees, now covered under EPFO, will benefit.
- Government-owned entities, and their employees, both at the Center and the states will continue to pay 12% each towards the provident fund
- For small and medium enterprises having less than 100 employees and 90% of them earning less than Rs 15,000 a month,
- The government will continue to bear the entire 24% contribution of both the employer and the employee towards the EPFO till the wage month of August
- The finance minister said the move would provide Rs 2,500 crore liquidity relief to 3.67 lakh establishments and their 72.22 lakh employees over the June-August period
- Initially, the relaxation was given for three salary months — March to May. Payments have been made to eligible accounts.
- Now support will be extended for another three wage months — June, July, and August with an infusion of Rs 2,500 crore liquidity.
- To address the liquidity crisis of the employers, the EPFO in the recent past launched several schemes, including pushing back of deadline for mandatory contribution.
- On April 30, the EPFO also decided to separate the filing of monthly electronic challan-cum-return (ECR) from payment of statutory contributions reported in the ECR but did not mention any timeframe as to how long the facility will be available for employers.
- It has also introduced a provision in the EPF scheme under which subscribers are allowed to avail non-refundable withdrawal of up to three months’ wages and dearness allowance (DA), or up to 75% of the amount standing to member’s credit in the EPFO account, whichever is less.
■ Pros and cons of new EPF changes
- It will lower employer cost and the companies will have more liquidity.
- It will increase employee’s take-home amount for 3 months and will help them increase liquidity in the times of cash crunch.
- The reduction to 10% would reduce the benefit provided to employees.
- It will be contrary to the employers’ promise of giving a 12% contribution to the contract.
What is EPF?
The Employees’ Provident Fund (EPF) is an important savings tool for the employees. An employee pays a certain percentage from his salary and the employer contributes an equal amount. At the time of retirement or two months after switching jobs, the employee gets a lump sum amount including his own and employer’s contributions with interest.
How does EPF work?
- It is mandatory to join the EPF scheme for factories and other establishments having 20 or more employees earning less than Rs 15,000 monthly wages under The Employees’ Provident Fund & Miscellaneous Provisions Act, 1952
- The government estimates that 6.5 lakh establishments and their 43 million employees are covered under EPFO.
- The employee makes a mandatory monthly contribution at a 12 percent rate by the monthly payment including monthly basic pay, dearness allowance, and retaining allowance.
- An employee can contribute up to 100 percent of the basic pay. Any contributions above the mandatory 12 percent are accounted for as a voluntary provident fund (VPF).
- There is no obligation of the employer to match employee’s higher contribution towards VPF but to match the employee’s contribution of 12 percent.
- The employer’s entire contribution does not go into the employees’ PF account. 8.33 percent out of 12 percent employer’s contribution (maximum of Rs 15,000) goes into the employee’s pension scheme (EPS) i.e. Rs 1250 every month, whereas, the balance goes in EPF.
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