Monday, October 11, 2021
HomeCorporate LawsEPFO notifies reduction in EPF subscription rate to 10%

EPFO notifies reduction in EPF subscription rate to 10%

10% EPFO low rate of EPFO notified with high liquidity in the hands of employees and employers during COVID-19 epidemic

Members of the public sector, their public undertakings, and establishments whose membership is being borne by the Central Government under PMGKY continue to have a membership at the old rates of 12%, with the lower rates applicable for the pay months of May, June and July 2020.

Various measures have been announced from time to time to provide relief to the employers and employees of the establishments covered under the EPF & MP Act, 1952 distressed by Lockdown to prevent the spread of COVID-19 and other disruptions due to Pandemic.

The reduction in statutory rate of contributions from 12% to 10% for wage months May 2020, June 2020 and July 2020 for all class of establishments covered under the EPF & MP Act, 1952 announced on 13.05.2020 by the Central Govt. as part of Atma-Nirbhar Bharat package has been notified vide SO 1513 (E) dated 18.05.2020 published in the Gazette of India. The notification is available under the TAB- COVID-19 on the home page of the EPFO website. https://www.epfindia.gov.in/site_en/index.php

The above reduction of the rate of contribution is not applicable to establishments like Central and State Public Sector enterprises or any other establishment owned or controlled by or under control of the Central Govt. or State Govt. These establishments shall continue to contribute  12% of basic wages and dearness allowances.

The reduced rate is also not applicable for PMGKY beneficiaries, since the entire employees EPF contributions (12% of wages) and employers’ EPF & EPS contribution (12% of wages), totaling 24% of the monthly wages is being contributed by the Central Govt.

Reduction in rate of EPF contributions from 12% to 10% of basic wages and Dearness allowances is intended to benefit both 4.3 Crore employees/members and employers of 6.5 lakhs establishments to tide over the immediate liquidity crisis to some extent.

As a result of a reduction in statutory rate of contributions from 12% to 10%, the employee shall have a higher take-home pay due to a reduction in a deduction from his pay on account of EPF contributions and employer shall also have his liability reduced by 2% of wages of his employees. If Rs.10000/- is monthly EPF wages, only Rs.1000/- instead of Rs.1200/- is deducted from employee’s wages and the employer pays Rs.1000/- instead of Rs.1200/- towards EPF contributions.

In Cost to Company (CTC) model, if Rs.10000/- is monthly EPF wages, in CTC Model the employee gets Rs.200/- more directly from the employer as employer’s EPF/EPS contribution is reduced and Rs.200/- less is deducted from his/her wages.

Under the EPF Scheme, 1952 any member has the option to contribute at a rate higher than the statutory rate (10%) and the employer can restrict his contributions 10% (statutory rate) in respect of such an employee.

TaxClue Teamhttp://taxclue.in
Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building.

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