Employee Provident Fund or EPF is a mandatory savings scheme for the employees in India whereby an employee makes a monthly contribution to the scheme which gets accumulated throughout his professional journey. The employers also make their contribution to the EPF as a support to their employees. The accumulated PF balance can be withdrawn after retirement from service. This scheme is implemented by the Employee Provident Fund Organization or EPFO to provide financial support to the salaried professionals after their service life.
After coronavirus hit the entire world, due to the pandemic situation and consequent lockdown, there have been layoffs in several companies and many employees have faced a salary-cut. Thus, their purchasing power got drastically affected during a period where prices of commodities are increasing considerably. To alleviate this financial stress and liquidity crisis arising as a side effect of the Covid-19 pandemic, the Ministry of Labour and Employment declared some changes in the EPF scheme. It is important to be aware of the changes in the scheme to avail its benefits.
New revised rules for EPF contribution
According to the conventional rule of the EPF scheme, if you are a salaried individual, you have to contribute 12% of your basic salary plus dearness allowance to the EPF. Your employer will also contribute the same amount. However, the contribution made by the employer is divided into two parts. 3.67% of the employer’s contribution is credited to the EPF account while the rest goes to the Employee Pension Scheme (EPS). However, some changes have been made in the EPF contribution to deal with the Corona effects.
Decrease in the EPF contribution rate
The Central Government, under the Atma-Nirbhar Bharat Package, has reduced the mandatory contribution of the employee and the employer to the EPF to 10% of an employee’s basic pay and dearness allowance for the months of May, June and July in 2020. This reduction in EPF contribution is covered under the EPF and MP Act, 1952 and is implemented to make more cash available to meet the emergency financial requirements during this Covid-19 pandemic.
No penalty for late payment
Due to the ongoing lockdown, establishments and factories have faced operational and economic crises. In view of this, the government has declared that for any delay in employer’s contribution to EPF or payment of administrative charges due during the lockdown, no penal charges shall be levied on the employer.
Relief package contributing to EPF
The Indian Government, under the Pradhan Mantri Garib Kalyan Yojna, announced a relief package of 1.70 lakh crores to help employees fight the Covid-19 situation. It was declared on 26 March 2020 whereby the government proposed to pay 24% of the monthly wages to the EPF for the next three months. Employees earning less than Rs. 15,000 per month and employed in establishments having a hundred or more employees with at least 90% of their employees having a monthly income of less than Rs. 15,000 can receive the benefit of this scheme.
New revised rules for EPF withdrawal
Under normal circumstances, you can withdraw your accumulated PF account balance after you retire from service. You can also withdraw the balance if you don’t get employed for more than two months after leaving your previous job. There are some special situations when you can withdraw money from the PF account partially such as in case of a medical emergency, organising the wedding of your child or close ones, funding building or renovation of your house, etc. However, these rules have been modified during corona.
EPF withdrawal is allowed if or when the government declares any phenomena as an epidemic or disaster. Since Covid-19 has been declared as a pandemic and it already has affected the economy, the government has decided to allow flexible withdrawal from EPF. If you are feeling the urgent need of funds during this lockdown, you can withdraw an amount of up to three months of your salary from your PF account or 75% of the PF balance.
The Government of India introduced these changes to provide relief to both the employees and the employers for assisting them in dealing with the financial crisis raised due to the prolonged lockdown. You can get in touch with the Provident Fund Organization or your employer to avail the benefits.
