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Reduction in statutory rate of EPF contribution from 12% to 10%. Employee Provident Fund Organization has reduced EPF contribution from 12% per month to 10% per month to complicate Employer as almost every employer has hugely got by the Covid Impact. Here are some frequently questions answers for you.
Q.1: What is the revised rate of EPF contribution announced by the Central Govt. under the Atmanirbhar Bharat package?
Ans. Under this package, the statutory rate of EPF contribution of both employer and employee has been reduced to 10 percent of basic wages and dearness allowances from the existing rate of 12 percent for all classes of establishments covered under the EPF & MP Act, 1952.
Q 2: What is the objective of reduction in the rate of contributions?
Ans: 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 during Pandemic situation.
Q 3: Whether any notification has been issued under the EPF & MP Act, 1952 for reducing the rate of contributions? If so, how can I access the notification?
Ans. The reduction in statutory rate of contributions from 12% to 10% for wage months May 2020, June 2020 and July, 2020 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. Reduction in EPF contribution from 12% to 10%
Q.4: What is the period for which a reduced rate of contribution is applicable?
Ans. The statutory rate of contribution will be 10% for wage months- May 2020, June 2020, and July 2020.
Q 5. Who are eligible for the reduced rate of contributions?
Ans. It is applicable to all classes of establishments covered under the EPF & MP Act, 1952, except the 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. The reduced rate is also not applicable to establishments eligible for PMGKY
benefits, 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.
Q6. Are exempted establishments eligible for the reduced rate of contribution?
Ans. Yes. The reduced rate is applicable to exempted establishments also. Reduction in EPF contribution from 12% to 10%
Q 7: How does the reduced rate of contributions help the employees and employer?
Ans: 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 the 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.
Q 8: I get salary under the Cost to Company (CTC) model, will the reduced rate of contributions from 12% to 10% still benefit me?
Ans: In the 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 the employer’s EPF/EPS contribution is reduced and Rs.200/- less is deducted from his/her wages.
Q 9. Is the 10% rate of contribution applicable to establishments that get registered with EPFO during wage months May 2020, June 2020, and July 2020?
Ans. Yes. Establishments covered during wage months of May-July, 2020 will be eligible for a reduced rate for eligible remaining period from the date of coverage.
Q 10. What will be the rate of contribution for administrative charges and insurance?
Ans. There is no change in the EPF administrative charges (0.5% of EPF wages subject to minimum prescribed) and EDLI contributions (0.5% of wages) both payable by employers.
Q 11. How is the benefit availed? One has to pay at the full rate and claim reimbursement later or direct payment at a reduced rate can be made.
Ans: Establishment has to remit dues at a reduced rate through the Electronic-Challan cum Return (ECR) itself. Reduction in EPF contribution from 12% to 10%
Q 12. Can the employer or employee pay at a higher rate or the contribution rate of 10% is mandatory?
Ans: The reduced rate of contribution (10%) is the minimum rate of contribution during the period of the package. The employer, employee, or both can contribute at a higher rate also.
Q 13. How the reduced rate of contribution will impact the amount of pension in the longer run?
Ans: The EPS contributions of 8.33% of wages (subject to a ceiling of Rs.15000/-) is diverted from the employer’s share of EPF contributions. The reduced rate of EPF contributions to 10% will not reduce the pension contributions or benefits.
Q. 14. My establishment will not be able to remit dues timely during the scheme period. Is it still eligible for a reduced rate of contribution?
Ans. Yes, the rate of contributions is 10% for the three wage months- May, 2020, June 2020, and July 2020 irrespective of the date of payment.
Q. 15. Is the option to contribute at a reduced rate available to establishments availing of PMRPY benefits?
Ans. Yes. The establishment availing of PMRPY benefits can remit contributions at a reduced rate.
Q. 16. The rate of contribution for my establishment is 10% as it is engaged in the manufacturing of guar gum. Will the rate of contribution be further reduced for my establishment?
Ans. The establishments, which were already entitled to a reduced rate of contribution (10%) through the SO 320 (E) dated 09.04.1997 are not eligible for any further reduction in the rate of contribution.
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