EPF contributions: As part of relief measures announced by the government under the Atma Nirbhar Bharat package for both employers and employees during the COVID pandemic, Employee’s Provident Fund (EPF) contribution was cut by 4% for the three months of May, June, and July. 

Since the reduced EPFcontribution amount was for three months (till July), from August onwards the EPF contribution will get deducted at 24 percent again (i.e., 12 percent each by the employee and the employer).

Earlier in May, finance minister Nirmala Sitharaman had reduced EPF contribution by 4% for three months. As a result, employees of around 6.5 lakh companies benefited with the liquidity of around Rs2,250 crore every month.

How much is contributed to EPF kitty every month

According to the EPF scheme rules, the employee contributes 12 percent of basic wages plus dearness allowance from his salary every month towards his EPF account, and the employer matches the contribution of 12 percent. So, in total, 24 percent of the employee’s pay goes towards his/her EPF account.

Out of the total 24 percent contribution, the employee’s share (i.e., 12 percent) and employer’s 3.67 percent goes to the EPF account, while the remaining 8.33 percent of the employee.

The statutory deduction was cut by a total of 4% (2% of the employer’s contribution and 2% of employee’s contribution).

In-hand salaries also went up by a sum equivalent to 4% of the basic and DA. In the case of employees of central public sector enterprises and state PSUs, 12% of the employer’s share was paid whereas employees paid 10%.

From next month, the deductions will revert to old levels.

While making the announcement, the labour ministry had said employees, if they want, can contribute more than 10% of basic wages to their provident fund (PF) for the next three months, but employers don’t need to match the higher contribution.

Why the EPF contribution amount was reduced

The EPF contribution rate was lowered to help both employers and employees tide over financial troubles caused by the pandemic. The reduced contribution amount meant that the take-home pays of employees increased and employers could also make some savings. The move was aimed to benefit 4.3 crore employees/members and employers of 6.5 lakh establishments, according to the labour ministry.

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