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Govt. Lowers EPF Contribution rates from 12 to 10% for three months

With the objective to put more  cash in the pockets of employees and employers,the government on Wednesday reduced the monthly provident fund contribution for both employee and employer from 12% each to 10% each for the next three months.


Both employees and employers together contribute 24% of salary including Basic , DA and fixed allowances on a monthly basis towards the employee’s provident fund (EPF). Now, both have to contribute 20%  only during this period of three months from may to july.


To understand how it will help employee, if an employee salary is 20 thousand and his contribution paid on Rs. 15k which is highest statutory limit @12% comes to Rs. 1800, now it be redured to only Rs. 1500 thus getting Rs. 300 more cash in his salary.


 Equally the same saving will be for the employer. He will also be required to less contribution of his  share . If the employer has shown his PF contribution @ 12% as part of CTC, as per terms of agreement, he will not be able to keep this 25 contribution with him but to pass on to employee, Failing to do show will result in lowering his CTC and breach of terms of agreement.


 The employer who have not shown this as part of CTC and kept in separate “additional statutory benefits” bracket, they need not to pass on this 2% to its employees.


 In case of employees getting higher salary and their PF contribution is paid on full salary, by virtue of reduced pf share their income will go up and may be liable to pay income tax more as it will be treated as increased income.


 It will also result in to your lower PF accumulations as a whole as on one side employee and employer has deposited less share , he will get less interest on less deposited amount, so double loss to employee.