EPF Contribution Change: When Does the New 10% Rate Start?

Dear All,

Recently, the government has announced a reduction in EPF contribution from 12% to 10% for the next three months.

My query is, from which month will this change be applicable?

Thanks

On the basis of feedback from EPFO officials, the slashing of contributions shall be effective from June 20 onwards. However, as of now, no official communication or circular has been issued from the Central PF Commissioner's Office in New Delhi.

Hi,

EPF 10% is applicable for May, June, and July 2020 (Notification Attached).

One query, please help to resolve: Who will get the benefit of the reduced 4% amount, the employee only or both the employee and employer, if Employer Contribution to EPF is part of CTC?

Dear All,

Although the Provident Fund office has not yet uploaded the clarification on its portal under the "COVID" tab, the Press Information Bureau has issued the notification. It also mentions CTC in relation to the employer's share of PF. This information is applicable for the wage months of May, June, and July 2020.

Regards,
Puran Dangwal

Dear All,

EPF contribution reduced for three months - May, June, and July.

Dear All,

Please find attached herewith a Breaking News related to EPFO.

Thank you.

EPF Contribution Reduced to 10% for Establishments

EPF contribution has been reduced to 10% for establishments other than those covered under PMGKY - Pradhan Mantri Garib Kalyan Yojana for the months of May, June, and July 2020.

As per the Press Information Bureau (PIB) Delhi, posted on 19 May 2020 at 6:32 PM: "In the Cost to Company (CTC) model, if Rs. 10,000/- is the monthly EPF wages, in the 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."

This means that if an employee who is contributing 12% on Rs. 15,000 (i.e., Rs. 1,800/-) will now contribute 10% of Rs. 15,000 (i.e., Rs. 1,500/-). The difference in CTC of Rs. 300/- needs to be paid to the employee along with the salary. Thus, the employee will receive a higher salary of Rs. 600/-, with Rs. 300/- by way of reduced deduction and Rs. 300/- from the employer as a part of CTC. (This is ridiculous; the government should have remained silent on the CTC part.) Many companies have paid full salary during the lockdown period without any income.

Regards, Suresh

Please confirm how much of the EPF contribution employees will benefit from? Is it 2% or 4%, and does this percentage apply to only the employee's share or both the employee and employer contributions?

CTC System and Liquidity Boost

Under a CTC system, the employee will receive 2% of the employer's contribution as an allowance (which is, obviously, a taxable allowance) for three months. They will get a liquidity boost of 2%, meaning 2% more than what they were receiving until April 2020. For an organization that caps contributions at 12% of Rs 15,000, the maximum liquidity available is Rs 300.

Relating Liquidity to Your Situation

How does this amount relate to your liquidity? Simultaneously, the Personnel/HR Officer needs to undertake additional clerical work to determine the 2% and incorporate it into the other allowances.

Dear All, as per the attached FAQ from the PF office, the answer to Q.12 states that the government has given both employees and employers the option to continue contributing at 12% if they wish. Please act accordingly.

An employee may approach you requesting to maintain their future savings intact, as reducing the contribution to 10% will not significantly impact their take-home pay but will increase their tax liability. The 2% employer share will be taxable on one hand, and on the other hand, the employee may fall short of their investment under section 80C.

Regards, Puran Dangwal

FAQ belongs to this post. The EPF posted FAQs on their website. You can visit for more updates.

If you have any doubts related to the recent change in EPF Contribution, please find the attached document.

Yes, it is applicable for the wage months of May, June, and July 2020.

Suresh