Govt proposes to reduce PF contribution rate from employees and employer

If the proposed changes are finalised, it could increase take-home salaries of employees.
 
If you are an employee in the organized sector and have subscribed to the Employees’ Provident Fund (EPF), which is mandatory, there may be changes in the contributions that are deducted from your monthly salary. According to aa Financil Express report, the central government is proposing to bring in an amendment to the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952. The draft of this amendment bill to be introduced in the Parliament is ready. According to this draft, the present rate of contribution of 12% of the basic pay as PF contribution is sought to be brought down to 10%. The contribution by the employers, which also stands at 12% will be reduced to 10% too.

If this amendment is passed and becomes an Act, then you could see your monthly take-home pay increasing by that quantum.

There are a number of other changes being proposed in the Amendment bill under preparation, it emerges. When enacted, it will be called the Employees’ Provident Funds and Miscellaneous Provisions (Amendment) Act, 2019. The present arrangement does allow the employee to increase his or her contribution whereas the employer need not pay beyond the stipulated amount. There may be provisions for select categories of companies and employees where the rate could be even less for a limited period. This will be known as and when the notification gets issued by the government.  

Some critics of this idea of reducing the PF contribution may argue that the change may mean the employee getting a reduced settlement at the time of retirement. It can affect the later part of life if he or she does not make alternate arrangements to save money.

One has to wait till the Ministry of Labour and Employment make the draft public to know what else is in store as changes to the PF Act. The PF Act becomes applicable to all business establishments that employ 20 persons or more.

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