There were over 10 lakh establishments under the ambit of EPFO, as per its Annual Report for FY17. (File Photo)
As part of its financial package to counter the outbreak of COVID-19, the government on Thursday announced measures for a section of organised workers by bearing the outgo on contribution to Employees’ Provident Fund (EPF) for low-income workers and relaxing withdrawal conditions to allow 75 per cent of the amount or three month of wages, whichever is lower, from the EPF accounts.
The EPF contribution waiver of 24 per cent (12 per cent for employers and employees each) will be for establishments having up to 100 workers with 90 per cent having income below Rs 15,000, which are approximately 4 lakh or 40 per cent of the total number of establishments under the ambit of the Employees’ Provident Fund Organisation (EPFO).
On the relaxation in withdrawal conditions from EPF accounts, officials clarified there will be no income threshold for the subscribers.
“The scheme is for MSMEs where more than 90 per cent are low-paid workers and employers too are economically not too strong, particularly in a situation like these days, when their business is hit,” a senior EPFO official told The Indian Express.
There were over 10 lakh establishments under the ambit of EPFO, as per its Annual Report for FY17. Finance Minister Nirmala Sitharaman said the government will pay the 24 per cent contribution for the next three months, which “may benefit 80 lakh employees and is expected to incentivise 4 lakh establishments”. The financial outgo for the EPF contribution waiver is expected to be around Rs 5,000 crore.
She added that the EPF scheme regulations would be amended because of the prevailing pandemic situation to allow a non-refundable advance of up to 75 per cent of the amount standing to the credit to the member or three month of wages, whichever is lower. “This is expected to benefit 4.8 crore workers registered with EPFO,” she said.
“All EPF subscribers can withdraw 75 per cent of amount in their accounts though there is a limit of withdrawal to 3-month wages in case the 75 per cent amount is higher, especially in case of high-income subscribers. However, we don’t think a higher salaried person will withdraw unnecessarily if he/she is getting such a tax-free high interest rate on deposits,” the EPFO official said.
Though there has been no official announcement on the date of implementation, the official said EPFO will try to do it as soon as possible. Under the EPF scheme, employees and employers have to contribute an equal amount of 12 per cent of the employees’ basic salary plus dearness allowance.
From the employer’s EPF contribution, 8.33 per cent is marked for the Employee Pension Scheme (EPS) and the remaining to the PF account of the employer. The EPS component is subject to a wage cap of Rs 15,000, or actual basic pay, whichever is lower.
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