The employee’s entire 12 per cent contribution goes to the EPF, but 8.33 per cent of the employer’s 12 per cent contribution goes to the Employee’s Pension Scheme (EPS).
CPSE and state PSU and employees working therein will not be covered by this reduced PF contribution.
In case of companies covered under employees ‘ Provident Fund Organisation (EPFO) and their employees who are not getting the benefit of government contribution under pm garib kalyan package, the EPF contribution of employer and employee has been 10-10% for three months from May, June, July. However, government institutions i.e. CPSE and state PSU and employees working therein will not be covered by this reduced PF contribution. Generally, the contribution from both employers and employees in EPF is 12-12 per cent of the employee’s basic salary +DA, i.e., 24 per cent in total.
It is noteworthy that 12 per cent of the employee’s contribution goes to the EPF, but 8.33 per cent of the employer’s 12 per cent contribution goes to the Employee’s Pension Scheme (EPS). Since the EPF contribution has declined for 3 months, there was ambiguity about whether the pension of the employee would be affected. Now EPFO has removed this ambiguity.
No impact on pensions
EPFO has recently released an FAQ on reduced EPF distribution. It also includes replies to the employee pension scheme. EPFO has clarified that the reduced contribution to EPF for three months will not affect the pension of the employee. Contributions from 12 to 10 per cent will not reduce contributions to EPS, nor will its benefits be affected. Epfo’s response shows that for the next 3 months, 8.33 per cent of the 10 per cent EPF contribution from the employer will also go to the EPS. The remaining 1.67 per cent will go to the employee’s EPF.
Rs. 1250/- Contributionto EPS can’t be more than a month
The maximum pensionable salary limit under EPS is fixed at Rs 15000 per month. That means, the pension will be deducted on the same basic + DA unmount, no matter how high the salary of the employee is. The maximum monthly contribution to EPS has been fixed at Rs 1250. After the age of 58, the employee can avail monthly pension from EPS money.
Understand the reduction in EPF
People whose monthly salary is more than Rs 15,000 are covered by reduced PF contracts. An example of how the 2-2 per cent reduced contribution from both employees and employers for May, June, July will affect the employee’s PF can be understood. If an employee’s basic salary +DA is Rs 30,000, 12 per cent goes to the EPF for Rs 3600 per month. The unmount will now be rs 3000 per month on 10 per cent for the next three months.
Now, out of 10 per cent, only 1.67 per cent will go to pf. The remaining 8.33 per cent in EPS. Thus, out of rs 3000 contribution made by the employer, Rs 1250 (since the maximum monthly contribution limit in EPS is Rs 1250) will go to EPS and the remaining Rs 3000-1250=1750 in PF.
Thus, the employee receiving the Rs 30,000 monthly basic salary +DA will have a 10-10 per cent contribution of both his and the employer to Rs 4750 (3000+1750) per month for the next three months. The unmount was 12-12 per cent at Rs 5950 per month. The contribution to provident fund declined by Rs 1200 a month from reduced contribution. The total contribution declined to Rs 3600 in three months.