From August 1, the reduced Employee’s Provident Fund (EPF) rates announced by Finance Minister Nirmala Sitharaman as part of her Aatma Nirbhar Bharat package will no longer be in effect. From monthly contribution of 20 per cent, it will increase to a monthly rate of 24 per cent for both employee and employer.
The reduced contribution amount, that is 10 per cent of employee’s basic wage plus dearness allowance, had been announced for the months of May, June and July 2020. At the time, the labour ministry said the reduction would increase the take-home pay of 4.3 crore employees reeling under the effect of COVID-19 related economic woes.
The EPF funds are managed by the Employees Provident Fund Organisation. The employee’s contributions are matched by the employer. Of the final amount, 3.67 per cent plus the employee’s 12 per cent will go into the EPF account while the remaining 8.33 per cent goes to the Employee's Pension Scheme (EPS) retirement corpus.
In the months after lockdown began in March—April to July—the EPFO saw eight million people withdraw their savings from the fund, a total of Rs 30,000 crore, the Economic Times reported. These withdrawals came as employees sought to take back their money amid a time of crisis where salaries are being cut and jobs are shed everywhere.
