The Ministry of Labor and Employment has implemented the decision to reduce the Employee Provident Fund (EPF) contribution from the existing 12 per cent to 10 per cent for three months by July. With this decision, 4.3 crore organized sector employees will be able to take more salary and some relief will be given to the employers facing the cash crisis due to Corona virus epidemic. It is estimated that this decision will increase the cash by Rs 6,750 crore in the next three months.
The Labor Ministry said in a notification issued on Monday that the reduction in EPF contribution would be applicable for the months of May, June and July, 2020. In such a situation, the salary in June, July and August will be higher and the contribution of the employers will also decrease. In this regard, Finance Minister Nirmala Sitharaman made the announcement last week.
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Explain that in view of the Corona crisis, the government has reduced the contribution made by both the company and the employee to the Employees Provident Fund (EPF) account from 12 per cent to 10 per cent for the next three months (June, July and August). . This step has been said that it will increase the take home salary (more money in hand) of the employees. On this decision, financial experts say that this step will definitely increase the take home salary but the burden of tax liability will also be higher.
In this way more money will come in hand
Let’s say that right now your basic salary and dearness allowance is 50 thousand rupees. You have to contribute 12% of this amount per month to the PF account. That is, you contribute 6000 thousand rupees per month. Your employer contributes the same amount. That is, the total contribution of Rs 12000 per month is still in the PF account. The total contribution will be reduced from 24 per cent to 20 per cent with the Finance Minister reducing the 2%. That is, only 10 thousand rupees have to be deposited in the PF account. In this way you will get 1000 rupees per month in your hands.
This way the tax liability will increase
According to Mr Finan, founder of FinSafe India, decreasing contribution to EPF will increase the burden on individual taxpayers according to their tax slabs. Taxpayers who fall in higher slabs will have to pay higher taxes. If the salary of a high-class taxpayer increases by Rs 1000, then it will be Rs 700 in his hands. 300 will go towards paying tax. He can get more investment tax exemption under Section 80C of Income Tax to avoid tax liability.
Retirement fund will also be affected
EPFO is an excellent medium for retirement planning. One gets a lump sum after retirement. Reducing contribution to EPFO will also affect the retirement corpus. In such a situation, experts say that this reduction will reduce the benefits to the salaried class and reduce the losses.
The government is contributing to these people
Under the PM Garib Kalyan package, companies in which up to 100 employees are present and 90 percent of these employees earn less than Rs 15,000 per month, the contribution of EPF from such companies and their employees from March to August 2020. Is being given by