Government notifies cut in EPF contribution to 10% which will increase take-home salary
Finance Minister Nirmala Sitharaman announced a reduction in the PF contribution of both employee and the employer to 10% each from the prevailing 12% each for all establishment secured by EPFO for the following 3 months.
Employees working in the private sector will take more salary home for May, June, and July – as the legislature has informed a decrease in EPF contribution for three months. The move is to bring an increase in taking away home salary for employees and to offer relief to companies in payment of EPF.
The decrease of the contribution is not for Central and State Public Sector endeavors or some other foundation owned or controlled by the Central Government or State Government. These establishments will continue to contribute 12 percent PF.
The reduction rate will profit about 4.3 crore PF contributors and around 6.5 lakh establishments will likewise benefit from this.
However, it might be beneficial to take a gander at the advantages and disadvantages of the declaration by the FM concerning the decrease of contributor’s rates from 12% to 10%.
The positive side will be that lower manager costs and expanded take home for 3 months, in this way expanding liquidity for people in coronavirus lockdown will fight catch crunch. However, there could be some related to ‘cons’ also. Managers regularly concede to a gross CTC which incorporates 12% of companies’ contribution to PF.
With the decrease of the rate to 10%, would there be a decrease in the advantage given to workers and thus be unfavorable to their preferences? Further, if the business has conceded to a 12% company’s contribution in their employee agreements, can the decrease be offered impact to?” asked Tapati Ghose, Partner, and Deloitte India.
Article Credit: The Business Standard/Firstpost/Financial Express