The Employee Provident Fund Organization (EPFO) has made a major change in the provident fund rules for its 80 million active subscribers, which may impact your take-home salary. Regarding the new rule, EPFO has said that from now on, any PF contribution of more than ₹ 1,800 every month will be completely voluntary.
Employees will have the option to contribute more to PF.
Under the new rule, 12% contribution up to the statutory salary limit (currently ₹15,000 per month) is required. Any contribution exceeding this limit will be considered voluntary. According to the Employee Provident Fund Scheme rules notified on Wednesday, “An employee may, at his discretion, choose to make additional contribution – at or above the statutory rate – on a portion of his salary in excess of the statutory salary limit.
The new rule does not apply to everyone
This means that if your basic salary is ₹ 15,000 per month or more, then as per government rules, you will have to deposit 12% of that amount – i.e. ₹ 1,800 per month – in PF. The new change in the rules is for those whose salary is very high. For example, if someone’s basic salary is ₹ 50,000, then as per the previous rule, 12% (approximately ₹ 6,000) will be deducted for PF. Under the new rule, even if your basic salary is ₹1 lakh per month, the company will deduct only the required ₹1,800 based on the initial limit of ₹15,000. The employer will also contribute equally. Whether you want to deduct PF from your remaining salary for retirement savings or not is entirely your choice.
How will you benefit from this?
If you choose to get PF deducted from salary more than ₹15,000, that amount will be added to your take-home salary; In other words, your salary payment will increase. Companies also benefit because they are not legally required to pay a higher share based on an employee’s higher salary.
