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Wednesday, May 25, 2022

FM outlines details of economic package: Rs 9,250-crore liquidity boost from EPF contribution cut, waiver extension

“It is necessary to provide more take home salary to employees and also to give relief to employers in payment of Provident Fund dues,” said Sitharaman.

By: ENS Economic Bureau | New Delhi |
May 14, 2020 3:00:48 am
epf contribution, epf contribution rate, epf contribution rate 2020, epf contribution rate for private sector, epf contribution by employer, epf contribution by employees, epfo, epfo contribution, pf contribution by employer and employee, pf contribution by employer, pf contribution by employee​, fm nirmala sitharaman, fm nirmala sitharaman announcements Finance Minister Nirmala Sitharaman in New Delhi on Wednesday. (Express Photo: Anil Sharma)

The finance Minister announced relaxations on contribution to Employees’ Provident Fund in a bid to provide liquidity to both employees and employers of private sector companies. While it announced a 3-month extension (till August) of the ongoing waiver from payment of EPF contribution both for the employer and employee for establishments having up to 100 workers with 90 per cent having income below Rs 15,000, it also provided relaxation to all other private sector companies by reducing the statutory PF contribution of both employer and employee from 12 per cent to 10 per cent for the next three months.

In aggregate, the two decisions would cover 10.17 lakh establishments and 5.06 crore employees and provide a total liquidity of Rs 9,250 crore to both the employees’ and employers of these establishments. The government also announced a cut in rates of Tax Deduction at Source and Tax Collection at Source by 25 per cent for non-salaried payments such as professional fees, interest, rent, dividend, commission, brokerage to provide more cash in hand to the tune of Rs 50,000 crore.

While the extension of waiver for employees and employers of smaller organisations and the contribution to be made by the government instead, is a continuation of the benefit that was announced by the Finance Minister in the first relief package on March 26, on Tuesday she provided some relief to the employees’ and employers of other businesses too.

“It is necessary to provide more take home salary to employees and also to give relief to employers in payment of Provident Fund dues,” said Sitharaman.

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What this will do is that while the employees’ will benefit in the form of getting the 2 percentage point of their EPF contribution as part of their take home income for the next three months, the employer’s will also save on it as they will not be required to provide for only 10 per cent PF contribution instead of 12 per cent earlier.

The FM said that this move to reduce statutory contribution will provide liquidity of Rs 6,750 crore to both employers and employees over 3 months and will provide relief to about 6.5 lakh establishments covered under EPFO and about 4.3 crore such employees.

The benefit for employees is, however, available to only private sector entities as the government clarified that central public sector enterprises and State PSUs will continue to contribute 12 per cent as employer contribution.

The earlier decision, where the government will continue to provide for employee and employer contribution for smaller companies for three more months till August, will provide liquidity relief of Rs 2,500 cr to 3.67 lakh establishments and for 72.22 lakh staff.

Bharatiya Mazdoor Sangh said raising the takeaway salary for employees  to increase liquidity is good but the reduction of EPF rate could have been avoided.

In other tax compliance related measures, the government extended the income-tax return deadline for FY20 from July 31 and October 31 to November 30 and tax audit from September 30 to October 31. The deadline for making payments under the Vivad se Vishwas Scheme without paying interest and penalty has also been extended to December 31 from June 30, providing an extension to the scheme by six months.

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