EPF Contributions to be Deducted at 12 per cent From Aug 1

Updated on: 14 Dec 2021 // 2 min read // #mmm news
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From August 1, EPF contribution will get back to previous rate of 24 per cent. The revised rate of 20% by Finance Minister Nirmala Sitharaman as announced Atma Nirbhar Package, expires on July 31, 2020.

Starting August, the EPF will be deducted at the rate of 12 per cent each by employee and the employer.

The move was taken to benefit 4.3 crore employees and 6.5 lakh establishments.

In its press statement later labour ministry, said: “In Cost to Company (CTC) model, if Rs 10,000 is monthly EPF wages in CTC Model, the employee gets Rs 200 more directly from employer as employer’s EPF/EPS contribution is reduced and Rs 200 less is deducted from his/her wages.”


✅ What are EPF Contribution rules?

Both employee and employers are mandated to contribute 12 per cent of the basic wage/salary plus dearness allowance each month towards EPF account. Thus a total of 24 per cent of the employee’s pay goes towards EPF saving.

Out of this 24 per cent contribution, the employer’s 8.33 per cent is diverted to the Employees’ Pension Scheme (EPS) account. While, the employee’s 12 per cent and 3.67 per cent remaining share of employer goes to the EPF account.

✅ Why did GOI reduce EPF contribution amount?

The EPF contribution rate was reduced to impart a temporary cash flow relief to both employers and employees amidst pandemic. The reduction in contribution resulted in marginal increase in the take home salary and some savings for employers as well.

✅ What happens to those who opted for VPF?

If you have opten for Voluntary Provident Fund (VPF) on the backdrop of reduced EPF contributions, please note that VPF as well as EPF will be deducted from August onwards. This will reduce your take home salary and thus you may wish to stop your VPF contributions.

Also Read: India’s 20 Lakh Crore COVID Package to Spur Growth & Build Self-Reliant Nation