EPF rule changed: Know how much will be your salary

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epf new rules

The new EPF rule change will change your in-hand salary for three months


Government is taking various steps to handle the economic crisis in India due to the coronavirus lockdown. In the series of new measures and rules, Union Finance Minister Nirmala Sitharaman announced that statutory rate of contribution for both parties will be reduced from 12 per cent to 10 per cent. The decision was taken to ease the liquidity pressure on both the employees and the employers.

Presently, both the employees and employers contribute 12 per cent each, a total of 24 per cent of the basic salary and dearness allowance to the retirement kitty run by the Employees Provident Fund Organization (EPFO). With new rule coming into force from this month, this 12 per cent will decrease to 10 per cent for three months -May, June and July.

The new rule is going to change the in-hand salary you were getting without a change in your total CTC (Cost to Company). This means that the salary you are going to get for May month will be higher by a sum equivalent to 4 per cent of your basic salary and dearness allowance.

Read more: Labour laws changed in India, Know the after effects

Understand with an example how CTC will change

For example, suppose your monthly DA and basic is Rs 20,000, now you and your employer will contribute only Rs 2,000 instead of Rs 2,400. This means that now your salary will be Rs 400 more than what you were getting so far. Also, the employer will have to contribute Rs 400 less to your EPF account.

The labour ministry had said that employees can contribute more than 10 per cent if they wish but the employer won’t have to do the same for that particular employee.

The new rule of reduction announced by Finance Minister will not be applicable to establishments like State or Central Public Sector enterprises or any other establishments which is owned or controlled by or under control of State Government or State Government. Employees and employers of these establishments will continue to contribute only 12 per cent of basic pay and dearness allowances.

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