In the month of May, Union Finance Minister, Nirmala Sitharaman, had announced that Employee Provident Fund (EPF) contributions will be reduced from 24 per cent to 20 per cent for the next three months, i.e May, June, and July. The EPF contributions will be deducted at 24 per cent again from August 1.
The change in EPF contribution meant the individual share of the employer and employee each was reduced from 12 per cent to 10 per cent. The announcement deducting EPF from 24 per cent to 20 per cent was made by the finance minister as part of the Atma Nirbhar Bharat package.
EPF deductions are maintained by Employees' Provident Fund Organisation (EPFO).
In the case of central public sector enterprises and state PSUs, the employer continued to pay 12 per cent while the employee paid 10 per cent.
This statutory deduction meant that the in-hand salary that employees received increased, while expenditure for employers decreased.
Companies and workers also had the option to continue with the statutory rates of 12 percent.
The decision was aimed to provide relief to both employers and employees during the pandemic and is believed to have benefitted 4.3 crore employees/members and employers of 6.5 lakh establishments.
The announcement was made for a period of three months, meaning starting August, both employers and employees would return to previous EPF deduction rates.