FAQ’s on Reduction in statutory rate of EPF contribution from 12% to 10%

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Q.1: What is the revised rate of EPF contribution announced by the Central Govt. under the Atmanirbhar Bharat package?

Ans. Under this package the statutory rate of EPF contribution of both employer and employee has been reduced to 10 percent of basic wages and dearness allowances from the existing rate of 12 percent for all class of establishments covered under the EPF & MP Act, 1952.

Q 2: What is the objective of a reduction in the rate of contributions? 

Ans: Reduction in rate of EPF contributions from 12% to 10% of basic wages and Dearness allowances is intended to benefit both 4.3 crore employees/members and employers of 6.5 lakhs establishments to tide over the immediate liquidity crisis to some extent during Pandemic situation.

Q 3: Whether any notification has been issued under the EPF & MP Act, 1952 for reducing the rate of contributions? If so, how can I access the notification?

Ans. The reduction in statutory rate of contributions from 12% to 10% for wage months May, 2020, June, 2020 and July, 2020 has been notified vide SO 1513 (E) dated 18.05.2020 published in the Gazette of India. The notification is available under the TAB- COVID-19 on the home page of the EPFO website.

Q.4: What is the period for which a reduced rate of contribution is applicable?

Ans. The statutory rate of contribution will be 10% for wage months- May, 2020, June, 2020 and July, 2020.

Q 5. Who are eligible for the reduced rate of contributions?

Ans. It is applicable to all classes of establishments covered under the EPF & MP Act, 1952, except the establishments like Central and State Public Sector enterprises or any other establishment owned or controlled by or under control of the Central Govt. or State Govt.

The reduced rate is also not applicable to establishments eligible for PMGKY benefits, since the entire employees EPF contributions (12% of wages) and employers’ EPF & EPS contribution (12% of wages), totaling 24% of the monthly wages is being contributed by the Central Govt.

The Complete FAQ’s can be accessed at: http://www.a2ztaxcorp.com/wp-content/uploads/2020/05/FAQ_Reduced_rate_of_contribution_20052020.pdf