What is pf contribution

In an employee-friendly move, the government on Saturday made provident fund contribution optional for workers getting salary below a threshold. However, the employer will continue to contribute his share of the PF irrespective of the worker opting not to pay his contribution.

"For employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employers contribution," Finance Minister Arun Jaitley said in his Budget speech.

The Budget proposals, however, did not specify the salary threshold for this. At present, all employees are required to pay 12 percent of basic wages including basic salary and DA as contribution to the PF.

The employers make a matching contribution, with 8.33 percent going towards pension, 0.5 percent towards Employees Deposit Linked Insurance (EDLI) scheme and remaining towards provident fund.

Also the Budget has provided that the members of private provident fund trusts will

not have to pay tax on pre-mature withdrawals provided the amount is either less than Rs 30,000 or their tax liability is nil even after including the withdrawn sum to their income. This facility will also be available to senior citizens.

As per existing provisions, in respect of such pre-mature withdrawal, the trustees of the recognised provident fund (trusts), shall deduct tax as computed at the time of payment.

Under the existing provisions EPF & MP Act, it has been provided that withdrawal shall be taxable if the employee makes withdrawal before continuous service of five years (other than the cases of termination due to ill health, closure of business, etc) and does not opt for transfer of accumulated balance to new employer.

It is proposed to insert a new provision in the Act for deduction of tax at the rate of 10 percent on premature taxable withdrawal from Employees Provident Fund Scheme (EPFO).

Source: m.moneycontrol.com

Category: Bank

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