The Employees’ Provident Fund Organisation (EPFO) has finally ended one major issue for millions of employees in the private sector. The government has lifted this burden off the heads of several thousand workers by raising the eligibility bar to apply for Provident Fund, a mandatory benefit. What this means and how it stands by its employees are discussed in further paragraphs:
Increased Basic Salary Eligibility Threshold
The new rule has increased the minimum basic salary for eligibility for PF to ₹21,000 from the previous ₹15,000. Thus, employees drawing a basic salary up to ₹21,000 are now eligible for Provident Fund benefits. The revised threshold will provide wider coverage, allowing more private-sector employees to enjoy long-term savings and social security.
Why It Matters
Millions of private employees, mainly those in the lower and middle-income groups, were deprived of PF benefits because of the old salary cap. The revision not only expands the safety net but also serves as a step toward the government’s objective of providing the working population with financial security.
Key advantages of the new salary threshold are:
1. Better Retirement Benefits: Increased PF contributions translate to greater retirement benefits.
2. Financial Security: Employees can now rely on a robust system for future emergencies.
3. Employer Contributions: With the PF ceiling raised, employers contribute more to employees’ PF accounts, ensuring mutual benefits.
Positive Reception Among Workers
The decision has been well appreciated by all, which has created a “happy atmosphere” among private employees. Workers now feel included in India’s social security framework. Furthermore, the change shows the commitment of the government towards improving labor welfare and enhancing the quality of life of employees in the private sector.
What’s Next
This should motivate organizations to adapt to such policies and create a fairer and more secure working environment. As the EPFO continues to refine its policies, this is one step forward toward strengthening the financial foundation of India’s workforce. The ₹21,000 threshold is more than a number for private employees.
Let us take a closer at each of these four changes.
Facility of auto-settlement
In a press release dated May 13, 2024, the auto-settlement facility for housing under Rule 68B and education and marriage under Rule 68K was announced.
A circular dated April 16, 2024 increased the amount under Rule 68J for receiving an advance for a medical condition. April 2020 saw the introduction of the facility.
Now all claims up to Rs 1 lakh under these heads will be auto-processed without any human intervention.
Rule 68J of the 1952 EPF Scheme deals with taking a part of money from an EPF account, known as an advance, to cure illness in specific instances. The advance is offered for either the members’ or their family members’ treatment.
Faster EPF claim settlementTo expedite claim settlement within the timeframes specified. A link office setup for multi-location claim settlement is being made, the EPFO said in a recent circular. It will minimize delays by evenly dispersing the burden linked to claim settlement across the country.By allowing for multi-location claim settlement, this feature will speed up member claims processing and replace the current geographical jurisdiction structure along with productivity in offices nationwide.This facility was first launched in 2020 by the EPFO department.
According to the EPFO circular dated May 8, 2024, “The effective functioning of the link arrangement between Delegating Regional Office (DRO) – Collaborating Regional Office (CRO) shall be the responsibility of the RPFCs In-charge of both these offices, who are expected to work in close co-ordination to ensure that the desired results in the claim settlement periodicity is achieved without any issues.
It has been decided that going forward, in all such death cases, processing physical claims without seeding Aadhaar may be permitted as a temporary measure, but only with the proper approval of the OIC in an e-office file duly recording the details of verification done to confirm the deceased’s membership and the genuineness of the claimants. Preventing any fraudulent withdrawals can be done in addition to other due diligence measures that the OIC deems appropriate.
This move came as family members are unable to seed and authenticate Aadhaar in cases of death of EPF members. In such cases, filed officers were unable to process the aforementioned physical claims, which resulted in an unnecessary delay in the timely disbursement of payments to the affected claimants, the EPSO stated in a circular issued on May 17, 2024.
New rule for EPF death claim: Now physical claims can be processed without seeding Aadhaar
The above instructions would apply only to those cases where the details of the member are correct in UAN but inaccurate/incomplete in Aadhaar database. According to the EPFO circular dated May 17, 2024,
Mandatory uploading of cheque leaf image
The Employees Provident Fund Organisation (EPF) has relaxed the requirement of mandatory uploading of the image of cheque leaf, attested bank passbook for certain eligible cases.This would facilitate the settlement of online claims more quickly and lower the amount of rejected claims resulting from the failure to submit an image of the certified bank passbook or cheque leaf at the time of online claim filing.
According to the EPFO circular dated May 28, 2024, “With a view to facilitate the speedy settlement of claims filed online and to reduce the rejection of claims due to the reason of non- uploading of the image of cheque leaf/ attested bank passbook while filing claims online, it has been decided with the approval of the CPFC to relax the requirement of mandatory uploading of the image of cheque leaf/attested bank passbook for certain eligible cases based on certain validations which include Online Verification of the Bank KYC by concerned Bank/NPCI, Verification of Bank KYC by the employer using DSC, Seeded Aadhaar Number verified by UIDAI among others.
Here’s a comprehensive guide on PF taxation in India:
Tax on Employee’s Contribution:
- Up to 12% of Basic Salary + DA: Tax-deductible under Section 80C of the Income Tax Act.
- Interest on Employee’s Contribution: Tax-exempt.
Tax on Employer’s Contribution: - Up to 12% of Basic Salary + DA: Tax-exempt.
- Interest on Employer’s Contribution: Tax-exempt.
Tax on Interest Earned on EPF Contributions: - Prior to FY 2021-22: Interest earned on EPF contributions was completely tax-free.
- FY 2021-22 and onwards:
- First Rs. 2.5 Lakh: Tax-exempt.
- Interest on Contributions Exceeding Rs. 2.5 Lakh: Taxable.
Tax on EPF Withdrawal: - Withdrawal Before 5 Years of Service: Taxable at 10% TDS.
- Withdrawal After 5 Years of Service: Tax-free under Section 10(10A) of the Income Tax Act.
Important Points: - Voluntary Provident Fund (VPF): If you contribute voluntarily to VPF, the interest earned on the excess contribution over Rs. 2.5 lakh will be taxable.
- Public Provident Fund (PPF): Contributions to PPF are tax-deductible under Section 80C, and the interest earned is tax-free.
- Employee Provident Fund (EPF): Contributions to EPF are tax-deductible under Section 80C, and the interest earned is tax-free up to a certain limit.
- Tax Deducted at Source (TDS): TDS will be deducted on the interest earned on EPF contributions exceeding Rs. 5,000 per year.
Additional Considerations: - PAN Card: Linking your PAN card to your EPF account is crucial to avoid higher TDS rates.
- Employer’s Contribution: Ensure your employer is contributing the correct amount to your EPF account.
- Consult a Tax Professional: If you have complex financial situations or need personalized advice, consult a tax professional.
For detailed information and the latest updates, please refer to the official Income Tax Department website or consult a tax advisor.