New Delhi: Finance Minister Nirmala Sitharaman on Wednesday announced reduction of statutory provident fund contribution by both employers and employees to 10 per cent of basic wages from the existing 12 per cent for the next three months.
The decision has been taken to facilitate more take-home salary for employees and give relief to employers in payment of PF dues, resulting in a liquidity ease of Rs 6,750 crore.
The decision, which will have an impact on 4.3 crore employees and 6.5 lakh employers reeling under liquidity crunch due to COVID-19 lockdown, will be applicable on all the establishments covered under the Employees' Provident Fund Organisation (EPFO).
Besides, the finance minister also announced the extension of another scheme under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) for three months till August, where the government would contribute entire 24 per cent of PF contributions till August, giving relief to 3.67 lakh employers and 72.22 lakh employees.
The government had imposed lockdown on March 25 to fight deadly COVID-19.
Under the Pradhan Mantri Garib Kalyan Package (PMGKP), payment of 12 per cent of employer and 12 per cent employee contributions were made into EPF accounts.
In a presentation on such steps, Sitharaman said, "This was provided earlier for salary months of March, April and May 2020. This support will be extended by another three months to salary months of June, July and August 2020."
The extension of the benefit will provide a liquidity relief of Rs 2,500 crore to 3.67 lakh establishments and for 72.22 lakh employees.
It also stated that businesses need support to ramp up production over the next quarter.
On PF contribution reduction, she said it is necessary to provide more take-home salary to employees and also give relief to employers in payment of provident fund dues.
The CPSEs and state PSUs will however continue to contribute 12 per cent as employer contribution to EPFO.
This scheme will be applicable for workers who are not eligible for 24 per cent EPF support under PM Garib Kalyan Package and its extension, according to the presentation.
This will provide relief to about 6.5 lakh establishments covered under EPFO and about 4.3 crore such employees, it said, adding that it will inject liquidity of Rs 6,750 crore to employers and employees over three months.