FM Sitharaman extends EPF subsidy deadline for new hires, low-income earners to benefit
If you are a fresh recruit set to enter the workforce post June 30, you will receive higher in-hand salary, as the central government will fund your employees’ provident fund contribution (EPF) for two years. Employees who landed a job after having been laid off after March 1, 2020 due to the novel Coronavirus (COVID-19) pandemic will also be eligible for this benefit.
Finance Minister Nirmala Sitharaman on June 28 extended the PF relief registration deadline for fresh recruitments and re-hires, which was set to expire on June 30, to March 31, 2022. She had first made the announcement last year as part Aatmanirbhar Bharat Rozgaar Yojana.
Likewise, employers making fresh hires till March 31, 2022 will continue to see lower total wage bill, with the central government funding the employers’ share in the provident fund contribution for two years.
Low-income earners primary beneficiaries
Under this scheme, the central government will take care of the provident fund (EPF) contributions of employees and employers for two years from the date of registration. Employees have to contribute 12 percent of their salary towards their provident fund every month and employers are required to match this contribution. So, now, the government will finance the aggregate contribution of 24 percent.
However, the benefit will be restricted to employees who earn up to Rs 15,000 a month. It will be applicable only to new employees who have been hired after October 1, 2020. However, it also covers individuals who were laid off after March 1, 2020 and landed jobs again after October 1, 2020.
In the case of companies with employee strength of up to 1,000, the government will fund employee as well as employer contributions. If the staff strength is over 1,000, the government will only fund the employees’ contributions. Termed a subsidy support, the amount will be credited to Aadhaar-seeded EPFO accounts of eligible employees. Aadhaar-UAN linkage has become mandatory for all employees.
Higher take-home salaries for employees
Besides boosting employment opportunities, the move will also mean more money in employees’ accounts every month. If you are a young fresher eligible for the subsidy with no major family responsibilities, you will have more money at your disposal. Instead of using the additional funds for eating out or buying new gadgets, consider directing it to your provident fund voluntarily to build your retirement kitty. “You can look at contributing to the voluntary provident fund (VPF) to earn high tax-free and assured returns on total contributions of up to Rs 2.5 lakh a year (effective financial year 2021-22),” says Saraswathi Kasturirangan, Partner, Deloitte India.
Alternatively, you can look at investing in equity mutual funds. “You can invest Rs 1,800 (12 percent of Rs 15,000) through the systematic investment plan (SIP) route. Indirectly, someone else will be funding this SIP. Once the two-year period ends, you can invest on your own. Else, you can also buy a health insurance policy for yourself,” says Pankaj Mathpal, Founder, Optima Money Managers. You can also consider buying health cover for your parents through the monthly premium payment mode.