EPF which stands for Employees’ Provident Fund, is a saving scheme that has been introduced by the EPFO under the guidance of the Government of India. This scheme is extended towards the salaried class to facilitate their habit of saving money to ensure a substantial retirement corpus.
The EPF scheme caters to crores of individuals in India directed by three different acts, namely Employees’ Provident Fund Scheme Act 1952, Employees’ Deposit Linked Scheme Act,1976 and Employees’ Pension Scheme Act 1995. The fund is build with monetary contributions extended by employees and their employers each month. Each of them contributes 12% of the employees’ monthly salary to this fund.
This fund accrues a pre-fixed rate of interest which is tax-free and can be withdrawn easily. This process has been made quick, efficient and hassle-free with the introduction of EPF online.
In the recent Supreme court judgement , the court struck down a 2014 amendment; that employees who go beyond the salary threshold of 15,000 per month should contribute at a rate of 1.16% of their salary monthly to the pension scheme.
This requirement of additional 1.16% made under the amendment scheme has been declared ultra vires(contradictory) to the provisions of Employees Provident Fund and Miscellaneous Fund Act of 1952 by the supreme court which has hence used it’s extraordinary powers under the article 124 of the constitution and suspended the implementation of this part for six months.
This means that the the entitlement is not limited to the employees who has already exercised an option under the unamended EPS. If an employee and employer jointly opt for enhanced pension coverage and have not done so prior to the 2014 amendment they can do so four months from today.
Before the introduction of the amendments every employee who became a part of the Employees Provident Fund Scheme aa on November 16, 1995 could avail the EPS. In the pre-amended version before 1995 the maximum pensionable salary was 6,500. However, members whose salary exceeded this cap could also opt along with employers to contribute upto 8.33% of their salaries to the fund.
The 2014 amendment raised this cap from 6,500 to 15,000 . One of the clauses of the amendments said that employees who were existing EPF members as in September 1, 2014 could continue to contribute to the pension fund in accordance with their actual salaries. They were even given a brief window of six months to opt for the new pension regime.
It is interesting to note that the court has removed the cut-off date in the 2014 amendments which implies that Employees who retired before September 2014 and did not exercise any option of the pension scheme will not be entitled to benefits of this judgement. The court has tried to include a large number of employees under the purview of this decision and provide pension for all.
read more : 8.5% Return on PF Deposits: Approval by Finance Ministry for FY21
