In a case where the CTC does not include the employer’s contribution, then the take-home salary increases by 2 per cent of the basic salary minus TDS.
The Government of India has reduced the statutory 12 per cent contribution to EPF by employers and employee to 10 per cent each for three months. This decision is expected to put more money into the hands of employees. But at the same time, it will also increase their tax liability. Archit Gupta, Founder and CEO, ClearTax, told FE Online that the EPF contribution is calculated as a percentage of the Basic Salary plus Dearness Allowance (DA) of an employee. The EPF contribution from both the employer and employee has been cut to 10 per cent from 12 per cent of the basic salary for the next three months from June to August 2020.
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Generally, the CTC (salary package) includes only the employees’ contribution to PF. Gupta said, “A reduction in the PF contribution of an employee also reduces the tax deduction available for tax-saving under section 80C. This will impact the tax (TDS) liability of the employee.”
Source: Financial Express