The government’s announcement will help employers to conserve 2% of cost to the company and aids employees by increasing their take-home by 2%.
Provident fund is one of the most popular retirement savings products where people get the benefit of compounding to grow their retirement corpus.
In order to provide more liquidity in the hands of employees and ease the cash crunch that employers may be facing, the government on Wednesday reduced the monthly provident fund contribution for both employee and employer from 12% each to 10% each for the next three months.
Both employees and employers together contribute 24% of the basic salary plus dearness allowance on a monthly basis towards the employee’s provident fund (EPF). Now, they will be contributing 20% during this period.
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If your basic salary plus dearness allowance is ₹50,000 per month, your PF contribution is equal to ₹6,000 ( ₹50,000*12%) and with a similar contribution by the employer, your monthly PF contribution is ₹12,000. Now, the reduced contribution will be ₹10,000 ( ₹50,000*20%). Your income will increase by ₹1,000 per month that is 2% of your basic salary plus dearness allowance. As your employer will be contributing less, this will bring down your cost to company (CTC) by 2% for these months.
Source: livemint
