Cabinet OKs Rs 23,000 Cr. outlay for EPFO contribution scheme

EPFO contribution scheme

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EPFO contribution scheme
EPFO contribution scheme
In News: EPFO contribution scheme
  • The Union Cabinet has given its approval for the Atmanirbhar Bharat Rojgar Yojana (ABRY), and approved an outlay of Rs 22,810 crore to the scheme.
  • The scheme was announced by the Finance Minister in November to boost employment.

News Summary:

  • The Union Cabinet has given its approval for the Atmanirbhar Bharat Rojgar Yojana (ABRY), and approved an outlay of Rs 22,810 crore to the scheme.
  • Cabinet has approved an expenditure of Rs. 1,584 crore for the current financial year and Rs. 22,810 crore for the entire Scheme period i.e. 2020-2023.
  • As per the Ministry of Labour and Employment, the scheme is expected to benefit more than 58 lakh employees.

About: EPF and EPFO

  • The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 is an Act to provide for the institution of provident funds [pension fund and deposit-linked insurance fund] for employees in factories and other establishments.
  • The Act and Schemes framed under the Act are administered by the Central Board of Trustees of EPF, consisting of representatives of Government (Both Central and State), Employers, and Employees.
  • The Central Board of Trustees operates three schemes for the workforce engaged in the organized sector in India:
    • Employees’ Provident Fund Scheme (EPF Scheme) 1952: established under the EPF Scheme.
    • Pension Scheme 1995 (EPS)
    • Insurance Scheme 1976 (EDLI)
  • The Employees’ Provident Fund Organization (EPFO), under the administrative control of Ministry of Labour and Employment, is an organization tasked to assist the Central Board of Trustees.
  • EPFO is now one of the world’s largest social security organizations.

About: EPF Scheme

  • The Employees’ Provident Fund (EPF) Scheme is a savings scheme introduced under the EPF Act, 1952.
  • EPF scheme aims at promoting savings to be used post-retirement by various employees all over the country.
  • Contributory scheme:
    • Employees’ Provident Fund or EPF is a collection of funds contributed by the employer and his employee regularly on a monthly basis.
    • The employer and employee contribute 12% each of the employee’s salary (basic + dearness allowance) to the EPF.
  • Interest: These contributions earn a fixed level of interest set by the EPFO.
  • No Tax: The amount of interest to be received on the deposit along with the total accumulated amount is totally tax-free, i.e. the employee may withdraw the entire fund without worrying about paying any kind of tax on it.
  • The accrued amount may also be withdrawn by the nominee or the legal heir of the employee post his death or can be withdrawn by the employee himself post-resignation.

About: Atmanirbhar Bharat Rozgar Yojana (ABRY)

  • In November 2020, as part of Atmanirbhar Bharat initiative, the government of India announced a new job creation scheme Atmanirbhar Bharat Rozgar Yojana (ABRY).
  • The purpose of the scheme is to boost employment in formal sector and incentivize creation of new employment opportunities during the Covid recovery phase under Atmanirbhar Bharat Package 3.0.
  • Under this, the government of India will pay the EPF contributions for two years of all new employees hired by establishments between October 1, 2020 and June 30, 2021.
  • The establishments must be registered with the Employees’ Provident Fund Organization (EPFO) to be eligible.
  • The definition of ‘new employee’ has been kept flexible to include both:
    • Those who were not part of the EPF net earlier (not working in establishments registered with EPFO before October 1, 2020, and who did not have a Universal Account Number or EPF Member account number)
    • Those in EPF net but had lost their job between March 1 and September 30, 2020.
    • This may help improve such workers’ re-employment prospects.

The salient features of the Scheme:

  • Under the scheme, the government will pay the PF contribution for workers with wages up to Rs 15,000.
  • For establishments employing up to 1,000 employees, the Government of India will pay 24% of wages towards EPF (both 12% employees’ contribution and 12% employers’ contribution) of new employees for two years.
  • For establishments employing more than 1,000 employees, the Government of India will pay 12% of wages towards EPF (the employees’ share of EPF contribution of 12%) of new employees for two years.
  • To be eligible for the scheme, firms having more than 50 employees must hire at least five new workers, while those with less than 50 employees must hire a minimum of two workers.
  • The scheme will cover nearly 99.1% of all establishments and an estimated 65% of all those employed under the formal sector.
  • EPFO will credit the contribution in Aadhaar seeded account of members in electronic manner.

Also Read: Mission Karmayogi: For Civil Servants

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