Check how your CTC, In hand salary will change due to the NEW EPF rule

With the announcement of NEW EPF, employees provident fund rule, your in-hand salary will get increased but it will not change the total CTC for the next three months starting from May.

To make it easy for employers and employees with the liquidity pressure, the government has announced that the statutory rate of contribution will be reduced from 12% to 10%.

Right now, both the employees and employers have to contribute 12%, total 24% of the basic salary and dearness allowance to the retirement kitty run by the EPF organisation. But under the new rule, it will be only 10% which makes it total 20% for the next three months, May, June and July. And hence, the salary in hand will be higher by the sum equivalent to the 4% of your basic and DA.

The labour ministry has stated-

“As a result of reduction in statutory rate of contributions from 12% to 10%, the employee shall have a higher take home pay due to reduction in deduction from his pay on account of EPF contributions and employer shall also have his liability reduced by 2% of wages of his employees.

If ₹10,000 is monthly EPF wages, only ₹1,000 instead of ₹1,200 is deducted from employee’s wages and employer pays ₹1,000 instead of ₹1,200 towards EPF contributions. In Cost to Company (CTC) model, if ₹10,000 is monthly EPF wages, the employee gets ₹200 more directly from employer as employer’s EPF/EPS contribution is reduced and ₹200 less is deducted from his/her wages,”

They have also said that if employees want, they can contribute more than the 10% of the basic wages to their EPF according to their convenience. However, it isn’t mandatory and the employer does not need to make a higher contribution.