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The Government of India will pay the employer and employee contribution to EPF account of employees for another three months from June to August 2020. The benefit is for establishments with up to 100 employees and where 90% of those employees draw a salary of less than Rs 15,000 per month. The contribution to EPF is reduced to 10% from 12% for non-government organisations. The interest rate applicable to the EPF contributions is 8.5% for FY 2020-21.
The EPF Scheme, 1952 provides for the grant of advance to members when a disaster or epidemic has been declared by the government. The advance is intended to help employees meet their financial needs during the lockdown period.
All employees who contribute to EPF can apply for an advance from their EPF accounts. For the purpose of withdrawal, an employee must have a Universal Account Number (UAN) allotted by EPFO and must link their Aadhaar, PAN and bank account with their UAN.
For example, Mr Z, an employee of a factory with an annual salary of Rs 7.2 lakh desires to obtain an advance from his EPF account as the factory is shut down due to the spread of COVID-19. Mr Z has a basic salary of Rs 3.6 lakh which is Rs 30,000 per month. Mr Z has been in employment for more than two years and his accumulated balance in EPF account stands at Rs 1 lakh. Here, Mr Z can withdraw lower of the below amounts:
Mr Z can withdraw Rs 75,000 as non-refundable advance from his EPF account
Any member of the EPFO employed in an organisation affected by the epidemic or pandemic can make an application to the Commissioner seeking an advance from their EPF account. The withdrawal can be made either by:
An online application can be submitted as below:
Employees who have linked their Aadhaar number and bank account with their UAN can submit their claim in the new composite claim form (Aadhaar) with the respective jurisdictional EPFO’s office. The Aadhaar-based form should be self-certified, but does not require attestation by the employer.
However, in the case of employees who have not linked their Aadhaar number and bank account with their UAN, the claim has to be made in the new composite claim form (Non-Aadhaar). The form should be self-certified and also requires attestation by the employer.
In both the cases, the employee should submit their PAN and a cancelled cheque along with the application for processing the amount into their bank account. The amount of withdrawal will be directly credited to the member’s bank account. The withdrawal in the form of non-refundable advance is allowed from 28 March 2020.
The facility of EPF withdrawal and obtaining a non-refundable advance is to help employees in need of money amidst the COVID-19 lockdown. Employees are given the option of using their EPF savings to meet their financial needs.
An EPF withdrawal is tax-exempt only if the employee renders a continuous service for five years. However, in a case where a facility of advance is provided due to a pandemic situation, a tax or TDS on the withdrawal will defeat the purpose of the advance, which is to provide liquidity.
The EPFO clarifies and states that there is no income-tax liability on the amount of advance an employee withdraws due to COVID-19.