EPF account deposits could be delayed this year during lockdown. How it affects you2 min read . Updated: 18 May 2020, 02:43 PM IST
- EPFO has allowed employers to delay the deposit of funds in EPF accounts during lockdown
- The move will affect employees in two ways
NEW DELHI : Don't be surprised if you see that there has been no deposit in your employees provident fund (EPF) account so far in the new financial year. With severe disruptions in cash flows during the lockdown that began on March 25 and has been extended for the fourth consecutive time till May 31, the Employees' Provident Fund Organisation (EPFO) has allowed employers to delay deposits in EPF accounts.
Under the EPFO rules, employers are mandated to deposit provident fund dues on salaries by 15th of the next month. After a grace period of 10 days, employers are penalised for any delay. So for example, EPF dues on your March month's salary should be deposited by your employer within 25th April to avoid any penalty.
Keeping the financial stress due to the lockdown in mind, the retirement funds body has issued a notification saying that no penalty will be charged for any delay in such deposits for the entire period of lockdown.
"Considering the difficulty faced by the establishments in timely deposit of contributions during the period of lockdown due to operational and economic reasons, it is evident that such delays are without mens rea (intention) of the employer," the EPFO said in a notification this month.
There are around 6.5 lakhs EPF covered establishments in India. Many employers are likely to avail the benefit of delayed deposits. The move could affect employees in two ways.
1) If you are planning to make a withdrawal from your EPF account anytime soon, the balance in your account might not include latest accruals due to a delay in deposits. For example, if you are planning to make a Covid pandemic withdrawal, your eligibility amount is dependent on your EPF account balance at the time of making withdrawal.
Under the Covid withdrawal rule, you can withdraw the less of the two amounts: your basic salary and dearness allowances (DA) for three months or up to 75% of the amount standing to member's credit in the EPF account.
2) Any delay made by employers in EPF deposits might also affect your interest income. "The interest on PF contribution is calculated on the balance accumulated at the beginning of each month for each employee. The same shall be credited by April after the end of the financial year. With delayed payments and lower contribution (10% instead of 12%) employees are likely to accumulate lower interest," Archit Gupta, Founder and CEO, Cleartax, told Livemint.
Interest rates for EPF have also dropped leading to further fall in interest accumulation for the EPF balance.