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The proposed amendments to the Employees’ Provident Fund Act may pave the way to extend provident fund benefits to many workers who have so far been outside the net. Among the changes proposed, a significant one is to allow rates of contribution by certain classes of employees to be lower than the mandatory 12 per cent.
Reports say that the government may also consider exempting certain classes of employers from the mandatory joint contribution to the EPF.
Seen together, this could allow the EPF benefits to be extended to a wider section of workers such as domestic help, drivers and the self-employed. While the rates of contribution to the EPF and other modalities are awaited, the steps towards providing much-needed social security to these vulnerable sections of society is welcome.
Along with the Pradhan Mantri Shram Yogi Maandhan scheme that aims to provide pension to workers in the unorganised and informal sectors, the proposed extension of provident fund benefits to a wider swathe of workers will be a good start, even if small, to address the retirement time-bomb problem that is ticking away in the country.
At the same time, the government must also consider restricting the benefits of the EPF to those who deserve them. As it stands, even employees who earn very hefty salaries are allowed to contribute 12 per cent of their basic and dearness allowance, without any monetary limit, to the EPF, with an equal contribution from their employers.
On this sum, they enjoy the benefits of attractive interest rates, fully tax-free. Not just that, employees can contribute extra to the EPF through the voluntary provident fund. On this too, they enjoy high tax-free returns.
There is little reason why the rich should be given such largesse. Budget 2016-17 had proposed a monetary limit for contribution of employers in recognised provident and superannuation funds of ₹1.5 lakh per annum for tax benefit.
But this proposal, along with other changes to the EPF, was rolled back that year due to protests. It’s time for a re-think.
Deputy Editor
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