ESIC COVID – 19 relief scheme to provide help and secure to the families of the IP due to the COVID – 19.
The EPF has provided separate login to each member (employee). The Link for same is Member Home (epfindia.gov.in). Many times the employees forget their password and are unable to login. Attached herewith is the procedure to reset the password of the member portal.
In order to link Aadhar with EPF the employee’s basic details like name and date of birth in the EPF website should be same as per his Aadhar Card. In case the basic details are different the employee must update the same through his member portal login. Attached file shows step by step procedure to modify basic details in EPF website.
Statutory Benefits available to covid-19 affected employees
Spread of covid-19 pandemic across India including the rural areas, it has become important to know what are the statutory and optional benefits( including financial) available to the Employees and also to their dependents
1. Employee’s State Insurance (ESIC) – There are two types of benefits in ESIC
• Medical benefit
i. The affected IP( insured person) and/ or or his family member can avail free of cost medical care in any ESIC hospital
ii. Further, the ESIC beneficiaries may seek emergency medical treatment from tie up Hospital directly without referral letter in accordance with his/ entitlement
iii. In case the IP or family member, being infected with covid-19, Take treatment in any private institution then reimbursement of Expenditure may be claimed from ESIC
• Cash benefit
i. Sickness benefit – The covid-19 affected IP can claim sickness benefit for his period of absenteeism as per his entitlement. The sickness benefit is paid at rate 70% of average daily wages for a maximum 91 days in a benefit period
ii. ABVKY – if an IP is rendered unemployed, he can avail ABVKY benefit 50% of average daily wage for a maximum 90 days
iii. RGSKY – in case a person becomes unemployed due to retrenchment for closure of the establishment he may claim unemployment allowance for a period of up to 2 years
iv. Funeral expenses – in the event of unfortunate demise of any insured person, funeral expenses of rupees 15000/- are paid to the eldest surviving member of his family
2. Group mediclaim offered by employer – As a welfare measure, many employers offer group mediclaim insurance policy to their employees. If the employee is getting such benefits then the covid-19 affected employee can use it to manage his medical care costs
3. No deduction from salary – State governments like the government of state of Maharashtra have officially notified the manufacturing employers not to deduct salary of employees affected by covid-19. Check out your state government’s latest notification for more information about the same.
4. Employees Provident Fund – The EPF is a compulsory saving Scheme for the employees designed with inbuilt pension (check eligibility) and life insurance schemes. The covid-19 affected employee has following provisions under the PF to his advantage
• Covid-19 Advance – The affected employee can take advance from his EPF savings subject to lower of 75% of EPF contribution balance or 3 times of his last drawn PF salary rate
• EDLI – There is an inbuilt life insurance scheme provided along with the employees Provident Fund Called Employees Deposit Linked Insurance (EDLI) scheme. In event of death of employees whose name was present of the rolls of the company, The nominee of the deceased employee can claim the EDLI amount by submitting form 5IF. This is subject to maximum 7 lakh rupees.
• PF and Pension – The dependent of the deceased employee can immediately claim the PF amount of the deceased employees by submitting form 20. Also if eligible, the window and up to two children of the the deceased employee can claim pension. The minimum widow pension is rupees 2500/- per month and the minimum child pension is rupees 625/- per month for each child.
5. P M J J B Y – Pradhanmantri Jivan Jyoti Bima Yojana – Has rupees 330/- been deducted from your bank account? If yes, you are getting coverage under the the PMJJBY scheme. It is the premium amount for term Life Insurance Scheme called PMJJBY. This insurance scheme gives rupees 200000/- to the nominee of the deceased. In the event of death of a person, including due to covid-19, the nominee of the deceased person must approach the bank where the premium deduction happened and claim the money. Documents required are claim form ( given by the bank), Death certificate of the deceased person and Cancelled Cheque of the nominee.
6. Gratuity and other legal dues from employer – In the event of death of an employee, including due to covid-19, the family member/ legal heir must approach employer of deceased employee and claim the gratuity amount as per eligibility and also all the pending legal dues like balance salary payable, leave encashment, pending bonus, etc from the employer. In case the employer provides for Life Insurance as an additional welfare scheme, the employer will help in claiming the insurance amount.
Thus above are some of the ways to financially help the employee and his/her dependents in these tough times. Employees are also advised to fill up and submit their nomination forms especially for PF, Gratuity, Pension and Life insurance. It saves the dependents from lot of pain and hassle. In case you know of any other benefits please mention the same in comments section.
The author is an expert in Labour and Employment Laws. You may reach him by emailing to email@example.com
The author is an expert in Labour and Employment Laws. You may reach him by emailing to firstname.lastname@example.org.
visit us at www.chhedaconsultancyservices.com
To begin with The EPF & MP Act 1952 is applicable to establishments having 20 or more employees. Sec 17 of the Act and Para 27A of the Scheme provide for exemption of the entire establishment and of class of employees respectively. Under the exemption provisions the establishment maintains an EPF trust and the PF contributions of all its employees or a class of employees as the case may be, is deposited into that EPF trust. Typically, this EPF trust is maintained by the establishment by employing experts personnel in HR team and finance team.
Let us first check what were the reasons the establishments preferred EPF trust under the exemption provisions rather than depositing the employees PF contribution with the government administered EPFO and are these reasons relevant today?
(a) Better Returns : – In old days i.e. prior to Y2K, most of the EPF trust were able to generate better returns than the EPFO primarily because EPFO functioned more as an enforcement body than as a financial organization. So it was more interested in inspections than managing the money properly.
(b) Shared responsibility : – Exempted EPF trust must have equal representation of employees and employers in its Board of trustees. Thus the management and employees both worked together to get better returns and have good administration of the trust.
(c) Cost of Trust administration :- During the Previous years i.e. prior to December 2014, the administrative charges taken by the EPFO under A/c 2 was 1.1 % of the Total wages. This was much higher than the cost of Trust administration. Trust administration cost includes salaries of the employees managing the trust, accounting costs, banking charges, Demat and brokerage charges, hardware and software costs, etc
(d) Service Delivery :- The most important factor that was tilting the game in favour of the EPF trust was Service Delivery. In old days i.e. prior to year 2014, all the EPF claims like transfers, advances, withdrawals and death cases settlements were completely manual and at the mercy of the EPFO clerk and accounting officers. Practically there was no transparency and accountability. The situation was so bad that Union Finance minister Shri Arun Jaitely in his Budget speech had referred to EPFO subscribers as “hostages, rather than clients”. In old days of manual settlements the claims used to be settled anywhere from 6 months to 1 year and varied from EPFO office to office and from clerk to clerk. In the EPF trusts of the company/ establishment, the claims were settled within a few days.
Fast forward 2021: – are above reasons relevant anymore? I would Say many of the above mentioned issues are resolved by the EPFO. On top of that many new restrictions have come in for the EPF trust. Couple that with changing scenario of manpower hiring in the industry Where it has become fashionable & potentially economical to employ the workforce as Contract Labour rather than direct employee
a) Returns :- Due to supermassive Corpus Fund next only to LIC Of India and the changes in investment pattern approved in recent years, the EPFO has raced ahead of others in generating good returns over the money invested. The rate of interest declared by EPFO for financial year 2020-21 is 8.5 % and that too without dipping into its reserves or seeking help from the finance ministry. Contrary to this, In the present low interest rates regime, most of the Exempted EPF trusts, especially the smaller ones, have failed to extract the necessary yield to required to give the interest at statutory rates declared. Consequently this interest deficit has to be fulfilled by dipping into the reserves. Where there are no reserves left, the deficit has to be made good by the establishment/ company. Also investment losses, like for example defaults of DHFL bonds & ILFS bonds and the likes, has to be borne by the company. This is becoming the greatest challenge in maintaining the overall viability of the Exempted EPF trusts in recent times.
b) Cost of Trust administration :- With the reduction in A/c 2 charges to a mere 0.5 % of the wages, this advantage of the exempted trusts is gone. On a comparative basis, after paying the inspection charges of 0.18% the trust is left with only 0.32% amount in which it has to manage its administrative costs. As on today this is a difficult task especially for a small EPF trust. This advantage remains only in case of EPF Trust having very large number of employees base and a big Corpus.
c) Service Delivery :- This is one particular area where the performance of the EPFO has improved dramatically and by leaps and bounds. Since 2012 i.e when the online service delivery started, the process at EPFO has evolved very well and now almost all the documentation and claims are online. The process of online claim has accelerated even further during the pandemic era
d) Lack of Succession planning : – In old days establishments used to appoint special personnel only for taking care of the EPF trust. Nowadays this is not happening and the new HR personnel do not know much about management of the EPF trust. The HR personnel are not well versed with the compliance requirements and investment pattern of the EPF trusts. Naturally it becomes difficult for them to manage EPF for trust. On top of that, during recent times most of the companies have stop recruiting special personnel to handle the EPF trust. They are now facing a very challenging task of succession planning. EPF trusts are not able to find good Successors for managing and administering it properly.
e) Increase in the compliance burden and stringent rules :- EPF trust has to follow more than 31 rules provided in Appendix A of para 27AA and countless notifications that keep on publishing every now and then. These are not easy to implement especially by small EPF trust. In case of breach of compliance conditions, the EPFO is well within its right to cancel the exemption of the PF trust. one such example of among various rules is that the EPF Trust has to maintain employee balances Online i.e. the employee must be able to access their EPF passbook in real time basis. As on today most of the small EPF trust find it difficult to implement this simple rule.
f) Permission for security sale :- In old EPF trusts it is found that there are retirements every month and money is required to pay the retiring employees. Generally such amount of cash is not readily available with the EPF trust and thus has to be planned well in advance. To generate cash EPF trust has to liquidate securities by selling them in open market. Before liquidating securities The EPF trust must obtain permission from the PF Commissioner for sale of the securities. The PF commissioner will give permission for sale of securities keeping in mind the investment pattern notification and overall welfare of the EPF trust. It takes three to six months to obtain such permission for sale of securities. This daunting task has become really challenging in this pandemic era.
After overall analysis, We are of opinion that it is more advantageous in long term for smaller EPF trusts (Generally having less than a thousand live employees) to surrender the EPF trust exemption and go for unexempted Government administered EPFO.
The author is an expert in Labour and Employment Laws and specializes in The EPF & MP Act compliances & EPF Trust management. You may reach him be emailing to email@example.com.
visit us at www.chhedaconsultancyservices.com
There are four points to be considered when we discuss about EPF and Taxes. Following are the cases in which your EPF money may be taxed:
- Premature Withdrawal – EPF Service is less than or equal to five year (FY 15-16 onwards)
- Employer’s Contribution to EPF for the year is above Rs 7.5 Lacs per annum (FY 19-20 Onwards)
- Employee’s Contribution to EPF for the year is above Rs 2.5 per annum (FY 21-22 onwards)
- Post-employment earnings through interest on EPF amount
Let us see each case one by one.
- Premature Withdrawal – EPF service is not more than five years.
This provision has come into effect from 01.06.2015. Withdrawal of Provident Fund may attract Income Tax. TDS @ 10% will be deducted from the withdrawal amount subject to monetary limit of Rs 50,000. This rate will be applicable only after the submission of PAN card. If PAN details are not submitted than TDS @ 34.78% will deducted and the employee will not be able to claim the same in his ITR. If an eligible PF account holder submits Form 15G or 15H as the case may be, then no tax may be deducted at source.
In case of withdrawal with less than 5 years of contribution, not only the amount withdrawn becomes taxable, but the tax benefits enjoyed on PF contribution during the service are also reversed. In such a case,
- payment received by the individual in respect of the employer’s contribution along with the interest accrual thereon is taxed as “salary”.
- Interest on the employee’s contribution is taxable as “other income”.
- Payment received in respect of the employee’s own contribution is exempt from tax (to the extent not claimed as a deduction earlier)
Full exemption will be available only if
- The employee has not completed 5 years of service due to termination of job by reason of the employee’s ill health or discontinuance of the employer’s business or for reason which is not in control of the employee.
- If the account is transferred to the new employer then the previous service from whom the account is transferred is also considered as a service period.
- Employer’s Contribution to EPF for the year is above Rs 7.5 Lacs per annum (FY 19-20 Onwards)
Any amount in excess of Rs. 7.50 lakh contributed by the employer to recognised provident fund accounts taken together shall be treated as perquisite in the hands of the employee will be included in his salary and taxed at the slab rates. Even the interest accrued in respect of such excess contribution shall also be included in the value of perquisite of the employee year after year.
- Employee’s Contribution to EPF for the year is above Rs 2.5 Lacs per annum (FY 21-22 onwards)
If the employee’s contribution to his or her EPF and VPF exceeds Rs 2.5 lakh in a year, the interest above that amount will be taxable as per employee’s income tax slab. This only takes into account the employees’ contribution and not employer’s (or the total contribution). It is not yet clear whether the interest income above the tax free level will be on accrual basis, which is every year, or at the time of withdrawal when the employee retires or withdraws PF amount.
- Post-employment earning through interest on EPF amount
Once an individual leaves job or retires, he or she does not remain an employee; hence, any interest earned attracts tax. In Dileep Ranjekar Vs Income Tax Department the Income Tax Appellate tribunal Banglore stated that interest earned before retirement will not get taxed irrespective of when it is withdrawn after retirement, but any interest earned post retirement will be taxable in the hands of the account holder. This is because the exemption is available only to an employee. Once an individual leaves their job or retires, he or she does not remain an employee; hence, any interest earned attracts tax.
It may be noted To discourage provident fund subscribers from neglecting their EPF accounts, especially the ones in which no contributions are being made at all, in 2011 the EPFO stopped paying interest on accounts that had been inoperative for more than three years, or 36 months. But in 2016, the rule changed and the EPFO said that inoperative accounts will also earn interest till the account holder turn 58. But after the retirement of the account holder, the EPFO will not pay interest if the account becomes inoperative.