Updates on how the PF rules shall be Taxable:

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  • As per the Union Budget 2021, taxes are applied to those employees who had emanated their excessive contribution into any EPF account of more than 2.5 lakh Indian Rupees.
  • During the announcement of Union Budget 2021, Finance Minister Nirmala Sitharaman had clearly stated the purpose of taxation upon the provident funds. The instruction inclined directly towards the interests enacted over employee’s benefactors that supposedly seem higher each year from the margin of 2.5 lakh Indian Rupees. This taxation shall be applied from the start of the month of April 2021. Annual contributions up to Rs 2.5 lakh has been kept as the deposit limit for which interest is tax exempt.
  • On a plain reading of the budget documents, it appears that tax will apply to the interest earned on contributions made to Employees’ Provident Fund (EPF), Voluntary Provident Fund (VPF) as well as Public Provident Fund (PPF). However, tax experts have clarified that there are separate limits for EPF/VPF and PPF i.e., contributions to PPF and EPF/VPF will not be aggregated for the purpose of calculating the Rs 2.5 lakh limit.
  • Effectively, this would mean that an individual will still enjoy tax exemption on the interest earned on PPF contributions because a person is not allowed to contribute more than Rs 1.5 lakh per financial year to PPF as per current laws.
  • Note that every month, at least 12% of an employee’s basic salary and performance wages is compulsorily deducted as provident fund, while the employer contributes another 12%. With this taxation, the government wants to curb high income earners from self-contributing more to their PF accounts.
  • The Memorandum Explaining Provisions of Finance Bill, 2021, says there are instances of some employees contributing huge amounts to PF, and the entire interest accrued being exempt from tax under clause 11 and clause 12 of Section 10 of the Income Tax Act. “This exemption without any threshold benefits only those who can contribute a large amount to these funds as their share,” said the memorandum.
  • Besides the official announcement, Finance Minister Sitharamanalso explained a better idea to rationalise the tax exemptions. She suggested to divide the interests to different PFs, rather than sticking to just one provident fund. This way each fund will have a limited and restricted contribution of 2.5 lakhs per annum. This method is applied to all those whose income is higher than the median ranged employees.
  • This move will affect mostly the high-income earners and High Net-worth Individuals (HNIs). Under the existing tax provisions, interest received/accrued from employee’s provident fund (EPF) is exempt from tax. The new rules will potentially impact employees in high income bracket or employees making large voluntary employee provident fund contributions.
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  • It is necessary to note that the new provision shall be accounted only to the employee’s contributions rather than the aggregate contribution maintained to the fund carried each year.
  • Added by Sitharaman, tax returns shall be about 8% as the employee’s tax benefit, as it is assured under the tax ambit.
  • Aside from high-income earners, salaried employees who use Voluntary Provident Fund (VPF) to invest more than mandatory 12% of basic pay, will also be impacted.
  • A large tax-free interest accrual which is not taxed on withdrawal either, is now being rationalised and will mostly impact those in the high-income bracket. The method of calculation will be specified later as the taxation details have not yet been shared by the government.
  • Meanwhile, around 4 million subscribers of the government’s pension scheme Employees’ Provident Fund (EPF) are yet to receive interest payments even after one-and-a-half months of the government announcing the payout for 2019-20. The delay occurred due to a mismatch of KYC or identification of the employees at the employer’s end. The field offices of the Employees’ Provident Fund Organisation (EPFO) are reaching out to the employers
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New Wage Rule Under Code of Wages passed by Parliament: Take-home salaries may reduce by April this year

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  • For increasing the gratuity and the contribution to the provident fund, A new act was passed by the parliament called Code of Wages/ Wage Code in which the take-home salary of maximum private firm employees is likely to come down. It is also announced that this new wage rules will come into effect from April 1, 2021.
  • The Code on Wages Bill, 2019 seeks to amend and consolidate laws relating to wages, bonus and matters connected therewith. It was passed in Rajya Sabha on August 2, 2019. Lok Sabha passed the bill on July 30, 2019
  • This undertaking is set by the draft rules of the central government because of the reconstruction in the salary packages of the employees. These packages are required to be aligned with the new wage rule which means the total cost to company (CTC) cannot exceed 50 per cent of the total compensation reverting the basic salary to 50% of the total pay.
  • Retirement contributions will also mean lower take-home salary for employees but the retirement corpus of employees will grow.
  • At present, several private companies prefer to set the non-allowance part of the total compensation less than 50 per cent and the allowance portion higher. However, this will change as soon as the new wage rules come to effect. The rules are expected to impact private sector employees’ salaries because they usually get higher allowances.
  • The inclusion of four labour laws of the Code Wage is the following:
  • Minimum Wages Act
  • Payment of Wages Act
  • Payment of Bonus Act and Equal Remuneration Act
  • Tramping of the employees can been seen further in future as they get on to their basic pay so as to meet the 50% basic pay as this take-home of every employee shall be deducted for providing better social security and retirement benefits.
  • The setting of non-allowances part of total compensation within the private firm sis still less than 50% of an employee’s CTC for keeping a higher portion for allowances.
  • Still confused about the Act? Check on the step-by-step explanations detailed down this page. You can get a brief learning about the system and structure.

Short-Overview:

  1. The re-structuralization of the wages should be made by the Private Sector.
  2. The allowance cannot exceed 50% of the total salary of the employees working in these private sectors. Further, the companies are required to increase the basic salary component that will get distributed as a provident fund and the rise in gratuity.
  3. The new wage rule may result in a lower take-home salary for all the employees.
  4. As per the new wage Act, at least 50% of the gross remuneration of employees shall structuralise the calculation of PF and gratuity.
  5. Under the new wage act, private companies wont be allowed to keep the allowances high and the basic salary low.
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What had happened with the Wage Code in the year 2019?

  • An attempt was made by the new wage code in 2019 to regulate and implement the wages with an ease.
  • As the 2019 Wage Code took effect, about 50% of the gross remuneration of the employees formed the basis to calculate benefits such as gratuity, retrenchment compensation, provident fund, etc where the total basic salary including several fixed allowances are below the margin of 50% of the total pay. This is going to get set up from the month of April.

What changes have been seen in 2021 as compared to 2019 Wage Code?

  • Out of 44 central government laws, 29 were the merges those resulted as the part of the four-labour code among with is the new wage code.
  • The existing acts that governed the employee’s provident fund (EPF) and gratuity will now be the part of the Code of Social Security.
  • The provident fund in 2021 shall depend up on the regulations instructed on the Wage Code, 2019.
  • Many private companies try to keep the basic pay of their employees low substantially increasing the allowance. However, the major change that can be seen in the new Wage Code is that these companies have to now restructure the salary in such a way that the employee’s basic pay remains high so as to meet the new requirements. If the salary exclusions are more than the total salary then the excess over the 50% must be inclusive within the wages that is basically based on the structure in which the EPF will be calculated.
  • The revision will result in reduction in take-home pay as provident fund (PF) contribution of most of the employees will go up. PF is calculated as a percentage of basic salary.

Effects of new Wage Code upon Private sector:

  • In addition to restructuring the pay packages, it will have significant cost repercussions for firms such as there will be an increase in the PF and gratuity, to which the workforce cost shall also increase. In addition, there will be a one-time cost increase for employers toaudit their current base of employee pay structure and align with the new system and rising compliance cost burden.
  • Firms will also see an impact is the increased gratuity cost. Currently, it is calculated on 15 days of basic pay and dearness allowance. Now, with the new calculation, gratuity will have to include the other allowances of wages such as travel, special allowance

How will the employees benefit from this?

  • With more sum deducted towards social security kitty as well as post-retirement gratuity, the scheme will prove beneficial to employees in the long run. However, while the new wage code is set for an April rollout, clarity is yet to emerge on many provisions
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How to Check TRRN Status Online – PF Payment Process

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What is TRRN?

The full form of TRRN is Temporary Return Reference Number. TRRN is the number which is generated by the EPFO against the payment transaction while a PF account holder or an employer makes an online payment towards the PF monthly contribution.

How to Check TRRN Status Online Explained on YouTube:

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How to Check TRRN Status Online?

  • Go to the google search bar
  • Type TRRN status and click enter
  • EPFO TRRN Details official website URL will be displayed
  • Upon clicking on the EPFO TRRN details URL you will be directed to the unified portal-EPFO website
  • Enter the TRRN number and enter the captcha code mentioned below
  • Your TRRN status will be displayed where you can find the details like your TRRN number, confirmation of the payment, challan type etc.
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EPFO TRRN Status check online – https://unifiedportal-epfo.epfindia.gov.in/publicPortal/no-auth/misReport/home/loadSearchTrrnHome

How to Pay PF Online?

  • Visit the unified portal of EPFO & Login to the unified portal of EPFO using your Electronic Challan cum Return (ECR).
  • Once check the PF details displayed are correct.
  • Select the ECR upload option from the Payment drop down menu.
  • ECR upload window will be displayed where you need to select Wage Month, Salary Disbursal Date, Rate of contribution.
  • After selecting now upload ECR text file.
  • Upon uploading the ECR text file, File Validation Successful message will be displayed if the uploading process is successful and the TRRN generated will be displayed for the uploaded ECR file.
  • Note down the TRRN number and hit the Verify button.
  • Once the verification is completed now hit the Prepare Challan button to get ECR summary sheet.
  • In the ECR summary sheet click on pay.
  • Select the mode of payment online and select your Bank from the list of Banks.
  • After the successful payment, Payment Transaction-id will be generated with e-Receipt.
  • EPFO provides the payment confirmation against the TRRN number.
  • That you can check the TRRN status by using the first process discussed in the article.

EPF payment online – https://unifiedportal-emp.epfindia.gov.in/epfo/

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Online Provident Fund Withdrawal

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Online Provident Fund Withdrawal Could Be Done By August

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Reports are rife that the Employee’s Provident Fund Organisation may introduce a facility for making online withdrawals. This is expected to be in place by August. By enabling online withdrawals the retirement fund scheme is likely to enjoy savings generated from eliminating paperwork. Members of the retirement fund organisation will also benefit from a more convenient service. The online facility would see the withdrawal times cut down to just a couple of hours.

A senior official of the Employee’s Provident Fund Organisation disclosed that the digitization of the body’s records and processes, which run on an operating system from Oracle, has been completed. The senior official also disclosed that they had high hopes the online withdrawal facility of provident funds would go live before August 2016.

PF Claim Status Check       PF EDLI Benefits

PF Claim Form                      PF Benefits                          PF Withdrawal Online Process

PF Rules                                 PF Interest Calculator       PF Withdrawal Rules

The senior official went on to disclose that the retirement body will in the near future purchase blade servers that will be used to set up data centers. The number of data centers are envisaged to be three. They will be located at Dwarka in Delhi, Secunderabad and Gurgaon. All the one hundred and twenty three EPFO offices will be connected to the 3 data centers.

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EPF e Passbook       EPF Balance Check Online     EPF Contribution Rules

EPF Office Addresses                    EPF Withdrawal for Repaying Home Loan

By May of this year the procedure of buying servers is expected to have been completed. Tests are expected to begin in the month of June in order to evaluate how the system would respond once it goes live. The intensive trials and tests would take up two months making it possible to plan for a launch in August.

The senior EPFO official confided that the moment the online withdrawal facility becomes operational, members of the fund would be able to make an online application to conduct a withdrawal. Following the authentication and authorization of a successful application, the funds would then be transmitted to the respective accounts at the respective banks.

Currently subscribers of the Employee’s Provident Fund Organisation have to make a manual application in order to withdraw from the retirement fund.

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In order to enjoy this facility of online PF withdrawals subscribers would be required to fulfill some requirements. One of these requirements is activating their Universal Account Numbers.

EPFO Portal Login                           EPFO Online Transfer

UAN Balance Check by SMS         UAN Registration        Apply PRAN Card Online

The Universal Account Number, which allows number portability between various provident funds was launched by Narendra Modi, the Prime Minister of India on the 1st October 2014. The UAN consists of 12 digits and is meant to give a subscriber one non-changing identity regardless the establishment they are working for or the employee provident fund they are contributing to. Throughout an employee’s life, the number will remain the same no matter how many times the employee changes jobs. The EPFO has given out more than sixty million Universal Account Numbers. Activations have been recorded in close to twenty five million of those UANs.

The PAN(Permanent Account Number), the Aadhaar number and bank account details would also be required as would other information that fulfils Know Your Client obligations.

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Currently the subscriber base of the Employee Provident Fund organisation has reached over ten million. The retirement fund has over five lakh crore of assets that it is currently managing.

EPFO UP                                  EPFO MP                               EPFO AP            

EPFO Delhi                             EPFO Maharashtra            EPFO Bihar

EPFO Tamil Nadu                 EPFO  Karnataka                EPFO Telangana

EPFO Kerala                           EPFO Odisha                        EPFO West Bengal

EPFO Chhattisgarh              EPFO Jharkhand                 EPFO Rajasthan

EPFO Haryana                      EPFO Punjab                        EPFO Jammu & Kashmir

EPFO Assam                          EPFO Chandigarh               EPFO Puducherry

EPFO Mizoram                     EPFO Tripura                       EPFO Arunachal Pradesh

EPFO Meghalaya                 EPFO Sikkim                         EPFO Himachal Pradesh

EPFO Manipur                     EPFO Gujarat                        EPFO Uttarakhand

EPFO Nagaland                   EPFO Goa