EPFO gives relief to these EPF members from submitting joint declaration form EPF scheme rules require mandatory submission of this form if an EPF member wants to contribute on basic pay exceeding statutory limit of Rs 15,000 per month
There is good news for some Employees' Provident Fund (EPF) account holders. The Employees' Provident Fund Organisation (EPFO) has issued a circular providing relief to certain EPF account holders from submitting a joint declaration form. Employers and employees are required to submit this form jointly for contributing to the EPF account on a basic salary higher than the current statutory wage ceiling of Rs 15,000 per month. The EPFO has issued a circular dated January 30, 2024, in this matter.However, the circular specifically states that the relief from submitting the joint declaration form does not apply to those who have applied for the higher pension under the Employees' Pension Scheme (EPS). So those who have applied for the higher pension have to mandatorily submit the form.
EPFO relief applies to these EPF members
The latest EPFO circular provides relief to certain EPF members who left employment or died before a specific date and certain existing members as well.
EPF members who left employment or died: The EPFO in its circular said that the relief from submitting the joint application form applies to those employees who have paid more than the statutory limit but left employment or died "till October 31, 2023". These EPF members are not required to submit the joint declaration form.
The circular states, "All such cases where the employees had already contributed on pay more than statutory limit and the employer had also paid administrative charges on such contribution made on pay more than the statutory limit but had left the employment or died till 31/10/2023, it is deemed that such cases had been allowed for contributing on pay more than the statutory limit so as to avoid hassles for the concerned stakeholders."
Radhika Viswanathan, Executive Director, Deloitte Haskins & Sells LLP, says, "For EPF members who left employment or died on or after November 1, 2023, the submission of the joint declaration form is mandatory if contributions to the EPF account are higher than the statutory limit."
Existing employees: All EPF members who are already contributing on pay exceeding the statutory limit and their employers are paying administrative charges on the higher contributions, will not have to file the joint declaration form immediately.
Viswanathan says, "The EPFO circular will provide immediate relief to two categories of existing employees. The first category of employees is those who have joined the EPF scheme with basic salary below statutory wage limit (currently Rs 15,000 per month) and continued to contribute to the EPF account even when the basic salary exceeded Rs 15,000 per month over time. The second category is those employees who joined with a basic salary below the statutory wage limit and switched jobs over time but forgot to submit the joint declaration form. It is important to remember that an employee with a basic salary exceeding the statutory wage limit will have to submit the joint declaration form at the time of joining a new job."
While the EPFO's circular covers both these categories of employees, they are not required to submit the joint declaration form immediately.
EPFO's new joint declaration format
The EPFO, in the same circular, has provided a new format for the joint declaration form for all EPF members.Viswanathan says, "The EPFO circular has clarified that the joint declaration form must be submitted when an individual joins the EPF scheme for the first time and their basic salary exceeds the statutory limit (currently Rs 15,000 per month) to contribute (to the EPF account) on such (higher) basic pay. Further, it appears that an existing EPF member at the time of switching a job must also submit the joint declaration form with the new employer, provided their basic salary exceeds the statutory limit. The joint declaration form must be submitted every time an existing EPF member switches his or her job with basic pay exceeding the statutory limit."
What EPF member should do now
The EPFO has started sending SMSes to the members stating: "Exciting news! EPFO has rolled out a new Joint Declaration functionality for its members. Easily update your details with this user-friendly feature. Check it out today! - Team EPFO". This gives an indication that even the existing members should file this joint declaration.
Viswanathan says, "It is advisable for eligible EPF members to start submitting joint declaration forms to avoid any issues at the time of EPF claim processing in the future."
Any change in their job status will make the submission mandatory.
The EPFO's January 30 circular applies to all new cases prospectively. So, employees who have joined the EPF scheme after this date must submit the form as soon as possible.
What are the EPF scheme rules?
According to EPF scheme rules, an employee will automatically be eligible to join the EPF scheme if his or her monthly basic salary does not exceed Rs 15,000. If the monthly basic salary of an employee exceeds Rs 15,000 at the time of joining the EPF scheme, the employer and employee must jointly submit the declaration form.
The EPF scheme rules were amended via a notification in August 2014 (effective from September 1, 2014). The statutory wage limit was hiked from Rs 6,500 to Rs 15,000 per month.
Further, a restriction was placed on who is eligible to join the EPS from September 1, 2014. An EPF member is eligible to join the EPS if, at the time of joining the provident fund scheme, the monthly basic salary does not exceed the statutory wage limit (currently Rs 15,000). If the basic salary of an employee at the time of joining the provident fund scheme exceeds the statutory wage limit, then he or she will not be eligible to join the pension scheme.
Under the EPF scheme, both the employer and employee make a matching contribution of 12% of their basic salary to the EPF account. The 12% contribution of an employee goes into the EPF account. This contribution is eligible for Section 80C deduction under the Income Tax Act. Out of the employer's 12% contribution, 8.33% contribution goes into the EPS. This EPS contribution is calculated at 8.33% on the basis of actual basic pay or a maximum basic pay of Rs 15000 in case the actual basic pay exceeds this limit.
Therefore, currently, Rs 1,250 (8.33% of Rs 15,000) is the maximum amount deposited from the employer's contribution to the pension account. The balance of the employer contribution, including 3.67%, is deposited to the provident fund account. The employer's contribution to the EPF account is not taxable at the contribution stage. However, no deduction under Section 80C is available for the employer's contribution to the EPF account.
This story originally appeared on: India Times - Author:Faqs of Insurances
