The Employees’ Provident Fund Organization (EPFO) has significantly reduced the penalty charges for employers who delay or default on depositing contributions towards provident fund, pension, and insurance. Previously, the maximum penalty was 25% per annum, which has now been reduced to 1% per month or 12% per annum.
Details:
The Ministry of Labour and Employment issued a notification on Saturday stating that the penalty for employers will be charged at 1% per month or 12% per annum on the outstanding contribution under three schemes: Employee Pension Scheme (EPS), Employee Provident Fund (EPF) Scheme, and Employees’ Deposit Linked Insurance (EDLI) Scheme.
Previous Penalty Structure:
| Delay Period | Penalty Rate (Per Annum) |
|---|---|
| Up to 2 months | 5% |
| More than 2 months and up to 4 months | 10% |
| More than 4 months and up to 6 months | 15% |
| More than 6 months | 25% |
New Penalty Structure:
| Delay Period | Penalty Rate (Per Month) | Penalty Rate (Per Annum) |
|---|---|---|
| Any delay | 1% | 12% |
Implications for Employers:
- The new regulation significantly lowers the penalty amount for employers, reducing the burden of penalties more than double compared to the previous rates.
- Employers now have to pay 1% per month as a penalty for delays, which translates to a 12% annual rate, providing a considerable relief.
Key Takeaways:
- Reduced Penalty: EPFO has reduced the penalty charges for delayed contributions to 1% per month or 12% per annum.
- Applicable Schemes: This applies to Employee Pension Scheme (EPS), Employee Provident Fund (EPF) Scheme, and Employees’ Deposit Linked Insurance (EDLI) Scheme.
- Significant Relief: The new penalty rates are significantly lower than the previous rates, offering substantial relief to employers.
Important Information:
| Aspect | Details |
|---|---|
| Previous Maximum Penalty | 25% per annum |
| New Penalty Rate | 1% per month or 12% per annum |
| Affected Schemes | EPS, EPF, EDLI |
| Implementation Date | Effective from the date of the notification |
| Employer Obligation | Submit the previous month’s return by the 15th of every month to avoid penalties |