If you have been an employee provident fund (EPF) subscriber before 2014, you can now opt for receiving a monthly pension
instead of withdrawing the accumulated corpus in one go. The Supreme Court
has directed Employees’ Provident Fund Organisation’s (EPFO) to allow subscribers to receive a pension
just like government employees do.
Many employees were not aware that EPFO
had started a pension
scheme in 1995. In this scheme, EPFO
had then said that an employer has to contribute 8.33 per cent of the basic salary
or Rs 541 a month (whichever is lower) towards Employee Pension
Scheme (EPS). This gave a limited pension
to an employee depending on the number of years he was enrolled in the scheme.
At that time, EPFO
also said that if an employee wanted a higher pension, he could increase the contribution to 8.33 per cent of the actual basic salary.
had to be intimated that the employee wants to contribute more than Rs 541 a month towards EPS.
Most employees were not aware of the provisions. On retirement, some employees asked EPFO
to commute their EPF contribution to EPS. But EPFO
declined and said that it had to be done within six months of joining the scheme. The pensioners approached the court to seek relief as the six-month timeline was not mentioned in the notification. “The Supreme Court
ruled in favour of the subscribers. The Court said that it’s a beneficial provision and EPFO
should allow its subscribers to take benefit of it,” says Kuldip Kumar, partner and leader - personal tax, PwC India. The court even allowed retired subscribers to get a pension
by paying the required amount to EPFO.
experts say that as the directive came from the Supreme Court, it’s binding on EPFO
and all those who joined EPFO
before September 1, 2014 can benefit. Those who have joined EPFO
after September 1, 2014 and have a salary
above Rs 15,000 are not eligible for a pension.
However, those starting with salaries lower than 15,000 can contribute to EPS. But the cap of Rs 15,000 will kick in when their salary
experts say that those eligible for a pension
can submit applications to EPFO
through their companies to increase the pension.
However, not all employees give their contribution to EPFO.
Some companies have their own EPF trust.
“There’s still lack of clarity whether those in private trusts would be eligible for increasing their contribution towards pension,” says Kumar. Tax
experts feel that EPFO
will soon provide clarity on this issue.