Provident Fund rate reduced to 10%

The Ministry of Labour & Employment, vide Notification No. 1513(E), has notified to include private establishment and companies under the definition of Schedule II of The Provident Fund & Miscellaneous Provisions Act, 1952.

To understand the definition of Schedule II, please refer the notification No.320 (E), dated 10th April 1997, which defines schedule II companies as:

  • Any establishment in which less than 20 persons are employed
  • Sick industries as defined by the Sick Industrial Companies Act, 1985
  • Any establishment whose cash loss is equal to or exceeds its entire net worth
  • Any establishment in the industry of Beedi, Jute, Brick, Coir and Gaur Gum factories

As per the new notification, in SCHEDULE II, after clause (iv), a new clause (v) would be added stating “Any establishment, other than Central Public Sector Enterprises and State Public Sector Enterprises and other establishments owned by, or under the control of the Central Government or the State Government, as the case may be, in respect of wages payable by it for the months of May, June and July, 2020.

For any company or establishment falling under schedule II, the reduced rate of 10% would be applicable as per the EPF Act. Thus, for the month of May, June and July 2020, revised PF contribution would be applied and calculated.

Notification No. 1513 (E): https://www.epfindia.gov.in/site_docs/PDFs/Circulars/Y2020-2021/GN_for_reduction_in_EPF_contribution_rate.pdf

Notification No. 320 (E): Link (see table below)

Please note this is optional and the company may or may not follow the reduced rates. In case the company plans and decides otherwise, the below 3 cases may arise:

Case 1: Employer contributing 10% and employee contributing 12%
Case 2: Employer contributing 12% and employee contributing 10%
Case 3: Employer contributing 12% and employee contributing 12%

Also, there have been many enquiries around the treatment of the 2% of employer’s share if the company decides to contribute at 10%. Let us understand the same through the following cases.

Case 1: The Employer contribution is part of CTC (Cost to Company).

Then the 2% of employer + 2 % of employee contribution would be paid in hands of the employee. Thus only 2% of employer contribution would be added back to the salary as an additional income and taxed accordingly.

Case 2: The employer contribution was not part of CTC.

Then the 2% of employer contribution would be company’s benefit and saving. The company can take a call on whether to add the 2% as an additional income for the employees or use the same to enhance liquidity at their end.

The new rate of PF contributions:

  EPF Account No. 1 EPS Account No. 10 EDLI Account No. 21 Admin Account No. 2
Employee 10%      
Employer **1.67% 8.33% 0.5% 0.5% (Min.Rs.500)
 

Advisory note on “no salary reduction” revoked by government

Under these critical times, the Ministry of Labour and Employment issued an advisory, directing all companies to:

  • Not cut salaries,
  • Terminate or lay off their employees

To read further, please refer the following link: https://labour.gov.in/sites/default/files/Central_Government_Update.pdf

Owing to various hardships faced, many business organizations had moved to the Supreme Court, challenging this order. In the light of on going social and economic conditions. The Supreme Court has barred the government from taking any action against companies not following the Home Ministry’s order on wage payment. Thus, following the order, the advisory issued has been withdrawn on 18th May 2020.

 

New Form 26AS format released

Budget 2020, It was declared that a new and advanced format for Form 26AS will be released which, in addition to existing details, will also have information of shares and mutual fund transactions and the capital gains and losses on house property. This new form would be called as “Annual Information Statement” (AIS)

The new information to be captured under this new form are as below:

SI Nature of Information
1. Information relating to tax deducted or collected at source
(TDS or TCS)
2. Information relating to specified financial transaction (SFT)
3. Information relating to payment of taxes
4. Information relating to demand and refund
5. Information relating to pending proceedings
6. Information relating to completed proceedings
7. Any other information in relation to sub-rule (2) of rule 114-I
 

The new form will come into effect from June 1, 2020.

To read further, please refer the official link: https://www.incometaxindia.gov.in/communications/notification/notification_30_2020.pdf

 

ITR due date has been extended

Most will have noted the due date for Individual ITR filing has been extended to 30 th November 2020.

As the government has been working towards improving the transparency of records and thus have introduced new ITR forms for AY 2020 21 filling. The below additional details under ITR compliance:

  1. Passport details are to be provided for ITR 1 & ITR 4
  2. All cash deposits (if the total amount exceeds 1 crore) need to be provided for ITR 4
  3. If an individual has spent Rs.2 Lakh or more for any foreign travel, then the same must be disclosed
  4. If the electricity bill for the year has exceeded Rs.1 Lakh then the same must be informed to the department
  5. Investment done during April 2020 to June 2020 must be separately shown, if the individual is claiming the benefit in the previous FY ending on June 30th
 

No Penalty on Delayed PF Remittance

With disruptions due to the pandemic wherein companies are distressed and unable to function normally and pay the statutory contributions in time, Employee’s Provident Fund Organization (EPFO) has decided not to impose any penalty for delay in payment of employees’ provident fund contributions by firms during the nationwide lockdown.

Thus, such delays due to operational or economic reasons shall not be treated as default and penal damages should not be levied for such delay.

To read further please find attached notification: https://www.epfindia.gov.in/site_docs/PDFs/Circulars/Y2020-2021/Relief_in_pd_due_2_covid.pdf

 

Monthly Calendar

TDS
Particulars Due Date
TDS payment for May 7 June 2020
TDS return for January - March 30 June 2020
Provident Fund
Particulars Due Date
Payment for May 15 June 2020
Employee State Insurance
Particulars Due Date
Payment for May 15 June 2020
Professional Tax
State Payment Due Date
Andhra Pradesh, Madhya Pradesh & Telangana 10 June 2020
Assam, Odisha, Maharashtra 30 June 2020
Gujrat 15 June 2020
Karnataka 20 June 2020
West Bengal 21 June 2020
Labour Welfare Fund (LWF)
Kerala (For S&E) (Worker Welfare Fund) 5 June 2020
 
 

Sources: Government Notifications, Circulars, Press Releases.

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