The Employees' Provident Fund Organisation (EPFO) has lowered the penal charges for employers who fail to deposit provident fund, pension, and insurance contributions on time. This new measure aims to make the penal charges uniform, regardless of the default duration.

According to a notification issued by the Ministry of Labour on Saturday, employers will now be charged a penalty of 1% of the arrears per month, or 12% annually, for defaults across three schemes: the Employees' Pension Scheme (EPS), the Employees' Provident Fund (EPF) Scheme, and the Employees' Deposit Linked Insurance Scheme (EDLI) under the EPFO. Previously, the highest penalty rate was 25% per annum.

These new provisions take effect immediately from the date of notification.

Before this change, penal charges varied based on the default period:

5% per annum for defaults less than two months
10% for defaults of two months and above but less than four months
15% for defaults of four months and above but less than six months
25% for defaults of six months and above
The revised penalty structure will significantly reduce the liability for employers who default over longer periods, while having minimal impact on those defaulting for less than four months.

Employers are required to file returns with the EPFO by the 15th of each month for the previous month. Any delay beyond this deadline is considered a default.

Currently, of the total 12% contribution from the employer:

8.33% goes to the employee's pension account under EPS
3.67% goes to the provident fund account under EPF
0.5% goes to the insurance account under the EDLI scheme
The employee's entire 12% contribution is allocated to the PF account.

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