Government Reduces Penalties for Defaulting on Contributions to EPFO Schemes

18 Jun, 2024

On June 15, 2024, the Employees’ Provident Fund Organisation (EPFO) announced a reduction in penal charges for employers who default or delay contributions to the Employees’ Provident Fund (EPF), Employees’ Pension Fund, and Employees’ Deposit Linked Insurance Scheme. According to an official release from the Ministry of Labour and Employment, the new penalty is set at a uniform rate of 1 percent interest per month on the arrears of the contribution amount for each of the three schemes. This 1 percent monthly interest translates to 12 percent annually, a significant decrease from the previous maximum penalty rate of 25 percent per annum on arrears. 

The official release stated, "If an employer defaults on any contribution payments to the Employees’ Pension Fund or any charges under the Act or Scheme, the Central Provident Fund Commissioner is authorized to recover damages at a rate of one percent of the arrear per month or part thereof."

Prior to this notification, the penalties were structured differently: a 5 percent annual interest for defaults up to two months, 10 percent for defaults between two and four months, 15 percent for defaults lasting four to six months, and 25 percent for defaults exceeding six months.

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Publisher: Monisha Ponnappa | Bizprout Expert Systems Private limited