Between March and May, the government announced three crucial reforms in the Employees’ Provident Fund (EPF) scheme; taxing 60% of EPF withdrawals, barring employees from full amount withdrawals prior to retirement age, and lowering the interest rate paid on funds – only to retract them in the face of public pressure. While the government insists the proposed reforms were aimed at building a fully pensioned society by moving the EPF towards being a social security scheme, both the public and opposition remain skeptical. The fact that the EPF is often the only savings that the low wage workers manage to make complicates matters, and the proposal to tax withdrawal amounts were interpreted as an attempt by the government to snatch peoples’ money.
What is the Employees’ Provident Fund (EPF)? The EPF is a mandatory retirement benefit scheme set up shortly after India’s independence in 1952 (with amendments made in 1995), and is available to all salaried employees of India. The Employees’ Provident Fund Organization of India (EPFO) maintains the fund and any business with at least 20 employees must register with the EPFO. An employee has to contribute 12% of basic monthly pay to this account and the amount has to be matched by the employer as follows: 3.67% in the employee’s EPF account, and the rest 8.33% to the Employees’ Pension Scheme (EPS).
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