The central government is reportedly set to introduce EPFO 3.0, an updated version of the Employees’ Provident Fund Organisation (EPFO) system, designed to provide more flexibility and enhanced benefits for subscribers. This follows the recent launch of PAN 2.0 and reflects the government’s ongoing efforts to modernize financial systems.
Key Features of EPFO 3.0:
Removal of the 12% Cap on Employee Contributions:
- Current Limit: Employees can contribute up to 12% of their basic salary and dearness allowance to the Provident Fund (PF).
- Proposed Change: The 12% cap on employee contributions may be removed, allowing subscribers to contribute higher amounts based on their personal savings goals.
- Employer Contributions: These will remain fixed and based on the employee’s salary, ensuring no additional financial burden on employers.
ATM-Based PF Withdrawals:
- Simplified Withdrawals: Subscribers may be able to withdraw PF amounts directly via ATMs.
- PF Withdrawal Cards: The Labour Ministry is working on issuing dedicated cards for ATM withdrawals, expected to be operational by mid-2025 (May-June).
- Impact: This initiative aims to make PF withdrawals more accessible and convenient, reducing dependency on paperwork and online portals.
Flexibility for Additional Contributions:
- Employees could contribute additional amounts to their PF accounts at any time, promoting better financial planning and savings.
- These extra contributions may be converted into higher pensions, enhancing long-term benefits.
EPS-95 Overhaul: Enhancing Pension Benefits
The government is also considering revising the Employees’ Pension Scheme 1995 (EPS-95):
- Direct Employee Contributions: Employees might soon be allowed to contribute directly to EPS-95, increasing their pension corpus.
- Current System: Presently, the entire 12% employee contribution goes to the EPF, while the employer’s 12% contribution is split between EPS-95 (8.33%) and EPF (3.67%).
- Potential Impact: Direct contributions could lead to higher pension payouts, benefiting retirees in the long run.
Wage Ceiling Increase for EPF Contributions:
- Current Limit: â‚ą15,000 (revised in 2014 from â‚ą6,500).
- Proposed Change: The ceiling might be raised to â‚ą21,000, providing better retirement benefits for employees.
- Significance: This would be the first increase in a decade, ensuring that more employees can contribute towards a secure retirement.
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