However, the employer will continue to contribute his share of the PF irrespective of the worker opting not to pay his contribution.
"...For employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer's contribution," Finance Minister Arun Jaitley said in his budget speech.
The budget proposals, however, did not specify the salary threshold for this.
At present, all employees are required to pay 12 per cent of basic wages including basic salary and DA as contribution to the PF. The employers make a matching contribution, with 8.33 per cent going towards pension, 0.5 per cent towards Employees Deposit Linked Insurance (EDLI) scheme and remaining towards provident fund.
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This facility will also be available to senior citizens.
As per existing provisions, in respect of such pre-mature withdrawal, the trustees of the recognised provident fund (trusts), shall deduct tax as computed at the time of payment.
Under the existing provisions EPF & MP Act, it has been provided that withdrawal shall be taxable if the employee makes withdrawal before continuous service of five years (other than the cases of termination due to ill health, closure of business, etc) and does not opt for transfer of accumulated balance to new employer.