Social security contributions in detail

The employer must deduct the social security (i.e. ‘Employees’ Provident Fund’) contribution from the employee’s salary and pay this, along with the employer’s contribution, to the relevant government department in accordance with law. Part of the contribution made under the provident fund scheme goes to a pension scheme.

An employee working for an employer to which provident fund law applies and earning wages up to INR 15,000 per month, has a statutory entitlement to benefits. Employers and employees are required to contribute to the statutory fund an amount equal to 12% per month of the employee’s basic salary. In addition, the employer is required to contribute 0.5% of an employee’s basic salary every month towards the Employees’ Deposit Linked Insurance Scheme, 0.1% towards administrative charges for that insurance scheme, and 0.5% towards administrative charges for the Employees’ Provident Fund.

Employees may voluntarily choose to contribute in excess of the prescribed threshold of INR 15,000; however, once they have volunteered for this coverage, they cannot withdraw their consent at a later stage. There is no obligation on the employer to contribute over and above the INR 15,000 threshold, but it may at its sole discretion agree to do so.

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Author: Kochhar & Co. 

Date: April 2020

Note: All currency conversions into EUR were made on 1 February 2019, using a mid-market rate.