·Millions of people lost their jobs due to the Corona epidemic and lockdown, facing severe financial crisis.
· The money of the Employee Provident Fund is their last hope and it is also being used extensively.
·The government has also asked the EPFO to expedite the release of PF money.
·The department is also doing commendable work in this direction.
According to the Economic Times report, in the current year 2020- from April to July, 80 lakh subscribers have withdrawn 30 thousand crore funds from Employee Provident Fund. EPFO manages funds of around 10 lakh crores and has a subscriber base of around 6 crore people. Regarding the spike in withdrawal, the department says that this will affect their earnings in the current financial year.
What is EPFO?
The Employees’ Provident Fund (EPF) is a savings tool for the workforce. It is a scheme managed under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, by the Employees’ Provident Fund Organisation (EPFO).
Under the EPF scheme, an EPMLOYEE has to pay a certain percentage from his pay and an equal amount is contributed by the employer. The employee gets a lump sum amount (which includes his own and employer’s contributions) with interest upon retirement or two months after switching jobs.
The EPF scheme basically aims at promoting savings to be used post-retirement by various employees all over the country.
Why are people withdrawing money from their EPFO?
A special Covid window for withdrawals was announced by Hon’ Finance Minister Nirmala Sitharaman soon after India declared a nationwide lockdown in late March to contain the spread of the pandemic.
The Ministry of Finance had declared in March that the EPFO subscribers can withdraw up to 75 percent of the amount or three months of the wages, whichever is lower, from their EPF accounts.
The amount withdrawn by EPFO subscribers exceeded the usual outgo recorded during the period, which could be due to layoffs, pay cuts and medical expenses, says their reports.
Increase in Unemployment, Increase in withdrawal.
EPFO officials said the gigantic figure is between the third week of April till mid-July. Under normal circumstances, such a large fund is not withdrawn in such a short time. This has happened because lakhs of people have lost their jobs or these expenses have been spent on salary cuts and medical expenses, says EPFO officials.
Maximum Amount under the title- Medical Expenses
According to the report, 30 lakh subscribers have withdrawn Rs. 8,000 crores under the Covid window. 50 lakh subscribers have withdrawn Rs 22,000 crore towards medical expenses. Officials say that the number of subscribers withdrawing very soon will reach 10 million.
Is EPFO Common Man’s only Aid?
The salaried people, in the covid-19 pandemic situation, have to face the cuts in Work from home pay. Plus, the lockdown in the initial stages has forced all the food items to run short due to scramble of the consumer’s over stocking of staple food items. In this chaos, the monthly budget of a common household has gone out of control. Further, all the educational institutions have demanded the parents to remit school fees, as the schools started the online teachings. The lower middle-class and middle-class are compelled to tap the EPF for all the emergency financial assistance.
How will this affect our Nation’s Economy?
EPFO works under the direct jurisdiction of the government and is managed through the Ministry of Labour and Employment.
The contributions earn a fixed level of interest set by the EPFO. The amount of interest to be received on the deposit along with the total accumulated amount is totally tax-free, i.e. the employee may withdraw the entire fund without worrying about paying any kind of tax on it.
The interest earned is directly transferred to the Employees’ Provident Fund account and is calculated depending upon the rate which is pre-decided by the Government of India along with the Central Board of Trustees (CBT). The CBT administers the Act.
The transferred interest is summed up with the next month i.e. April’s balance and is then again used for calculation of the interest, hence forming an important part of our economy.
Withdrawal amount of the Previous Financial Year:
If we look at the old EPFO withdrawal figures, a total of Rs 72 thousand crore was withdrawn in the financial year 2019-20. In the current financial year, 30 thousand crore rupees have been withdrawn in just four months.
What will be the scenario in the near future?
It is a known fact that, Corona cases are increasing steadily. As matters are increasing, the economic crisis is getting deeper. Based on the such grave scenarios, in the coming days there will be more and more rapid withdrawal from EPFO funds. It is expected that the number of withdrawals will reach 10 million in the coming years.
What can be done to recover from this economic crisis?
Provision of unemployment insurance or loss of job insurance can be part of contribution towards common man’s insurance policies. A Universal basic wage based on limited unemployment allowance for 6-12 Months is needed subject to earnings of a particular household.
It should cover regular, contract and daily rates workmen’s as well as the lower middle class and middle class employees working day in and day out to provide food on the table for their families.