The government is exploring ways to provide comprehensive social security benefits to EPFO members. Proposed changes include converting PF funds into pensions, deferred pension options, lump sum deposits in PF accounts, and enhanced IT systems. These measures aim to ensure better financial security post-retirement.
Key Proposals for EPFO Members
- Convert PF Funds into Pensions
- Employees may get the option to transfer their PF funds to a pension fund at retirement.
- This will enable retirees to receive higher pension amounts, enhancing financial stability.
- Interest on PF Post-Retirement
- Retirees may choose to delay their pension start date (e.g., from 58 to 60 or 65 years).
- Interest will continue to accrue on the pension fund during the deferment period, resulting in higher pension payouts.
- Lump Sum Contributions
- EPFO members might soon be allowed to deposit additional lump sum amounts into their PF accounts beyond the regular monthly contributions.
- This will increase the total fund under social security, leading to larger pensions.
- Income Tax Benefits on Additional Contributions
- Discussions with the Finance Ministry include offering tax exemptions on lump sum contributions.
- This could encourage individuals to deposit savings into their EPF accounts, taking advantage of higher interest rates compared to bank FDs.
- Enhanced IT System for EPFO
- EPFO’s new IT System 3.0, expected by June 2025, aims to offer banking-like services for smoother fund management.
- The system will improve accessibility and streamline operations.
Focus on Social Security Expansion
The Ministry of Labor and Employment is working closely with EPFO to broaden the scope of social security benefits. These discussions may lead to announcements in the upcoming budget or later in the year.
Tax Exemption on HRA
For employees claiming House Rent Allowance (HRA), the tax exemption is calculated as the least of the following:
- Actual HRA received from the employer.
- 50% of basic salary + dearness allowance (for metro city residents) or 40% for non-metro residents.
- Rent paid exceeding 10% of basic salary + dearness allowance.
By addressing EPFO and HRA benefits, the government aims to enhance financial security for employees and retirees alike.