- Date : 01/08/2022
- Read: 3 mins
The inclusion of self-employed people in the EPF scheme will provide social security benefits to more than 15 million self-employed people.
The Government of India is planning to extend the Employees’ Provident Fund (EPF) scheme of the Employees’ Provident Fund Organisation (EPFO) to cover self-employed people.
The move will impact two categories of people:
- When an existing salaried person transitions to self-employment, they will be able to continue with their PF contributions even when they are self-employed.
- Existing self-employed people who are out of the purview of the EPF scheme will be able to join it and enjoy the EPF benefits.
The proposal to extend the EPF scheme to self-employed people is at the proposal stage. The Central Board of Trustees of the EPFO will decide on the proposal. Under the Social Security Code, the government is empowered to frame a new social security scheme for unorganised workers. But, if the code implementation is delayed, the government can amend the EPF Act and include self-employed people in the EPF scheme.
What happens to the EPF membership of an existing employee when they become self-employed?
As per the existing rules, there is no restriction on the period for EPF membership. Even after leaving an existing organisation, an EPF member can continue with their membership. However, if a member does not make any contribution to their EPF Account for three consecutive years, their account will not earn any interest after three years from the stopping of employee contribution.
Though still in the proposal stage; when an existing employee becomes self-employed, they will be able to continue with their Employee Provident Fund membership. The EPF payment contribution amount will depend on what the government decides. It may be 10% of the income or something else. There may also be an income ceiling on which the rate of contribution will depend. As per existing rules, the wage ceiling for calculating the EPF contributions is Rs 15,000 per month.
Who will manage the contributions of self-employed people?
Contributions from the self-employed may or may not be a part of the existing fund that has contributions from employees and their employers. If not, the contributions of self-employed people may be managed through a separate fund. In that case, the interest paid to self-employed people may also be different from the existing EPF interest rate.
As a self-employed individual, should you enroll for EPF?
The existing employee PF scheme is one of the best schemes for building a retirement corpus. As and when the government rolls out EPF details for the self-employed, you may consider the scheme rules and accordingly decide to apply for an EPF account. However, as a salaried or self-employed person, you shouldn’t depend only on the EPF scheme for your retirement. You should have a diversified investment portfolio with EPF, SIP in equity mutual funds, National Pension Scheme (NPS), etc., to build your retirement corpus.