RAS question
Employees' Provident Fund (EPF) contribution rate is:
Correct answer: (A) 12% each by employer and employee.
The standard Employees' Provident Fund contribution is 12% of basic wages plus dearness allowance from the employee and 12% from the employer.
Explanation
EPF is a payroll-linked social security contribution managed by EPFO. In the standard case, both sides contribute 12% of basic wages plus dearness allowance: the employee's 12% goes to EPF, while the employer's 12% is split between pension and provident fund components. EPFO's contribution-rate note shows the employee contribution as 12% or 10%, and shows the employer provident fund share as the difference between the employee share and the 8.33% pension contribution. Out of the employer's 12%, 8.33% goes to the Employees' Pension Scheme and 3.67% remains in EPF. The stated FY24 EPF interest rate was around 8.25%, but the contribution rate is 12% each.
Why the other options are wrong
- (B) 15% each overstates the statutory contribution rate; the standard EPF rule and EPFO contribution table support a 12% standard employee share, not 15%.
- (C) 8% each confuses the standard EPF contribution with older or separate contribution figures; the standard EPF contribution is 12% each by employer and employee.
- (D) 10% each is listed by EPFO for specified cases, but the standard EPF rate is 12% each.
Concept
This tests the Indian Economy syllabus area on labour welfare and social security institutions. RAS repeats such facts because EPF links wages, statutory deductions and state-backed worker protection in one compact policy area.