Budget 2024: Government to implement the below benefits related to the Provident Fund

In the Union Budget 2024, the Ministry of Finance has announced the following benefits with respect to Provident Fund:

1. Scheme A: This is applicable for employees joining employment for the first time in the formal sector covered by the Employees Provident Fund Organization.

• Eligible employees’ salaries should be less than 1 lakh per month. Such employees will receive one month’s wages as a subsidy, subject to a maximum of INR 15000.
• Subsidy would be directly paid to the employees by the Government, through a direct benefit transfer in 3 installments.
• Such eligible employees must undergo a compulsory financial literacy course before claiming the second installment.
• There is a cap of minimum employment period of 12 months in this category. In case of termination of the employee within 12 months, the subsidy received will have to be refunded by the employer to the Government.

2. Scheme B: Substantial employment creation in the manufacturing sector :

• Applicable for first-time employment employees being enrolled with Employees Provident Fund Organization.
• The Government will pay incentives on a specified scale directly from PF contributions to both employer and employee for the first four years of employment.
• The employer will have to refund the subsidy to the Government if the employment of first-time employees ends within 12 months of enrolment.

3. Scheme C: Benefits to employers

• This scheme applies to all additional employment created by employers, where the employee salary is within 1 lakh per month.
• Employers will receive a reimbursement of INR 3000 per month for 2 years towards each employee’s PF contributions.
• Apart from the above, the other 2 schemes that would impact PF would be the fourth and fifth schemes related to the skilling program, the upgradation of Industrial Training Institutes, and Internships in top companies. The budget details the provisions.
• For specifics on PF applicability for interns, refer to our alert shared on 3^rdAugust 2022, with respect to the applicability of PF for interns.

Our Comments:

Measures introduced by the Ministry of Finance are directed towards employment generation, with an aim to integrate more individuals into the formal economy. These measures include covering social security for such enrolled employees.

It also provides financial benefits to employees and employers in this category. In addition, it builds a strong platform for the future workforce.

Detailing with respect to the mode of availing these benefits and modalities is awaited from the respective regulators