EPFO may extend PF benefits to self-employed, gig workers under universal scheme
The Employees’ Provident Fund Organisation (EPFO) is preparing a framework to extend provident fund benefits to self-employed individuals, gig workers, workers in the unorganised sector and employees of exempted establishments, according to a report byThe Times of India (TOI).
The proposal aims to create a universal provident fund (PF) scheme that would allow individuals currently outside the EPFO network to voluntarily contribute a portion of their income towards retirement savings. However, the government and EPFO have not made any official announcement on the proposed scheme.
What does the proposed scheme offer?
According to the TOI report, the accumulation phase of the proposed scheme would be modelled on the existing EPF system. Subscribers could choose how frequently they contribute, ranging from daily to annual contributions, while the accumulated corpus would earn annual interest.
The report said the proposed scheme is also expected to offer tax benefits similar to those available under EPF. It added that annual contributions of up to ₹2.5 lakh and the interest earned on them could be exempt from tax. These features, however, have not been officially notified.
TOI further reported that EPFO is considering changes to the withdrawal phase. Instead of requiring subscribers to withdraw their corpus at retirement, members may be allowed to retain their savings with EPFO and withdraw them gradually through a systematic withdrawal plan (SWP)-like mechanism. Under such a model, retirees could decide the amount and timing of periodic withdrawals based on their financial needs.
The report added that this option could also be extended to existing EPF subscribers.
Proposal still under discussion
The proposal comes as the government looks to expand social security coverage beyond workers in the organised sector. The Code on Social Security, 2020 empowers the Centre to frame social security schemes for gig workers, platform workers, unorganised workers and other eligible categories. However, no universal EPF scheme has been notified so far.
According to the TOI report, EPFO has floated a tender to design and develop the IT architecture required for such a scheme, even though it has not yet received a formal mandate from the government.
The report said the proposed scheme would be entirely self-funded, unlike the Pradhan Mantri Shram Yogi Maandhan Yojana, under which the Centre contributes an equal amount towards the subscriber’s pension savings.
Government officials quoted by TOI said discussions are at an initial stage and various international models, including Singapore’s retirement savings framework, are being studied before the proposal is finalised.
If approved, the scheme could significantly expand EPFO’s reach by bringing millions of freelancers, consultants, gig workers and self-employed individuals under a formal retirement savings framework for the first time.
