The Employees’ Provident Fund Organisation (EPFO) has decided to discontinue the deductions under the Group Insurance Scheme (GIS) with immediate effect for government employees who joined service after September 1, 2013.
“It is directed to discontinue the deductions under GIS wherever being made from the salaries of all employees who joined EPFO after 01.09.2013 immediately,” said EPFO in a circular dated June 21, 2024.
All government employees are not impacted by this decision
The impact of this circular is restricted to those government employees who joined the service after September 1, 2013. According to Akhil Chandna, Partner, Grant Thornton Bharat, a tax and business consultancy company, “Employees who joined EPFO after 01 September 2013 would not be covered under the GIS anymore and any deduction already made from their salaries would be refunded to them.”
Government employees who are affected will receive a windfall gain and increased salary
Experts say that net in-hand salary may increase for government employees for whom GIS is discontinued.
“The discontinuation of deductions under GIS will indeed increase the take-home salaries. Previously, the deductions were made from employees’ monthly salaries as per their pay-scales to fund the GIS. With this scheme no longer in effect for these specified employees, the deductions will stop, and they will receive higher net-in-hand salary,” Chandna says.
While the net-in-hand salary may increase, the exact amount is still unknown, and it is uncertain whether it will significantly affect your salary.
“Without the deduction for GIS, the take home salary will increase for the specified employees. However, the proof of the pudding is in eating it and time will tell whether the monthly deductions which are a small percentage of salary each month and finally amounting to a large lump sum through the years at the time of retirement, would make any significant difference to the monthly take home salary of eligible employees,” says Jasmine Damkewala, Senior Partner at Circle of Counsels (Law Firm).
In addition to the increase in salary, these employees will also receive a lump sum amount in lieu of the deductions made after September 1, 2013, or joining, whichever is earlier. “Further the deductions done till now in respect of such cases are to be refunded back to the employees,” the EPFO circular said.
What is the GIS scheme by EPFO and what are the benefits it offers?
The Central Government Group Insurance Scheme (GIS) came into force on January 1, 1982, under the name Central Government Employees’ Group Insurance Scheme 1980.
According to Damkewala, “The GIS is a social welfare scheme under the Employees Provident Fund Organization (EPFO) being run under the Ministry of Labour and Employment, Government of India to ensure ease of living for members and pensioners under a social security system tailored to provide socio-economic protection to workers and their dependants in case of mishaps. The scheme encompasses twin purposes, namely, (a) insurance; and (b) savings.”
Who are not eligible for GIS?
According to Damkewala, contract employees, casual labourers, part-time and ad-hoc employees, persons recruited in the Central Government after attaining the age of 50 years or persons on deputation from State Government Public Sector Undertakings or other autonomous organisations locally recruited staff in the missions abroad are not covered by the GIS scheme.
Has the GIS scheme been discontinued?
Experts say that it cannot be said that the GIS scheme itself has been discontinued as the notification dated June 21, 2024 mentions only about the discontinuance of deductions under GIS scheme for specified employees.
According to Nilesh Tribhuvann, Managing Partner White & Brief – Advocates & Solicitors, “At this point, the directive specifically addresses the discontinuation of GIS deductions for employees who joined the Employees’ Provident Fund Organization (EPFO) after September 1, 2013. There are no changes or discontinuation directives for employees who joined before this date. The existing GIS scheme may continue to apply to them as per the current guidelines.”
“Under the Notification of June 21, 2024, the directive to discontinue is for discontinuance of deductions but it does not explicitly state that the GIS is discontinued. Accordingly, as such it is at present difficult to comment on whether there is an amalgamation or floating deduction on a standard cut or an altogether scrapping. The internal Office Notes and comments have to be perused before the reasoning or objective is determined,” says Damkewala.
Experts say that the GIS scheme offered significant benefits to employees. According to Himesh Thakur, Counsel, PSL Advocates & Solicitors, “Keeping aside the risk factors associated with the GIS, it can’t be denied that the GIS is necessary for employees and their families as it provides them security and certainty. It is an admitted position that the benefits and number of schemes at the disposal of an employee have increased but no parallel scheme provided can be categorised as a substitute for the GIS.”
