Employees’ Provident Fund Organization (EPFO) has recently proposed a change in salary limit, which will benefit millions of employees. Under this change, there is a plan to increase the salary limit of EPF and EPS (Employees’ Pension Scheme from ₹ 15,000 to ₹ 21,000. This step has been taken with the aim of increasing the financial security of the employees and strengthening their retirement funds.
Let’s know in detail about this new scheme, its benefits, effects and other important aspects.
EPFO Pay limit change: main details
| Parameter | Description |
| Current pay limit | ₹ 15,000/month |
| Proposed pay limit | ₹ 21,000/month |
| Additional Cover Employees | ~ 7.5 million |
| EPS contribution of employer | Increased from ₹ 1,250 to ₹ 1,749/month |
| Retirement corpus effect | ~ Possible growth up to ₹ 1 crore (in 35 years) |
| Minimum pension | Demand to increase from ₹ 1,000 to ₹ 7,500 |
| Government’s purpose | Increased social security coverage and improvement in retirement savings |
Why change in EPFO pay limit?
Currently, only those employees whose monthly income is ₹ 15,000 or less under the EPF. This limit was fixed in 2014. But now it has been proposed to increase it keeping in mind the changing inflation and increasing salary.
The main objectives behind this change are:
- To expand social security coverage.
- To improve employees’ pension and retirement funds.
- To reduce the influence of inflation.
Who will benefit from this change?
Employee
- Those whose salary is more than ₹ 15,000 but ₹ 21,000, will now get the benefit of EPF and EPS.
- The retirement fund will be large, which will make the future financially safe.
- The pension amount received under EPS (Pension Scheme) will increase.
employer
- Employers will have to increase their contribution, which will increase their financial responsibility.
- They have to update their payroll system so that the new salary limit can be implemented.
Impact on pension and PF
Pension calculations
According to EPFO’s new rules, pension is the formula of calculation:
= (×)) 70
= (×)) 70
Example:
- current limit:
If an employee has a salary of ₹ 15,000 and has served 35 years:
15,000 \ Times 35 \ div 70 = ₹ 7,500/month $ $
- New proposed limit:
If the salary turns ₹ 21,000:
21,000 \ Times 35 \ Div 70 = ₹ 10,050/month $$
This change will increase the monthly pension of employees by about ₹ 2,550.
Pf contribution
- The contribution of both employee and employer will increase as it is based on salary.
- This will also increase the retirement corpus of employees.
Other benefits of EPFO’s new rules
- PF withdrawal facility from ATM: Now employees will be able to withdraw money directly from their PF account through ATM.
- Get pension from any bank: Pensioners can now take their pension from any bank branch.
- Improvement in investment options: EPFO is now focusing on investment options like ETF (Exchange Traded Funds) which can improve returns.
Possible challenges
- Financial pressure on employers: Employers will have to increase their contribution that may increase their costs.
- Employees’ take-home salary may decrease: PF contribution can reduce the monthly tech-hom salary of employees.
- It may take time to implement new rules: companies will take time to update their system.
Experts’ opinion on EPFO pay limit change
Experts believe that this step will prove to be long -term beneficial for employees. However, it can have a financial impact on employers.
Other than this:
- This step will motivate employees to save more.
- Will provide more financial security to pensioners.
conclusion
This change proposed by EPFO can prove to be important for both employees and employers. This will not only strengthen the retirement fund but also improve social security. However, there are some challenges with it which is necessary to keep in mind.
Disclaimer:
This article has been written with the aim of providing information. These proposals have not yet been fully implemented by EPFO. Please wait for official announcements and updates.
