EPF Act: The Central Government of India is set to increase the EPF bar from 15,000 per month in salary to 21,000. This act can help the employees. Last time in 2014, the government increased the bar from 6,500 to 15,000. Now, according to the new proposal, 15,000 basic to increase 21,000 income per month.
As per the Provident Fund Act, if the basic salary of an employee exceeds Rs 15,000 per month, he is not eligible to join the EPS even if he is part of the EPF scheme. Now, if the salary limit is increased to Rs 21,000, then employees joining the EPF scheme with a basic salary of more than Rs 15,000 will also be eligible to join the EPS. After the proposal is approved, individuals with a basic monthly salary of Rs 21,000 will be able to enroll in the EPS scheme. This change will also pave the way for these employees to get eligible for pension on retirement.
However, employees should note that if they become an EPS member, the employer’s contribution to the EPF account will reduce. This is because currently both the employee and the employer’s contribution is credited to the EPF account. This makes the EPF corpus larger. Once these employees join the EPS scheme, 8.33% of the employer’s 12% contribution will go into the EPS account. The increase in EPF salary limit will also increase the EPS contribution.
At present, a contribution of Rs 1,250 is deposited in the EPS account of the employee every month. The current EPS law allows an individual to deposit a maximum of Rs 1,250 in an EPS account. EPS contribution is calculated on the employer’s contribution to the wage ceiling limit. That is, it is 8.33% of Rs 15,000. The balance of the employer’s contribution is credited to the EPF account of the employee along with his/her own contribution.
What is the calculation
The salary limit for EPS contribution is Rs 15,000. Therefore, the EPS pension contribution is limited to Rs 1,250. The balance of Rs 1,750 (Rs 3,000 minus Rs 1,250) goes to the EPF account. If the wage ceiling is increased to Rs 21,000 per month, the EPS pension contribution becomes Rs 1,749 per month. The remaining Rs 1,251 (minus Rs 1,749 from Rs 3,000) will be deposited in the EPF account.If the salary threshold limit is increased to Rs 21,000, the pension amount received will also increase. The formula to calculate EPS pension is as follows: Number of years of pensionable service x Average monthly salary for 60 months)/70.