Employees and account holders of the Employees Provident Fund Organization have received positive news. The Modi administration is thinking about raising the salary cap for EPF from 15,000 to either 21,000 or 25,000 in the upcoming year 2025. If this proposal is accepted, the pension received upon retirement may also rise.
As per media reports, the Ministry of Labor and Employment is gearing up for significant alterations to the Employees’ Pension Scheme within the Employees Provident Fund Organization (EPFO), where the central government is contemplating raising the salary cap under EPF from ₹ 15,000 to either ₹ 21,000 or ₹ 25,000. Should this proposal be approved, it will mark the third rise in the contribution limits for EPF and EPS. Consequently, 75 lakh more workers will be included within this scheme. The retirement pension is also expected to rise.
Which workers will receive the advantage?
At present, the minimum basic salary threshold set by EPFO is Rs 15,000. A 12% deduction from the salary goes towards the PF account, and the company also contributes the same amount to the PF account. 8.33% of the employer’s share, that is, the contribution from the company, is allocated to the pension fund (EPS), whereas 3.67% is placed in the PF account.
If the government raises the EPF salary cap to ₹ 21,000, then workers with a basic salary exceeding ₹ 15,000 can enroll in the EPS program. This will benefit 75 lakh employees.
Should the government raise the EPF salary cap to ₹21,000, employees earning above ₹15,000 can enroll in the EPS scheme.
Previously, the salary cap was updated in 2014, when the government raised the PF salary threshold from Rs 6,500 to Rs 15,000.
What will be the increase in the salary pension for workers/pensioners?
At present, the lowest basic salary threshold under EPFO is ₹15,000. 8.33% of the employer’s contribution is allocated to the pension fund (EPS), whereas 3.67% is placed in the PF account. If an employee earns a salary of up to ₹ 15,000, then 8.33% goes to EPS up to ₹ 1,250, while the remaining amount is placed in EPF. If the salary is ₹ 21,000, then a maximum of ₹ 1,749 will be allocated to EPS, thereby decreasing the amount saved in EPF.
At present, EPS pension is determined using a salary cap of ₹ 15,000; however, if this cap is raised to ₹ 21,000, the pension will be computed using ₹ 21,000. If an employee has a pensionable service duration of 30 years and earns over ₹ 15,000 within 60 months, then presently his pension amounts to ₹ 6,857 each month, and based on a salary of ₹ 21,000 per month, he will receive a pension of ₹ 9,600 per month.
