EPFO: If you’re employed and your basic salary is ₹25,000 or less, this news is a boon for your future! According to sources, the central government is planning a major increase in the salary limit of the Employees’ Provident Fund Organization (EPFO) from ₹15,000 to ₹25,000 per month. This historic move will now bring even higher-paid employees under the PF and Pension Scheme (EPS).
It’s believed that this change will provide social security benefits to over 10 million employees. The proposal is expected to be finalized at the EPFO’s Central Board of Trustees (CBT) meeting in December or January. This decision will make the retirement of the working class more secure than ever before.
What are the current rules, and why is change necessary
Currently, EPF and EPS (Employees’ Pension Scheme) benefits are available only to employees whose basic salary is ₹15,000 or less. Due to this current limit, if your salary exceeds this limit, you have the option of not contributing to PF. Companies are also not required to register such employees with EPF.
This means that even employees with a basic salary of ₹15,001 were deprived of this important social security scheme, weakening their retirement security. This change is necessary to address this discrepancy and provide social security to more employees.
New limit of ₹25,000
If this new proposal is passed, joining EPF and EPS will become mandatory for employees earning ₹25,000 or less. This means that PF will be deducted from your salary. Your employer will also contribute an equal amount to the PF, providing you with better pension and interest benefits upon retirement. According to the Ministry of Labor, this move will bring over 10 million new employees under the EPFO umbrella, increasing the financial security of organized sector workers in the country.
PF Deductions and Pension Contributions
It’s important to understand how PF deductions work for your future. Currently, both employees and employers contribute 12% to the EPF. The employee’s full 12% goes into your PF account. The employer’s 12% is divided as follows: 3.67% goes into the PF account and 8.33% goes into the EPS (pension fund). With the new limit in effect, your PF contribution will increase, providing you with greater interest benefits and a stronger retirement pension corpus. This is a great tool for long-term savings.
Will salaries be reduced
Some employees may initially fear that the increased PF contribution will slightly reduce their in-hand salary. Experts consider this an investment for the future. They say that a small reduction today will prove to be a significant benefit tomorrow.
According to Adil Ladha of the law firm Saraf & Partners, this move will increase corporate transparency and protect employees’ savings. Sujjain Talwar of the Economic Laws Practice believes that despite initial opposition, this decision will prove extremely beneficial for workers in the long run.