EPFO: Good news for pensioners. Especially if you are an EPFO member, then this article is for you. There might be some upcoming changes to the rules regarding the Employees’ Provident Fund (EPF) and the Employees’ Pension Scheme (EPS). Reports suggest that the salary cap for EPFO could rise from Rs 15,000 to Rs 21,000.
If the rumors are accurate, the central government is considering increasing this salary limit. Should this change take place, around 7.5 million employees would benefit, allowing them to receive a higher pension upon retirement. It’s worth noting that the government currently spends over Rs 6,700 crores annually on the EPFO’s Employees’ Pension Scheme. An increase in the salary cap would require the government to allocate additional funds for it.
EPFO: What to expect with the salary cap increase
Under the current EPFO guidelines, only employees earning a basic salary of Rs 15,000 or less can access EPF and EPS benefits. Both employees and employers contribute 12% of the employee’s basic salary to the EPF. Of the employer’s contribution, 8.33% goes towards the EPS, capped at Rs 1,250. Sources indicate that the government is contemplating raising this limit to Rs 21,000. If approved, many more employees will qualify for EPF and EPS benefits, including those earning between Rs 15,000 and Rs 21,000.
Benefits of raising the salary cap
At present, the maximum employer contribution to EPS is Rs 1,250, but with the new limit, this could increase to Rs 1,749, leading to a higher pension after retirement. Employees earning above Rs 15,000, who previously had limited EPF deductions, will now be required to contribute fully based on their actual salary, resulting in a larger amount being deposited into their EPF accounts.
Previously, those with salaries exceeding Rs 15,000 were ineligible for EPS benefits, but now employees earning up to Rs 21,000 will be able to participate in the pension scheme. This means companies will need to contribute more as employers.