EPF Calculation: If you are a PF account holder, this news could be critical for you. The EPFO, which manages PF accounts, regularly provides new facilities to account holders. Recently, the EPFO raised the salary ceiling limit from ₹15,000 to ₹25,000.
This move has brought a significant boost for over 51 lakh employees across the country. As a result of this government decision, the EPS and EDLI benefits will also extend to employees. The question now arises: how much will the retirement corpus increase due to this higher salary limit? Let us understand the increase in detail.
How will the amount increase?
According to experts, if an individual accumulates more money in their PF account, it is not a gift from the government; rather, it is part of the EPF fund itself. This increase occurs because the salary limit has been raised, requiring the company to make a higher contribution. Consequently, the interest earned will also increase.
EPF rules allow you to withdraw up to 75% of your total fund during times of need, while the remaining 25% must be maintained as a minimum balance. Currently, the EPF offers an interest rate of 8.25%.
By how much will the retirement fund increase?
This rule impacts the overall PF corpus, and a similar effect will be seen on employees’ retirement savings. Under the previous calculation rules, a fund of approximately ₹4.4 lakh would accumulate over 10 years; under the new rules, that figure rises to ₹7.3 lakh. This implies that over 30 years, the accumulated fund would have been ₹35 lakh, whereas under the new rules, it will reach ₹58 lakh. This fund will prove highly beneficial at the time of retirement.
Will there be an impact on take-home salary?
It is worth noting that this new rule will also reduce the take-home salary of employees who previously contributed ₹1,800 per month towards PF based on the ₹15,000 salary limit. Their contribution will now increase to ₹3,000. Consequently, the monthly take-home salary will decrease by ₹1,200. At the same time, the company’s contribution will also rise, leading to a significant accumulation in the pension and PF accounts.
Will everyone benefit from this change?
It is worth noting that not all employees will benefit from the increase. This rule primarily affects those with a basic salary ranging between ₹15,000 and ₹25,000. Employees whose basic salary already exceeds this limit—and whose PF contributions were previously calculated based on that higher amount—will derive greater benefits from this change.