EPFO Update: If someone in your family is an EPF employee, then good fortune is coming your way. The central government is considering a major announcement for provident fund (PF) employees, which will benefit a large number of people. The salary limit for contributions to the Employees’ Provident Fund Organisation (EPFO) may be increased.
The salary limit could be raised to Rs 25,000. Currently, this limit is Rs 15,000 per month. This means there will be an increase of Rs 10,000. This change was last made in 2014.
The government is taking this step with the aim of strengthening social security and retirement funds. This announcement is likely to be made in the Union Budget on February 1st. If this happens, this year will be like a booster dose for private sector employees.
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Reasons for the increase in the salary limit
According to current rules, employees with a basic salary of up to Rs 15,000 are required to be included in the EPF scheme. On this salary, 12% is contributed by the employee and 12% by the company.
The surprising fact is that inflation and average salaries have increased significantly in the last 11 years, making the Rs 15,000 limit outdated. The government believes that the salary limit for PF deductions should be increased from Rs 15,000 to Rs 25,000 per month. This will also bring new employees, who are currently outside the PF scheme, under its purview.
Major changes will also occur in this area
If the government increases the salary limit for PF deductions, it will affect employees’ pensions. Pension calculations are based on a capping of Rs 15,000. If this limit increases to Rs 25,000, the amount deposited in the employee’s pension account every month will increase.
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This means that the monthly pension you receive after retirement will increase significantly. The total fund accumulated in your PF account will also grow faster, as PF will now be deducted from a larger portion of your salary.
Account will be affected by the salary change
The increase in the limit to Rs. 25,000 will likely have a slight impact on your take-home salary. Now, instead of the previous Rs. 15,000 limit, 12 percent of your salary will be deducted as PF up to the new limit of Rs. 25,000. This will increase the employee’s contribution. According to experts, this deduction is beneficial for the employee in the long run, as the company will also increase its contribution.