Epfo Salary Limit: Employees Provident Fund Organization (EPFO) is going to take a key decision. It is going to increase the basic salary limit. Will this benefit you? Or harm you? Find out.
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Epfo Salary Limit: The Indian government is all set to make a major change in the Employees Provident Fund Organisation. Currently, EPF mandatory enrolment is only applicable to those earning up to Rs 15,000 per month in basic salary. Those earning more than Rs 15,000 will be exempted from mandatory coverage. There is no requirement for companies to include them either. This is creating a gap in pension coverage in urban areas as even entry-level salaries are crossing this threshold.
The Employees’ Provident Fund Organisation (EPF) is considering raising the mandatory salary limit for EPF. The current limit is Rs 15,000 per month. The limit was last raised in 2014 from Rs 6,500 to Rs 15,000. This limit determines who is eligible for EPF and EPS. This is a key step in the efforts to provide retirement security to more workers.
Speaking at an event in Mumbai, DFS Secretary M. Nagaraju said it is not good that many employees earning more than Rs 15,000 per month do not have pension cover. He said that even those who slightly exceed that limit are not covered by formal pension schemes and have to depend on their children in old age. This gap is widening as EPF registration is mandatory only for those earning up to Rs 15,000.
According to various reports, the EPFO salary limit is likely to be increased to Rs 25,000. The proposal is likely to be discussed in the EPFO Central Board of Trustees meeting early next year. The Labor Ministry estimates that if the limit is increased by Rs 10,000, over 1 crore new people will come under the EPF and EPS coverage. Trade unions have also been demanding this increase for a long time, as the Rs 15,000 limit is now not enough to cover urban wages.
This move is in line with the government’s goal of increasing social security in the country. More than 8.3 crore people have already joined the Atal Pension Yojana. Half of them are women. Still, many people in the country do not have life insurance, and their savings for retirement are also low. If the EPF limit is increased, more people will come into long-term savings. In EPF, 12% of the employee’s salary goes to EPF. The employer contributes 12%. Of this, 8.33% goes to EPS and 3.67% to EPF. If the limit is increased, all these will increase. This will increase both retirement savings and pension amount.
The impact of this change on you is as follows. EPF and EPS will now be mandatory if you earn more than Rs 15,000 but less than Rs 25,000. Benefits like mandatory savings, lifelong pension after 10 years of employment, higher interest on EPF will be available. There is no direct impact if you earn more than Rs 25,000, but your company can offer EPF to more people. If you are already an EPF member, your EPF amount, if reduced due to the base limit of Rs 15,000, will now increase. This will increase the EPF amount, pension amount, employer contribution, tax-free savings. If you are an employer, your cost will increase, but the future security of employees will be strengthened.
Pension coverage in India is still low. Life expectancy is increasing, expenses are rising, and savings are decreasing. At a time like this, by increasing the salary limit, more people will come under pension protection. Currently, EPFO manages 26 lakh crores, with 7.6 crore active members. The new limit will further strengthen the system.
The increase in EPF salary limit from Rs 15,000 to Rs 25,000 is a major reform that has been awaited for a long time. With this, more employees will come under the pension system, accumulate more money for retirement and get better security in old age. Once approved by the EPFO trustees, this change will bring a change in the lives of lakhs of lower and mid-income employees, especially in cities.
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