There is major and reassuring news for millions of salaried employees in India.
The central government is seriously considering increasing the wage ceiling for mandatory provident fund (PF) contributions under the Employees’ Provident Fund Organization (EPFO).
At present, the salary limit is ₹15,000 per month, but it may be raised to ₹25,000. If approved, this will be the first major change since 2014 and will strengthen employees’ social security and retirement savings.
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What the Salary Limit Increase Means
Under current rules, employees with a basic salary of up to ₹15,000 must join the EPF scheme. Both the employee and the employer contribute 12% of this salary to PF.
However, due to rising inflation and increasing average wages over the past 11 years, the ₹15,000 limit has become outdated.
By increasing the limit to ₹25,000, the government aims to include millions of employees who are currently outside the PF system.
Higher Pension and Retirement Savings
The biggest benefit of this change will be seen in employees’ pensions under the Employees’ Pension Scheme (EPS). At present, pensions are calculated based on the ₹15,000 salary cap.
If the limit is raised to ₹25,000, more money will be deposited into pension accounts every month. As a result, employees will receive a higher monthly pension after retirement.
At the same time, the total PF corpus will grow faster because contributions will be calculated on a larger salary amount.
Impact on In-Hand Salary
This change may slightly reduce employees’ in-hand salary. Since PF contributions will be calculated on ₹25,000 instead of ₹15,000, the employee’s contribution will increase.
However, experts say this is beneficial in the long run because the employer’s contribution will also rise, leading to higher savings and better financial security after retirement.
Financial Impact on Companies
The government is also considering the impact on companies. If the salary limit increases, employers will have to pay higher PF contributions for their employees, which will increase their financial burden.
Therefore, the government is carefully reviewing the proposal to ensure that it does not negatively affect small and medium enterprises (MSMEs).
A Major Change After 11 Years
The EPF salary limit was last increased in 2014, when it was raised from ₹6,500 to ₹15,000. Since then, the economy and wage structure have changed significantly.
High-level government committees have already recommended this increase, and the proposal is now awaiting approval from the Ministry of Finance. If approved, it will boost employees’ savings and expand the reach of social security in India.