If you belong to the salaried class, you will be pleased to hear this news. Indeed, the government is thinking of raising the amount placed in the Employee Pension Plan (EPS) and the Employee Provident Fund Organization (EPFO). Labor Minister Mansukh Mandaviya is cited in a Financial Express piece that makes this assertion. The amount that is currently deducted from employee salaries and placed into EPS and EPFO each month is anticipated to rise in the future. The Employees Provident Fund has a cap of Rs 15000 at the moment.
This ceiling was previously set at Rs 6500 and last raised to Rs 15000 in 2014. Nothing about it has changed since then. Now the government is considering increasing this limit to Rs 21000. This simply means that employees will be able to deposit more money in EPFO and EPS than before. After the new rule is implemented, crores of salaried class will get its benefit. This will also affect the pension received by employees after retirement.
How does the current EPFO rule operate?
Currently, both the employer and the employee must contribute 12% of the employee’s monthly salary—up to Rs. 15,000—to the Employee Provident Fund (EPF). However, the employer’s funds are split into two categories. Of this, 3.67% is deposited in the Employee Provident Fund (EPF) and 8.33% is allocated to the Employees Pension Scheme (EPS). An employee making Rs 15,000 per month would be required to contribute 12% of that amount, or Rs 1800, to their EPF account. In addition, your employer will deposit Rs 1800, or 12% of your pay. However, this money will be split between EPS and EPF. EPS receives Rs 1250 of this, with the remaining Rs 550 going to EPF.
What will be the new limit?
If the government increases the limit to be deposited in EPF from Rs 15,000 to Rs 21,000, then the calculation will also change. On a salary of Rs 21,000, Rs 2,520 will be deducted as PF every month at the rate of 12 percent. Apart from this, out of the same contribution given by the company, Rs 771 will be deposited in the EPF account and the remaining Rs 1,749 will be deposited in the EPS account.
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