A proposal to raise the salary limit for mandatory coverage under the EPF and Employee Pension Scheme (EPS) from 15,000 to 25,000 rupees per month may be presented at the upcoming Central Cabinet meeting, which could potentially be a significant advantage for employed workers.
If this proposal is approved, new employees will automatically start benefiting from the PF (Pension Fund) and pension. The last adjustment to the mandatory threshold for the PF was made on September 1, 2014, when it was increased from 6,500 to 15,000 rupees.
This rule applies to employees whose basic salary and inflation allowance total 15,000 rupees; if the limit is raised to 25,000 rupees, workers earning 25,000 rupees per month (including basic salary and inflation allowance) will be required to contribute to both the PF and the pension fund.
For those earning more than 15,000 rupees, contributions to the pension fund currently depend on their own willingness. However, after the limit is set at 25,000 rupees, they will have to make mandatory contributions to the EPS. Furthermore, if the total amount of their basic salary and allowance exceeds 25,000 rupees, the decision to contribute to the pension fund will remain theirs.
According to the government's proposal, although the salary limit will be raised to 25,000 rupees to cover a larger number of employees, companies may be given the option to continue using the old limit of 15,000 rupees when calculating their contributions, which will reduce financial pressure on businesses.
Employees in the range of 15,000 to 25,000 rupees who previously did not contribute to the PF will see a significant increase in their monthly savings once the new rule comes into effect. This will lead to a decrease in their net salary, but these funds will accumulate for their future pension.
