The central government of India has announced a significant change for private sector employees. The minimum salary threshold required for pension contributions has been raised from 15,000 to 25,000 rupees.
According to the government, this change will make pension contributions mandatory for 51 million employees, leading to a projected budget burden of 11,339 crore rupees. It is important to note that the pension contribution will be made not from the employee's salary, but through employer contributions.
Employers will contribute 8.33% to the pension fund, and the remaining amount will go into the PF account. Thus, employees will benefit from pension contributions without a reduction in their actual salary. The government adopted this decision with the aim of improving employee social security.
This new rule came into effect today, September 17, 2026. Many workers are interested in what pension amount they can expect if their Basic salary plus Dearness Allowance (Basic + DA) is 25,000 rupees.
There is a special formula for calculating the pension under the Employees' Pension Scheme (EPS). This formula allows for an approximate estimation of future pension based on your salary and length of service. The formula is as follows: Monthly Pension = Pensionable Salary × Years of Pension Service ÷ 70. Additionally, if there is 20 years or more of work experience, an extra allowance equivalent to two years of service is provided.
Assuming a retirement age of 58, if a person is 25 years old with a Basic salary plus Dearness Allowance of 25,000 rupees, the pension service would be 33 years, to which a two-year premium will be added. In this case, the estimated monthly pension would be 12,500 rupees. Similarly, if the age is 30 years and the Basic salary plus Dearness Allowance is 25,000 rupees, the pension service would be 28 years with a two-year bonus, resulting in an expected monthly pension of 10,714 rupees.
The calculations show: at age 25 and a pensionable salary of 25,000 rupees: 25,000 × 35 ÷ 70 = 12,500 rupees per month. At age 30 and a pensionable salary of 25,000 rupees: 25,000 × 30 ÷ 70 = 10,714 rupees per month. These calculations are valid provided that 25,000 rupees is your pensionable salary. The actual EPS calculation considers the pensionable salary of the last period and the total length of service; your pension will be calculated based on the above calculations if both these conditions match the scenario.