Most private sector workers are members of EPF, but they are not included in the EPS pension scheme. However, after the government increased the maximum salary threshold from 15,000 to 25,000 rupees, most employees will now fall under the scope of pension provision.
Employers will transfer contributions from EPF to EPS for employees whose basic salary is up to 25,000 rupees, as they will become EPS members and be eligible to receive the PF pension benefit. The government states that this will cover 51 million employees.
Under previous rules, employees who became EPF members in September 2014 or later, and whose income exceeded 15,000 rupees, generally did not have the right to participate in EPS. Their basic salary was 12% of employee contributions and 12% of employer contributions going into EPF according to current regulations.
Now that the salary ceiling has been raised to 25,000 rupees, employees with a basic salary up to this amount who are not EPS members are required to join EPS. This means they will guaranteed receive a pension benefit.
If your PF-eligible salary is 20 thousand, the employee contribution may increase from 1,800 to 2,400 rupees, meaning a monthly increase in PF contribution of 600 rupees. This is because previously PF was calculated on a basic salary of 15,000, whereas now it will be calculated on 20,000 rupees. The more funds contributed to PF, the less amount will remain in your net salary.
When calculating PF on an amount of 20,000 rupees, out of the total 12 percent, the company will contribute 8.33% to EPS, and the remaining 3.67% to PF. This means that 1,666 rupees will go to the pension, and 734 rupees to PF.