If your salary exceeds 15,000 rupees (basic pay plus inflation allowance), but you were previously not covered by the Employees' Provident Fund (EPF), this news may be important for you. The Employees' Provident Fund Organisation (EPFO) has increased its Wage Limit. EPF is not just the amount deducted monthly from the salary, but also a tool for accumulating retirement funds. Contributions are made by both employees and employers, and interest is accrued on the accumulated funds.
The central government has raised the monthly EPFO wage threshold from 15,000 to 25,000 rupees for mandatory social security. According to government estimates, this decision, which will come into effect on September 17, will benefit approximately 510,000 new employees who will first be covered under EPF, pension, and EPFO insurance. Therefore, if you fall under the mandatory coverage according to the new threshold, be sure to check your registration with your company.
This revision primarily benefits employees whose Basic Pay and Dearness Allowance (DA) combined exceeded the previous limit of 15,000 rupees, which prevented them from participating in mandatory EPF coverage. Now, employees with a salary in the range of 15,000 to 25,000 rupees can join the program subject to applicable rules and conditions. However, meeting the threshold alone does not guarantee eligibility for participation.
Employees who meet the criteria under the new threshold can be included in EPF coverage. Nevertheless, each employee's situation will differ. This depends on whether the employee is already an EPF member and what program rules apply to them. Therefore, it is crucial to contact your company's HR or accounting team to determine your eligibility.
Instead of applying individually to these programs, the employee must go through their employer, i.e., the company. First, they should check their eligibility with the HR team or accounting departments. Then, they need to provide necessary information related to identification, employment, Aadhaar, and bank account. After registration, ensure that your EPF contribution is correctly reflected in your payslip and EPFO passbook.
Contributions to the Employees' Provident Fund (EPF) are made by both employees and employers. The interest accrued on this amount helps build the pension fund over time. If you work for a long time and continue regular contributions, the accumulated amount can increase. The new wage limit opens the door for eligible employees to participate in this social security scheme.
Eligible members can receive a pension under the Employees' Pension Scheme (EPS) provided the established rules and required service period are met. A portion of the employer's contribution is directed to this program as per the rules. However, the right to receive a pension and its amount depend on factors such as the employee's membership, pensionable salary, and length of service. Thus, inclusion in EPF does not mean that every employee will immediately start receiving a pension.
The insurance associated with EPF membership is called the Employees' Deposit Linked Insurance Scheme (EDLI). In the event of the death of an eligible member, their nominee or legal heir may claim an amount of no less than 2.5 lakh and no more than 7 lakh according to the rules. The claim is filed by the nominee or legal heir through Form 5 IF. The premium for this program is not deducted separately from the employee's salary but is paid by the employer. This provides financial protection to the employees' families.
It is not necessary for PF deductions to automatically increase for every employee. The new wage limit may increase the base for calculating contributions for eligible employees, but the actual deduction depends on prevailing rules and salary structure. The employee's basic pay, Dearness Allowance, existing EPF membership status, and applicable provisions play a decisive role in determining the contribution amount.
If a qualifying employee is subject to a 12% employee contribution based on a full salary of 25,000 rupees, then 3,000 rupees will be deducted monthly for PF. The employer also contributes according to the rules, of which 3.67% goes to EPF, and 8.33% goes to EPS. The EDLI premium is paid separately by the employer. It should be noted that this is just an example; the actual contribution may vary depending on applicable rules and the employee's situation.
