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If you are employed then this news is for you because there is a plan to increase social security coverage at the government level. It is being said that under this, the minimum salary limit for contribution to the provident account i.e. basic salary can be increased from Rs 15 thousand to Rs 21 thousand. Which simply means that more salary will go to PF and pension account. Earlier, the Center had increased this limit in 2014. In 2014, the government increased the PF salary limit from Rs 65,000 to Rs 15,000. If this is done it will be a big step towards universal social security. This will benefit lakhs of salaried employees.
For the last few years, no action has been taken on the proposal to increase the salary limit of EPF. But now this proposal is being considered. According to the report published in Economic Times, an official related to the matter said that we are evaluating all the options and the new government can take a decision on this. Doing so would be a strong step towards achieving universal social security.
what will be the benefit
If the basic salary becomes Rs 21 thousand then the employee's contribution to PF becomes Rs 2520. Which is currently Rs 1800. Whereas the employer will also contribute the same amount in which Rs 1749 will go to pension and the remaining Rs 771 will be deposited in PF.
epf pension calculation
Increasing the salary limit to Rs 21,000 will also affect the pension received after retirement. Assume your pension service is 30 years. Monthly salary is calculated from the average salary of 60 months before retirement. If someone's average salary is Rs 15000 per month during 60 months, then the pension will also be calculated on this amount. Two years are added as bonus to the service limit of an employee who completes more than 20 years of service. Therefore, (32×15,000)/70 = Rs 6,857. But if the same calculation is done on the salary limit of Rs 21000 then it will be (32×21000)/70 = Rs 9600. Accordingly, there will be a difference of Rs 2743 in monthly pension. This will yield an annual profit of Rs 32,916.
what are the rules now
As per the existing rules, both the employee and the employer contribute equally 12 percent of the basic salary, dearness allowance and dearness allowance (if any) to the EPF account. Where the entire contribution of the employee is deposited in the provident fund account. While 8.33 percent of the employer's contribution goes to the employee pension scheme and the remaining 3.67 percent is deposited in the PF account.
profit or loss
It is a big question whether increasing the salary limit will benefit you or harm you. Let us tell you that at present Rs 1800 out of Rs 15000 is deposited in the EPF account by the employees as contribution. But with increase in the limit, it will become Rs 21000 and the contribution will also increase to Rs 2520. This means that Rs 720 will be reduced from your in-hand salary but its benefit in the long run will be on EPF contribution and pension received after retirement.
When was the last change?
Earlier changes were made in the year 2014. Then the salary limit was increased from Rs 6500 to Rs 15000. On the contrary, the salary limit in Employees State Insurance Corporation is higher. In this, the salary limit is Rs 21000 since the year 2017.
When is the salary cap?
1952-1957—-300 rupees
> 1957-1962—-500 rupees
> 1962-1976—-1000 rupees
> 1976-1985—-1600 rupees
> 1985-1990—-2500 rupees
> 1990-1994—-3500 rupees
> 1994-2001—-5000 rupees
> 2001-2014—-Rs 6500
> 2014—-15000 rupees