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PF Contribution Rate: If you are also employed then this news is useful for you. Preparations are underway to increase social security coverage at the government level. It is being told that the Center is preparing to increase the salary limit under the Employees Provident Fund (EPF) scheme from Rs 15,000 to Rs 21,000. Earlier this limit was increased by the Center in 2014. In 2014, the government had increased the PF salary limit from Rs 6500 to Rs 15000. If this is done, it will be a big step towards universal social security. This will benefit lakhs of salaried class.
The new government can take a decision on this
For the last several years, no action has been taken on the proposal to increase the salary limit of EPF. Now this proposal is being reconsidered. According to the news published in the Economic Times, an official associated with this entire matter said that all options are being evaluated. Only the new government can take any decision in this regard. He said that if the government wants to bring more and more employees under the ambit of social security, then it will have to move forward in this direction.
The pension received by the employee will be affected
Lakhs of employees will get the benefit of increasing the salary limit. The minimum salary in most of the states is between Rs 18000 to Rs 25000. The implementation of this proposal will also have a direct impact on the amount of contribution to the EPF scheme and Employee Pension Scheme (EPS). Along with this, it will also affect the pension received by the employee at the time of retirement. Let us know what effect it will have on EPF and EPS contributions if the salary limit is increased to Rs 21,000?
Pension contribution will increase
At present, contribution to the Employees' Pension Scheme (EPS) account is calculated on the basis of basic salary of Rs 15,000 per month. On the basis of this, a contribution of Rs 1800 is deducted from the employee's salary. Based on this, the maximum contribution to the EPS account is limited to Rs 1,250 per month. Increasing the salary limit to Rs 21,000 will also affect EPS. Thereafter the monthly EPS contribution will be Rs 1,749 (8.33% of Rs 21000).
3.67 percent amount is deposited in EPF account
Let us tell you that the entire contribution made by the employee is deposited in the EPF account. But out of the 12% employer's contribution, 8.33% is deposited in the Employees' Pension Scheme (EPS). The remaining 3.67 percent amount is deposited in the EPF account. By increasing the salary limit under the EPF scheme, the pension received at the time of retirement will also increase. As per the Employees' Pension (Amendment) Scheme, 2014, EPS pension is calculated as follows-
epf pension calculation
Number of years of pensionable service
Understand this way, how much will the pension increase?
Increasing the salary limit to Rs 21,000 will also affect the pension received after retirement. Suppose your pension service is 30 years. Monthly salary is calculated from the average salary of 60 months before retirement. If someone's average salary during 60 months is Rs 15,000 per month, then the pension will also be calculated on this amount. If an employee works for more than 20 years, two years are added to the service limit as a bonus. According to this (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 was a difference of Rs 2,743 in the monthly pension. This will yield an annual profit of Rs 32,916.
What is the rule of contribution?
Under the Employees' Provident Fund Act, 1952, both the employee and the employer contribute 12% of basic salary, dearness allowance and retention allowance, if any, to the EPF account. While the entire employee's contribution to the PF account is deposited in the provident fund account, 8.33% of the employer's contribution goes to the employee pension scheme. The remaining 3.67 percent amount is deposited in the PF account. EPFO subscribers are entitled to provident fund, pension and insurance benefits under the EPF & MP Act, 1952.
Will there be benefit 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, for every Rs 15000 contributed by the employees, Rs 1800 is deposited in the EPF account. But with increase in the limit to Rs 21000, this contribution will increase to Rs 2520. That means your inhand salary will be reduced by Rs 720. But you will get its benefit in the long run on EPF contribution and pension received after retirement.
When was the last change?
Earlier there was a change in the year 2014. Then the salary limit was increased from Rs 6,500 to Rs 15,000. In contrast, the salary limit in Employees' State Insurance Corporation (ESIC) is higher. ESIC has a higher salary limit of Rs 21,000 since 2017.
When was 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