PF Account Update: This important update for PF account holders, will get a benefit of Rs 33 thousand, know how…
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 wage 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 wage limit from Rs 6500 to Rs 15000. If this is done then it will be a big step towards universal social security. Lakhs of salaried classes will benefit from this.
Decisions can be taken by the new government-
No steps have been taken regarding the proposal to increase the wage limit of EPF for the last several years. Now this proposal is being reconsidered. According to the news published in the Economic Times, an official related to this entire matter said that all the options are being evaluated. Any decision in this regard can be taken by the new government. 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 wage limit. The minimum wage in most states is between Rs 18000 and Rs 25000. The implementation of this proposal will also have a direct impact on the amount of contribution made 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 if the salary limit is increased to Rs 21,000, what will be its impact on EPF and EPS contribution?
Pension contribution will increase-
Currently, the contribution to the Employee Pension Scheme (EPS) account is calculated based on a basic salary of Rs 15,000 per month. Based on 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. EPS will also be affected due to an increase in wage limit to Rs 21,000. After this, the monthly EPS contribution will be Rs 1,749 (8.33% of Rs 21000).
3.67% 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 12% of the employer’s contribution, 8.33% is deposited in the Employee Pension Scheme (EPS). The remaining 3.67% is deposited in the EPF account. Due to the increase in 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, the 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 wage limit to Rs 21,000 will also affect the pension received after retirement. Suppose your pension service is 30 years. The 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 at the wage limit of Rs 21000, then it will be (32×21000)/70= Rs 9600. According to this, 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, of 1952, both the employee and the employer contribute 12% of basic salary, dearness allowance, and retaining allowance, if any, to the EPF account. While the entire contribution of the employee in 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% is deposited in the PF account. EPFO subscribers are entitled to provident fund, pension, and insurance benefits under the EPF and MP Act, 1952.
Will there be a benefit or loss?
This is a big question whether you will benefit or suffer loss by increasing the wage limit. Let us tell you that currently, for every Rs 15000, Rs 1800 is deposited in the EPF account as a contribution on behalf of the employees. However due to the increase in the limit to Rs 21000, this contribution will increase to Rs 2520. That means your in-hand salary will be reduced by Rs 720. But you will get its benefit in long term on EPF contribution and pension received after retirement.
When was the last change?
Earlier there was a change in the year 2014. Then the wage limit was increased from Rs 6,500 to Rs 15,000. On the contrary, the salary limit in Employees’ State Insurance Corporation (ESIC) is higher. There is a higher salary limit of Rs 21,000 in ESIC since 2017.
