The Employees' Provident Fund Organization (EPFO) is making changes to its provident fund rules after 12 years. This change will have a major impact on employees' salaries. The government is considering increasing the salary limit for EPF. This proposal is likely to be finalized at a meeting of the EPFO's Central Board of Trustees (CBT) next month. This will directly impact your monthly salary, PF funds, and retirement pension.

The EPFO ​​last revised the salary limit in 2014. This limit was ₹6,500 per month, which was then raised to ₹15,000. Inflation and average salaries have increased significantly in the 12 years since then. However, the basic salary for PF contributions has remained stagnant at ₹15,000. This fixed salary limit has deprived many middle-income workers of the full benefits of social security.

Now this limit will be increased to ₹25,000 per month. This decision could be a big game changer for private sector employees. This increase in the salary limit will bring more employees under the EPF scheme and provide them with social security benefits. The first and most direct impact of this change will be on the salary received by the employees. Currently, if your basic salary is more than ₹15,000, the company deducts 12% PF based on only ₹15,000.

However, with the new limit of ₹25,000, the 12% deduction will be based on this increased base. This means that employees earning between ₹15,000 and ₹25,000 will have a higher PF deduction than their salary. Their actual salary is likely to be slightly lower.

Impact on Pension and PF Corpus
The biggest benefit you'll receive in exchange for a small salary cut is your retirement fund (PF corpus). The employer is required to contribute to the EPF at the same rate as the employee. The increase in the salary limit will also increase the company's contribution. Consequently, the contribution to the Employee Pension Scheme (EPS) will also increase. This increase in the salary limit will also increase your future pension amount.

PC: The Economic Times