BUSINESS
This new PF decision will save the lives of employees' families! Family members will receive double their insurance money
There's some very comforting news for members of the Employees' Provident Fund Organization (EPFO). The central government is considering increasing the required basic salary limit for PF contributions from ₹15,000 to ₹25,000 per month. This was approved in Tuesday's cabinet meeting.
This decision of the government will not only increase the retirement fund of the employees, but the amount of free life insurance (EDLI Scheme) given to their families is also likely to double.
Currently, an employee's family receives insurance (EDLI) of up to ₹7 lakh in the event of their sudden death. However, with the new salary limit of ₹25,000, this maximum insurance cover is expected to increase to ₹10.50 lakh. This will provide significant financial assistance to the families of millions of employees working in the private sector.
How will insurance coverage be increased? Learn the math in detail.
If the central government increases the EPFO's required basic salary limit from Rs 15,000 per month to Rs 25,000 per month, the free life insurance cover available under the Employee Deposit Linked Insurance Scheme (EDLI Scheme) could increase significantly. In the event of an EPF member's sudden death while in service, their heir (nominee) receives a minimum sum assured of Rs 2.5 lakh and a maximum of Rs 7 lakh. However, if the salary limit is raised to Rs 25,000, this maximum sum assured is likely to increase to Rs 10.50 lakh (or more).
The following formula is used to determine the sum assured under the EDLI scheme:
(Last 12 months average basic salary × 35 times) + (50% of last 12 months average EPF balance - maximum Rs 1.75 lakh)
As per the limit of Rs 15,000 (current calculation):
Rs 15,000 × 35 = Rs 5.25 lakh
Rs. 5.25 lakh + Rs. 1.75 lakh (additional cover) = Total Rs. 7 lakh
Based on the Rs. 25,000 limit (prospective calculation):
Rs. 25,000 × 35 = Rs. 8.75 lakh
Rs. 8.75 lakh + Rs. 1.75 lakh (additional cover) = Total Rs. 10.50 lakh
(Note: This figure is based on probabilistic calculations and the final decision will be taken by EPFO.)
PC: mint
