The EPFO salary ceiling for mandatory coverage could rise from ₹15,000 to ₹25,000 a month if a proposal discussed at the Union Cabinet meeting reported for September 16 is approved, potentially bringing more employees into compulsory provident fund and pension contributions.
According to Aaj Tak Business, the proposal concerns the salary limit used for mandatory coverage under the Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS). The report said the proposal may be placed before the Cabinet and could receive approval, but it did not report a confirmed Cabinet decision.
The proposed change would apply to employees whose basic salary and dearness allowance together total up to ₹25,000 a month. Under the existing limit described in the report, employees with basic salary and dearness allowance of up to ₹15,000 fall within mandatory EPF and EPS coverage. The ceiling was last raised on September 1, 2014, from ₹6,500 to ₹15,000.
Employees earning more than the existing ₹15,000 threshold can currently choose whether to contribute to the pension scheme, according to the report. If the ceiling is raised to ₹25,000, employees in the ₹15,000-to-₹25,000 bracket who were previously outside mandatory coverage would be required to contribute to EPS as well as EPF. Employees whose basic salary and dearness allowance exceed ₹25,000 would continue to have the option of contributing to the pension scheme, as described in the report.
The proposed arrangement could also limit the immediate increase in employer costs. Aaj Tak Business reported that while the mandatory coverage ceiling may be raised to ₹25,000 to bring more workers under the schemes, companies could be allowed to calculate their contributions using the existing ₹15,000 limit. The report described this as a measure that could reduce the additional burden on employers.
For employees newly brought under mandatory coverage, the main immediate effect would be a reduction in monthly take-home pay because a larger amount would be deducted towards provident fund and pension contributions. The amount would instead be credited towards retirement savings. The report did not provide an estimate of the number of employees who could be affected or specify the size of the contribution change for individual workers.
The outcome depends on whether the reported proposal is formally placed before and approved by the Cabinet. Any final decision would also determine the effective date, implementation instructions and the manner in which employers and the Employees’ Provident Fund Organisation apply the revised ceiling.
