The EPFO salary limit for mandatory coverage has been increased from ₹15,000 to ₹25,000 a month, bringing more workers into the provident fund, pension and insurance framework while potentially reducing the monthly take-home pay of some employees.
According to a report by Aaj Tak Business, the revised threshold took effect on 17 September. The government expects the change to bring more than 51 lakh additional employees under mandatory Employees’ Provident Fund Organisation coverage.
The change is particularly relevant to employees joining the EPFO system for the first time. Since September 2014, employees earning up to ₹15,000 a month in basic salary at covered establishments were required to contribute under the applicable provident fund rules. The revised threshold extends that mandatory coverage to employees earning between ₹15,000 and ₹25,000 a month.
For a worker with a basic salary of ₹20,000 a month, the change means that EPFO contributions will now begin if the employee joins a covered company and falls under the revised rules. The worker becomes eligible for provident fund savings, pension benefits under the Employees’ Pension Scheme and insurance protection under the Employees’ Deposit Linked Insurance Scheme, or EDLI.
The immediate effect on take-home pay depends on how contributions are calculated. Under the earlier statutory ceiling, the employee contribution was capped at 12% of ₹15,000, or ₹1,800 a month, where the contribution was limited to the prescribed wage ceiling. Under the revised ₹25,000 threshold, the corresponding 12% contribution would be ₹3,000 a month. This can increase the monthly deduction by up to ₹1,200 for employees whose contributions are linked to the revised ceiling.
The additional deduction means workers may receive less salary in hand each month, while a larger amount is credited to their provident fund savings. The change therefore shifts part of current income towards retirement-linked savings and related social-security benefits.
Employees earning ₹10,000 a month are not expected to see a change from the threshold revision because they were already within the earlier ₹15,000 limit. Their contribution would continue according to the applicable existing calculation.
Workers earning more than ₹25,000 a month may also see higher deductions where their contribution was previously restricted to the statutory ceiling. The report indicates that the maximum employee contribution in such cases could rise from ₹1,800 to ₹3,000 a month under the revised limit.
The operational impact will depend on the employee’s basic salary, the employer’s coverage under EPFO rules and whether contributions are calculated on the statutory ceiling or a higher wage base. Employers and employees will need to apply the revised threshold from the effective date specified in the reported change.
