EPF Rule Change: Major change in EPF rules after 12 years! ₹25,000 salary limits; find out how this will affect your salary?

The Employee Provident Fund (EPF) is considered a crucial foundation for future financial security for salaried employees. Now, there's news that a major change is imminent in the salary limit associated with the EPFO. The Union Cabinet has reportedly approved raising the current monthly basic salary limit of ₹15,000 to ₹25,000. This change could bring a large number of employees under the ambit of the social security scheme.

Under current rules, eligible companies with 20 or more employees are required to include employees with a basic salary of up to ₹15,000 in EPF and EPS. If the new limits are implemented, employees with a basic salary between ₹15,000 and ₹25,000 can also join these schemes. Additionally, they are likely to benefit from EPFO-linked insurance protection.

Impact on take-home salary

This decision could directly impact the salaries of some employees. For example, if the basic salary is ₹25,000, an employee's 12% contribution could result in approximately ₹3,000 going into the EPF each month. This will reduce their take-home pay somewhat, but will also increase future savings and social security.

Employee and Company Contributions

As a general rule, an employee contributes 12% of their basic salary, and the company contributes 12%. A portion of the company's contribution goes toward the Employee Pension Scheme (EPS), while the remaining amount is deposited into the EPF. Typically, of the company's 12% contribution, 8.33% goes toward the EPS and 3.67% toward the EPF.

Over 5.1 million employees will be covered by claims.

This change is expected to bring over 5.1 million more employees under the ambit of mandatory social security systems. The annual cost of this decision is expected to be approximately ₹11,339 crore, which could rise to ₹56,696 crore over five years. Companies' payroll costs are also likely to increase.

The EPFO's salary limit was originally set at ₹15,000 in September 2014. After nearly 12 years,

the proposed increase is expected to provide greater protection to employees, their families, and their future social security.

PC: Dainik Bhaskar