Salary limit for PF raised from ₹15,000 to ₹25,000; employees to gain benefits including EPF and EPS..
Employees earning a salary between ₹15,000 and ₹25,000 will now legally come under the ambit of EPFO-linked schemes and benefits. This decision was taken during a Cabinet meeting held today, Wednesday, under the chairmanship of Prime Minister Narendra Modi. The Cabinet has approved raising the monthly wage ceiling for mandatory coverage under the Employees' Provident Fund Organisation (EPFO) from ₹15,000 to ₹25,000.
Here, 'salary' refers to Basic Salary plus Dearness Allowance (DA), not gross salary or CTC.
This means that young people starting jobs with salaries between ₹15,000 and ₹25,000 will now also avail themselves of EPFO-related benefits. This is being hailed as a significant step for employees in terms of savings and social security.
Three immediate benefits for employees:
First, they will gain the benefit of regular savings under the Employees' Provident Fund (EPF); those earning ₹25,000 will now be included in this bracket. Second, they will receive post-retirement pension security through the Employees' Pension Scheme (EPS); upon completing a minimum of 10 years of service, they will be eligible for a lifelong monthly pension after attaining the age of 58. Third, insurance coverage will be available under the Employees' Deposit Linked Insurance (EDLI) scheme; this scheme provides a safety net for the family in the event of any untoward incident during the tenure of employment.
A fund for the future will be created.
According to the EPFO, 12% of an employee's salary goes into the EPF, and the employer (company) contributes an equal amount (12%). Until now, the company's mandatory contribution was limited due to the ₹15,000 wage ceiling. With the ceiling raised to ₹25,000, the total monthly contribution to the PF account from both the employer and the employee will increase, thereby building a substantial fund for the future. Balancing Take-Home Salary and Savings
How will the scope of social security expand?
The previous wage ceiling of ₹15,000 meant that many entry-level employees fell outside the social security net. Now, thanks to the government's decision, over 51 lakh employees will immediately gain access to organized social security benefits.
An employee's UAN (Universal Account Number) and PF account will remain active and continuous even when switching jobs from one company to another.
What does the EPFO rule say, and where was the catch?
Under government regulations, PF deduction is mandatory only for employees earning up to ₹15,000 in companies with 20 or more employees; it is not legally required for those earning above this limit. This threshold has now been raised to ₹25,000.
You might wonder why PF is being deducted for you—or for others—even if the salary exceeds ₹15,000 or ₹25,000. There are two reasons for this.
First, you are an existing PF member. This means that on the day you joined the job, your salary was likely below ₹15,000, making you eligible for PF coverage. Second, once you are enrolled in the PF scheme, you cannot opt out even if your salary subsequently increases. Many large companies deduct PF even for employees earning more than ₹15,000—even though it is not legally mandatory—to ensure the employee benefits; this is known as Voluntary PF.
One might assume that PF is deducted for everyone, but in reality, PF is still not deducted for 90% of the country's unorganized sector workers or for many private-sector jobs paying above ₹15,000. To bridge this gap, the government decided to raise the salary threshold to ₹25,000.
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