Retirement Savings to Increase Soon? Government may raise EPF contribution limit to Rs 21,000
The wage threshold was last raised by the central government in September 2014, which was eight years ago.
According to reports, the central government intends to expand the Employees' Provident Fund (EPF) program wage maximum limit from the current limit of Rs. 15,000 to Rs. 21,000 in the nearish term. The wage threshold was last raised by the central government in September 2014, which was eight years ago.
According to ET, if this plan is approved, it will affect the amount of contributions made to the Employees' Pension System (EPS) and the EPF scheme. It affects the amount of pension an employee is eligible for when they retire.
The Employees' Provident Fund and Miscellaneous Provisions Act, 1952 mandates that both the employee and the employer match each other's contributions to the EPF account at a rate of 12% of the employee's basic salary, dearness allowance, and retention allowance, if applicable. The EPF account receives the full employee contribution.
On the other hand, out of the employer's contribution of 12%, 8.33% is deposited in the Employees' Pension Scheme and the balance 3.67% is deposited in the Employees' Pension Scheme and the balance 3.67% is deposited in the EPF account.
The base income is now limited to Rs 15,000 per month for the purpose of calculating contributions to the Employees' Pension Scheme (EPS) account. The maximum monthly contribution to an EPS account is therefore currently limited to Rs 1,250. Therefore, if the government raises the salary cap to Rs. 21,000, this contribution will also rise. According to the report, "The monthly EPS contribution will become Rs 1,749 (8.33% of Rs 21,000)," says Mallika Noorani, Senior Partner, Parinam Law & Associates.
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