The government has introduced a major and significant change to the Employees' Provident Fund Organisation (EPFO) rules. The wage ceiling for basic salary regarding EPF coverage has been raised from ₹15,000 to ₹25,000. The government estimates that this new rule will directly bring approximately 51 lakh additional private-sector employees under the EPFO ​​ambit.

Benefits for EPF Subscribers
Upon retirement, the employee receives the entire accumulated amount in their PF account as a lump sum. Under the Employees' Pension Scheme (EPS), employees become eligible for a regular monthly pension after retirement, subject to meeting certain conditions. A third benefit is provided under the Employees' Deposit-Linked Insurance (EDLI) scheme.

Company Contribution
12% of your basic salary goes into the PF, and the company contributes an equal 12%. The company's 12% contribution is allocated as follows:

1. 8.33% goes to the EPS fund: Under the old rule (with the ₹15,000 limit), the company contributed a maximum of ₹1,250 per month to your pension fund; however, under the new rule (with the ₹25,000 limit), ₹2,088 will be deposited into your fund.

2. 3.67% goes to the EPF account.

What pension will be received with a ₹25,000 salary limit? Years of Service    Bonus Years    Calculated Years    Pension at Old Ceiling (₹15,000)    Pension at New Ceiling (₹25,000)
Monthly Pension Increase
35 years    2 bonus years    37 years    ₹7,928    ₹13,224    ₹5,000+

It is worth noting that a 2-year service bonus is added to the pension calculation for those who have served for more than 20 years.

Understand with an example:
How much pension will an employee with 15 years of service receive?

Suppose your basic salary is ₹25,000 and you have served for 37 years.

Under the old rule, the pensionable salary was considered to be ₹15,000. Based on the formula 15,000 x 37/70, your pension amounted to ₹7,928 per month.

However, with the new rule in effect, the pensionable salary will be considered ₹25,000. Based on the formula 25,000 x 37/70, your pension will be ₹13,224 per month. This means a direct monthly benefit of ₹5,296 for you.

Under the new rule, a basic salary of ₹25,000 now falls under the EPF ambit.

According to the new rule, employees with a basic salary of up to ₹25,000 will now mandatorily come under the EPFO. If an individual's basic salary is ₹25,000, a 12% contribution will be deducted from their salary; this amount comes to ₹3,000. The employer will also make a matching contribution of ₹3,000. Employers are required to comply with this rule. This will benefit employees upon retirement.

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