EPF salary limit may be raised to Rs 25,000: How your PF and pension could change

New Delhi: The Central Government is preparing to increase the maximum salary ceiling under the Employees' Provident Fund (EPF) and Employees' Pension Scheme (EPS) from Rs 15,000 to Rs 25,000.

According to reports, the Expenditure Department under the Ministry of Finance has approved the proposal. The revised salary ceiling will come into effect once it receives Cabinet approval.

Under the EPF scheme, which has been in force since September 1, 2014, the wage ceiling has remained at Rs 15,000. The effective date for the proposed increase to Rs 25,000 will be decided after Cabinet clearance, with indications suggesting it could be implemented from April 2027.

What changes if the salary limit is raised?

For employees who joined service on or after September 1, 2014, a mandatory 12 per cent of Rs 15,000 (Rs 1,800) is currently contributed to the EPF, regardless of their actual salary. Employers are required to make an equal contribution.

Of the employer's contribution, Rs 1,250 (8.33 per cent of Rs 15,000) is credited to the pension fund, while the remaining amount goes to the provident fund. As a result, a total of Rs 2,350 is credited to the EPF account.

If the salary ceiling is increased to Rs 25,000, the employee's contribution to the EPF will rise to Rs 3,000. From the employer's matching contribution of Rs 3,000, Rs 2,082 (8.33 per cent of Rs 25,000) will be diverted to the pension fund, while the remaining Rs 918 will be credited to the provident fund. This would increase the total EPF contribution to Rs 3,918.

For existing EPF members, the employer's contribution to the pension fund would increase from Rs 1,250 to Rs 2,082, resulting in higher pension benefits upon retirement.