Union Budget 2025: Experts predict that in the upcoming year’s Union Budget, which is scheduled to be presented on February 1, the Center will likely announce an increase in the wage ceiling under the Employees’ Provident Fund Organization (EPFO). According to reports, the labor ministry submitted a proposal to the finance ministry earlier this year to raise the wage cap for workers covered by the EPFO. Since the Employees’ Pension Scheme (EPS-95) monthly contributions to the EPF and pension plan are correlated with the wage ceiling, if the limit is raised to Rs 21,000 as anticipated, employees will have a larger retirement corpus and pension upon retirement.
Impact of EPS-95 on retirees’ pensions and retirement corpus
Employees covered by the EPS-95 will probably see an increment in their retirement corpus and pension amount if the wage ceiling is raised to Rs 21,000. In addition, it will immediately result in higher expenses for employers and lower employee monthly salaries. Both the pension contribution 8.33% of the salary towards EPS and the employer’s contribution to the Employees’ Provident Fund 3.67% going towards EPF would rise with the cap raised to Rs 21,000, according to SandeepvAgrawal, Director and Founder of Team lease Regtech.
As EPF contributions 12% of the employee’s and employer’s salary increase, employees’ retirement corpus would grow dramatically with a higher EPF wage ceiling, resulting in greater savings over time, he continues. Furthermore, according to Agrawal, raising the ceiling to Rs 21,000 would raise the pensionable salary and result in a larger monthly pension.
The new pension would be computed as Rs 21,000 x 35 / 70, or Rs 10,050 per month, if the wage ceiling was raised to Rs 21,000. This amounts to a monthly increase of Rs 2,550 in the EPS pension, which will greatly raise the retirement income for qualified workers and give them more financial stability after they retire.
Germany to Issue 200,000 Skilled Worker Visas in 2024 – Complete Guide
Labor unions are demanding for an increase in the wage cap to Rs 25,000
Labor unions have been urging the government to raise the EPF wage ceiling from the current Rs 15,000 to Rs 25,000 in order to fight inflation and rising living costs. Given that salaries and expenses have been rising steadily over time, the current cap of Rs 15,000 is thought to be insufficient to guarantee workers a sufficient income after retirement. Many workers make far more than this, especially in the organized sector, and unions contend that their retirement benefits ought to reflect their increased income, according to Agrawal.
Sheffield University Scholarship 2024-25 [£10,000], Apply Now, Eligibility to Selection Process
US Rice University Scholarship for Indian Students [$2 Million], Apply Online
Changes to the EPF wage ceiling over time
Rising food and energy prices were the main causes of India’s 5.1% inflation rate in 2023. Sharp increases in food prices were the primary cause of the 2024 inflation rate’s October spike to 6.21%. These inflationary pressures imply that worker’s purchasing power has diminished, necessitating a wage ceiling revision to keep social security benefits in line with the state of the economy.
