Employees are expected to receive good news soon, as a proposal to raise the Provident Fund account contribution from Rs. 15,000 to Rs. 21,000 has reached the Union Finance Ministry.
This long-demanded proposal is likely to be positively considered. If it is approved, the maximum pension for employees working in the organized sector will be affected.
The Union Ministry of Labor and Employment has forwarded proposals to the Center to increase the maximum Employees’ Pension Scheme (EPS) contribution limit to Rs. 21,000.
If approved, this will result in an increase in the pension received by employees in the organized sector. Currently, the maximum wage limit for a provident fund pension is Rs. 15,000.
However, if the proposal to raise the limit to Rs. 21,000 is approved, the maximum pension will also increase. The Employees’ Provident Fund Organization (EPFO) oversees the Employees’ Pension Scheme.
On September 1, 2014, the Center increased the PF salary limit for calculating EPS pension to Rs. 15,000 after it had remained at Rs. 6,500 for a long period.
However, it has yet to be revised since 2014. As a result, there have been ongoing demands for a decade to increase it to Rs. 21,000.
Let’s examine the EPS pension calculations:
- EPS Pension = (Average Salary X Pensionable Service) / 70.
- The average salary refers to the basic salary plus dearness allowance combined.
Example 1
- The current maximum salary limit is Rs.15 thousand.
- EPS Pension = 15000×35/70 = 7500
- At present, the maximum pension is Rs.7500 per person.
- So, the maximum salary limit is Rs. 15,000, resulting in a maximum pension of Rs. 7,500 per person.
Example 2
- If the salary limit is increased to Rs. 21,000.
- EPS Pension = (Average Salary X 35) / 70 = Rs. 10,050
This means that if the wage limit is raised to Rs. 21,000, the maximum monthly pension will be Rs. 10,050, providing an additional benefit of Rs. 2,550 per month compared to the current maximum pension. This will offer additional benefits to eligible employees after retirement.