The government can increase the wage ceiling limit in the EPF scheme. Currently it is Rs 15,000. It can be increased to Rs 21,000. This will affect crores of people working in private companies.
The government last increased the wage ceiling limit in 2014. Then it was increased from Rs 65000 to Rs 15,000. If the government increases the wage ceiling limit, then the contribution of the employee and employer in retirement and pension savings will increase.
Contribution to EPS will increase every month
Experts say that increasing the wage ceiling limit will increase the contribution to EPS . This will increase the pension received by the employee after retirement. Every month, the employee and the employer have to contribute equal amount in EPF. 12% of the employee’s basic salary is deposited in EPF. The employer also contributes 12% of the basic salary. Out of this 12%, 8.33% is deposited in the EPS account. The rest is deposited in the EPF account.
Calculation based on wage ceiling limit of Rs 15,000
Currently, 8.33 percent of Rs 15,000 is deposited in the employee’s pension account (EPS) every month. When the wage ceiling limit increases to Rs 21,000, 8.33 percent of this amount will be deposited in his EPS account. This means that Rs 1,749 will be deposited in the employee’s EPS account every month. Currently, 8.33 percent of Rs 15,000, i.e. Rs 1,250 is deposited in the employee’s EPS account every month.
Out of the employer’s 12% contribution, 8.33% goes to EPS
Experts say that if the government increases the wage ceiling limit, then the pension amount of the employee will increase. The reason for this is that after retirement, the employee gets the entire amount deposited in EPF in lump sum. But, he gets pension every month on the money deposited in EPS. By increasing the wage ceiling limit, more money will be deposited in his EPS account every month.
Change in wage ceiling limit 10 years ago
This will result in a good amount of money being deposited in his EPS account till retirement. This will also increase his pension every month. Experts say that the government had revised the wage ceiling limit 10 years ago. Meanwhile, inflation and income have increased. Therefore, the government should make changes in it.
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