GOVERNMENT MAY RAISE EPFO WAGE CEILING TO ₹21,000
The proposed increase in the EPFO wage ceiling to ₹21,000 is a significant step forward for many employees. This means that more of their salary will be contributed to their provident fund, leading to a larger retirement corpus.
The current wage ceiling of ₹15,000 (Which used to be ₹6,500 in 2014) for employees’ contribution may get raised for them to invest more into their EPF corpus, according to the report.
Key Benefits of This Increase:
- Enhanced Retirement Savings: Employees earning above the current wage ceiling will now contribute more to their EPF, resulting in a substantial increase in their retirement savings.
- Improved Financial Security: A larger EPF balance can provide greater financial security during retirement, helping individuals meet their living expenses and maintain their lifestyle.
- Increased Pension Benefits: For those eligible for the Employees’ Pension Scheme (EPS), a higher wage ceiling will lead to increased pension benefits upon retirement.
How do EPFO contributions work?
- Both the employee and the employer contribute 12% of the employee’s salary each if the employee earns ₹15,000 or less each month.
- However, the employer’s contribution is divided into two parts. 8.33% is allocated to the Employee Pension Scheme (EPS) while the remaining 3.67% goes to the provident fund.
How much can the revised wage ceiling increase the EPFO interest amount?
An employee joining the EPFO scheme at the age of 23 to contribute to the fund for 35 years with a basic pay of ₹15,000 will get a total corpus of ₹71.55 lakh, with the compounded interest amount alone being ₹60.84 lakh from the total contribution of ₹10.71 lakh at an 8.25% interest rate per annum.
If the limit is hiked to ₹21,000, the total corpus would reach ₹1 crore, with an invested amount of ₹15 lakh and interest amount of ₹85 lakh, meaning the employee can earn an extra ₹28.45 lakh if the salary is ₹21,000 and the hike also happens.
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