- Finance Ministry approved increasing EPF salary cap to Rs 25,000.
- More employees will gain mandatory provident fund and pension coverage.
- Implementation expected by April 2027, pending Cabinet approval.
The Finance Ministry has approved a proposal to raise the salary threshold for mandatory coverage under the Employees’ Provident Fund (EPF) from Rs 15,000 to Rs 25,000 per month, according to a Moneycontrol report.
The report said the revised EPF wage ceiling could come into effect from April 1, 2027, although the final implementation date will be decided after the proposal receives Cabinet approval.
More Employees To Come Under Mandatory EPF, EPS
At present, only employees with a basic monthly salary of up to Rs 15,000 are mandatorily covered under the Employees’ Provident Fund (EPF) and Employees’ Pension Scheme (EPS). Those earning above this limit can choose to opt out, and employers are not legally required to enrol them.
If the salary ceiling is increased to Rs 25,000, employees earning between Rs 15,000 and Rs 25,000 a month will also come under mandatory provident fund and pension coverage.
Government Considered Rs 30,000 Ceiling
According to the report, the Department of Expenditure had initially examined increasing the EPF wage ceiling to Rs 30,000 before finalising a proposal to raise it to Rs 25,000.
Cabinet Approval Still Pending
The proposal will now be placed before the Union Cabinet for approval.
Even if it receives the Cabinet’s nod, the revised wage ceiling is not expected to be implemented immediately. Companies will require time to update payroll systems, compliance processes and other operational arrangements.
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According to the report, the government may provide a transition period before the revised salary limit comes into force.
While the proposed implementation date is April 1, 2027, the final timeline will depend on Cabinet approval and the time given to businesses to prepare for the changes.
First Revision Since 2014
The EPF wage ceiling was last revised in September 2014, when it was increased to Rs 15,000.
Government, Employers May See Higher Contribution Outgo
The proposed revision is expected to increase the government’s pension expenditure.
Under the current framework, employers contribute 8.33% of an employee’s basic pay towards the pension fund, while the government contributes 1.16% of the basic pay.
A higher EPF wage ceiling would bring more employees under the Employees’ Pension Scheme (EPS), increasing the number of workers for whom the government contributes. While the contribution rate of 1.16% would remain unchanged, the government’s overall pension contribution is expected to rise.
The change is also likely to increase employers’ costs, as they would have to make provident fund and pension contributions for a larger number of employees.
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