New Delhi: If a family member of yours has PF (Provident Fund) deductions, this news will prove very useful. The Central Government has surprised everyone by announcing a major change regarding the EPF (Employees’ Provident Fund). The government has effectively given a significant gift to the country’s salaried workforce.
In a cabinet meeting chaired by PM Narendra Modi on Wednesday, the salary threshold for mandatory EPF coverage was raised from ₹15,000 to ₹25,000 per month. This is a historic decision approved by the government. While announcing this change—the first of its kind in 12 years Union Minister Ashwini Vaishnaw stated that this decision would bring approximately 51 lakh additional employees across the country under the social security net.
Major details shared by the Minister
Union Minister Ashwini Vaishnaw shared this significant information. He stated that the government would bear an annual expenditure of approximately ₹11,339 crore to implement this new threshold. The estimated total expenditure on this scheme over the next five years is projected to be ₹56,696 crore.
He further explained that the PF contribution consists of three parts: the employee’s share, the employer’s (company’s) share, and the government’s share. The Central Government’s contribution goes directly into the employee’s pension fund, i.e., the EPF.
How many employees will benefit?
Union Minister Ashwini Vaishnaw informed that this decision could bring over 51 lakh employees under the ambit of mandatory EPFO coverage. This paves the way for these employees to avail the benefits of PF and the associated social security system. EPF involves contributions from both the employee and the employer, while the government’s contribution is linked to the employee’s pension.
Let’s understand with an example.
Suppose an employee has a basic salary of ₹20,000 per month. Under the old rules, the PF deduction was calculated based on a salary of ₹15,000 (at a rate of 12%, amounting to ₹1,800), with the company making a matching contribution of ₹1,800. Under the new rules implemented by the Central Government, the PF deduction will be calculated at 12% of the employee’s basic salary of ₹20,000, resulting in a deduction of ₹2,400.
The company will also contribute ₹2,400. While this will lead to a slight reduction in Ramesh’s take-home pay, a larger amount will be deposited into his PF account each month, causing his retirement fund to grow more rapidly.
Estimated Annual Expenditure
This decision by the Central Government is estimated to result in an additional annual expenditure of approximately ₹11,339 crore. The current annual budgetary support stands at around ₹10,250 crore. Over a period of five years, the government’s estimated expenditure could reach approximately ₹56,696 crore.
