The Employees' Provident Fund Organisation (EPFO) has recently introduced significant changes to its rules. Under these amendments, the salary limit for EPFO coverage has been raised from the previous 15,000 rupees per month to 25,000 rupees monthly. The government anticipates that this change will bring over 510,000 additional employees under the purview of EPFO, and it will also increase the PF contribution from employee salaries.
Previously, EPFO set the salary limit at 15,000 rupees. This meant that an employee earning a basic salary of 20,000 rupees per month exceeded the legally established threshold and was not covered by the system. However, after the limit was increased to 25,000 rupees, they now fall under mandatory coverage, meaning their contributions to the pension fund will begin.
The main benefit for such an employee earning 20,000 rupees will be the ability to receive benefits from accumulated PF funds upon retirement, entitlement to a pension under EPS, and insurance coverage under the EDLI scheme linked to the employee's savings.
The modified EPFO salary limit, increased from 15,000 to 25,000 rupees, came into effect on September 17, 2026. Consequently, a proportional calculation based on the old and new salary limits will be required in September. The first full month of work under the new rules will commence in October, according to the EPFO rule change.
Let's consider an example for an employee with a salary of 20,000 rupees. Starting in October, this employee will contribute 12% of their salary to EPF, which amounts to 2,400 rupees. The employer will also contribute 2,400 rupees. This employer contribution will be divided between the Employee Pension Scheme (EPS) and the EPF Account.
Of this amount, 1,666 rupees, which is 8.33%, will go to EPS, and 734 rupees, corresponding to 3.67%, will go to EPF. Thus, the total contribution from the employee and employer will be 4,800 rupees. It should be noted that this calculation is based on the example provided by EPFO for October 2026.
The changed limit also affects employees who were already EPF members but were excluded from EPS because their salary exceeded the former limit of 15,000 rupees per month. EPFO states that existing EPF members earning 20,000 rupees who were not EPS members are now obligated to join EPS according to the amended provisions.
The answer to this question is negative. In fact, the sum of 25,000 rupees is the adjusted statutory salary limit, not a single base for contributions for every worker. If an employee's salary is below the established limit of 25,000 rupees, the contribution calculation is made based on that actual salary. The Employees' Provident Fund Organisation clarified that PF salary and gross salary do not necessarily have to match.
For instance, in the EPFO example for October, the employee contribution is set at 1,200 rupees for a salary of 10,000 rupees, 2,400 rupees for a salary of 20,000 rupees, and 3,000 rupees for the adjusted limit of 25,000 rupees.
It is evident that employees whose contributions were previously capped at the 15,000 rupee limit may face an increase in monthly deductions in PF. Accordingly, the employer's contribution will also rise proportionally. The impact on the employee's salary will depend on their current contribution and salary structure. Furthermore, the organization emphasized that the legal contributions of the employer and employee are legally separate, and part of the employer's contribution cannot be considered a deduction from the employee's salary, classifying it as part of the CTC.
