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By:

Sumit Ranjan Das

21 August 2024 at 4:08:59 pm

EPFO’s Big Wage-Band Reset

Twelve years is a long time for a wage ceiling to remain unchanged. The last revision came in September 2014, when the limit was raised from Rs.6,500 to Rs.15,000. Last week, the Union Cabinet approved another increase, taking the ceiling to Rs.25,000 a month with effect from 17 September 2026. The government’s estimate is that more than 51 lakh additional employees will come within mandatory EPFO coverage as a result of the change. For employers and payroll professionals, however, the...

EPFO’s Big Wage-Band Reset

Twelve years is a long time for a wage ceiling to remain unchanged. The last revision came in September 2014, when the limit was raised from Rs.6,500 to Rs.15,000. Last week, the Union Cabinet approved another increase, taking the ceiling to Rs.25,000 a month with effect from 17 September 2026. The government’s estimate is that more than 51 lakh additional employees will come within mandatory EPFO coverage as a result of the change. For employers and payroll professionals, however, the headline number is only the starting point. The more important questions are who will be covered, which wages will be taken into account and how the revised provisions will be implemented. Wage Ceiling The existing wage ceiling of Rs.15,000 a month is being raised by Rs.10,000, or 66.7 percent, to Rs.25,000. The change takes effect from 17 September 2026 and marks the first revision since September 2014. The government expects more than 51 lakh additional employees to be covered. Estimated expenditure is about Rs.56,696 crore over five years, while annual government outgo is expected to rise to approximately Rs.11,339 crore. The standard contribution remains 12 percent each from the employee and employer, subject to applicable provisions. The Cabinet said the decision will expand access to provident-fund savings, pension protection under the Employees’ Pension Scheme (EPS) and insurance protection under the Employees’ Deposit Linked Insurance Scheme (EDLI), in accordance with the applicable scheme provisions. The wage ceiling is not merely an administrative threshold. It determines the point at which mandatory EPF coverage applies under the existing framework. At present, a fresh employee joining employment at wages above Rs.15,000 a month is not automatically brought within mandatory EPF coverage and may remain outside mandatory provident-fund, pension and associated insurance protection, subject to applicable statutory provisions. The revised ceiling will bring a substantial section of employees earning between Rs.15,000 and Rs.25,000 within the mandatory coverage framework. The government has also quantified the fiscal impact. The estimated expenditure is about Rs.56,696 crore over five years, while annual government outgo is expected to rise to approximately Rs.11,339 crore, compared with existing annual budgetary support of about Rs.10,250 crore. The Labour Ministry has linked the revision to sustained wage growth, rising incomes and the continued expansion of formal employment since the previous revision in 2014. Payroll Illustration Consider an employee earning Rs.22,000 a month who becomes subject to mandatory coverage under the revised ceiling. At the standard 12 percent contribution rate, if the full eligible wage is used as the contribution base, the employee’s contribution would rise from Rs.1,800 to Rs.2,640 a month, while the employer’s contribution would similarly rise from Rs.1,800 to Rs.2,640. Total monthly contributions would therefore increase from Rs.3,600 to Rs.5,280 — a combined increase of Rs.1,680. However, this should not be treated simply as Rs.1,680 of additional employee savings. Contributions are allocated between EPF and EPS components as prescribed, with the EPF component accumulating in the employee’s account and the EPS component providing pension benefits subject to scheme conditions. The Rs.22,000 example is illustrative, not a universal payroll formula. The final treatment of wage components, existing employees in this band, EPS allocation and transitional matters will depend on the statutory notification and EPFO implementation instructions. For payroll professionals, the immediate task is to assess the operational impact. Key questions include the effective date for existing employees and new joiners, which wage components will count towards PF, whether the 10 percent concessional rate for notified establishments will continue, how the revised ceiling will interact with EPS pensionable wages, and what changes will be required in payroll systems. The Cabinet approval establishes the policy decision; the formal Gazette notification and EPFO instructions will determine how it is translated into payroll processes. The revised ceiling is the first increase since September 2014 and is expected to bring more than 51 lakh additional employees, particularly those in the Rs.15,000-Rs.25,000 wage band, under mandatory EPFO coverage. For them, the change can expand access to provident-fund savings, EPS pension and EDLI insurance, subject to scheme provisions. For employers, it means reviewing payroll costs, employee data, eligible wage components, contribution calculations and compliance systems. The government has described the move as part of efforts to extend statutory social security and strengthen formal employment. The policy has been announced. For payroll professionals, the next chapter is implementation. (The writer is a Cost and Management Accountant and founder of TaxoDas. Views personal

Battle royale at Prabhadevi-Mahim belt

Naresh Kamath
Jan 13
3 min read

Amidst cut-throat competition, five seats up for grabs

Mumbai: South Central Mumbai’s Prabhadevi-Mahim belt, an epicentre of Mumbai’s politics, promises a cut-throat competition as the two combines – Mahayuti and the Shiv Sena (UBT)-Maharashtra Navnirman Sena (MNS) combine – sweat it out in the upcoming BrihanMumbai Municipal Corporation (BMC) polls.


It is the same ward where Shiv Sena founder Bal Thackeray used to address mammoth rallies at Shivaji Park and also the residence of MNS chief Raj Thackeray.


This belt has five wards and boasts of famous landmarks like the Siddhivinayak temple, Mahim Dargah and Mahim Church, and Chaityabhoomi, along with the Sena Bhavan, the headquarters of Shiv Sena (UBT) combine.


This belt is dominated by the Maharashtrians, and hence the Shiv Sena (UBT)-MNS has been vocal about upholding the Marathi pride.


This narrative is being challenged by Shiv Sena (Shinde) leader Sada Sarvankar, who is at the front. In fact, Sada has fielded both his children Samadhan and Priya, from two of these five wards.


Take the case of Ward number 192, where the MNS has fielded Yeshwant Killedar, who was the first MNS candidate announced by its chief, Raj Thackeray. This announcement created a controversy as former Shiv Sena (UBT) corporator Priti Patankar overnight jumped to the Eknath Shinde camp and secured a ticket. This raised heckles among the existing Shiv Sena (Shinde) loyalists who raised objections. “We worked hard for the party for years, and here Priti has been thrust on us. My name was considered till the last moment, and overnight everything changed,” rued Kunal Wadekar, a Sada Sarvankar loyalist.


‘Dadar Neglected’

Killedar said that Dadar has been neglected for years. “The people in chawls don’t get proper water supply, and traffic is in doldrums,” said Killadar.


Ward number 191 Shiv Sena (UBT) candidate Vishaka Raut, former Mumbai mayor, is locked in a tough fight against Priya Sarvankar, who is fighting on the Shiv Sena (Shinde) ticket. Priya’s brother Samadhan is fighting for his second term from neighbouring ward 194 against Shiv Sena (UBT) candidate Nishikant Shinde. Nishikant is the brother of legislator Sunil Shinde, a popular figure in this belt who vacated his Worli seat to accommodate Sena leader Aaditya Thackeray.


Sada Sarvankar exudes confidence that both his children will be victorious. “Samadhan has served the people with all his dedication so much that he put his life at stake during the Covid-19 epidemic,” said Sada. “Priya has worked very hard for years and has secured this seat on merit. She will win, as people want a fresh face who will redress their grievances, as Vishaka Raut has been ineffective,” he added. He says the Mahayuti will


Ward number 190 is the only ward where the BJP was the winner last term (2017) in this area, and the party has once nominated its candidate, Sheetal Gambhir Desai. Sheetal is being challenged by Shiv Sena (UBT) candidate Vaishali Patankar. Sheetal vouches for the BJP, saying it’s time to replace the Shiv Sena (UBT) from the BMC. “They did nothing in the last 25 years, and people should now give a chance to the BJP,” said Sheetal.


Incidentally, Sheetal is the daughter of Suresh Gambhir, a hardcore Shiv Sena founder Bal Thackeray loyalist, who has been a Mahim legislator for 4 terms and even won the 1985 BMC with the highest margin in Mumbai.


In the neighbouring ward number 182, Shiv Sena (UBT) has given a ticket to former mayor and veteran corporator Milind Vaidya. He is being challenged by BJP candidate Rajan Parkar.


Like the rest of Mumbai, this belt is also plagued by inadequate infrastructure to support the large-scale redevelopment projects. The traffic is in the doldrums, especially due to the closure of the Elphinstone bridge. There are thousands of old buildings and chawls which are in an extremely dilapidated state.


The belt is significant, as top leaders like Manohar Joshi, Diwakar Raote and Suresh Gambhir have dominated local politics for years. In fact, Shiv Sena party’s first Chief Minister, Manohar Joshi, hailed from this belt.

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