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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

Ceremonial Power

Feb 11
2 min read

With the Bharatiya Janata Party’s Ritu Tawde assuming office in an unopposed election, Mumbai has broken a glass ceiling as Maximum City gets its first female mayor. It is a moment freighted with symbolism in a metropolis that prides itself on modernity. But this celebration, such as it is, should not obscure a more awkward question which is what exactly, is Mumbai’s mayor expected to do?


Tawde’s opening pitch was suitably ambitious. She acknowledged that Mumbai is creaking under the strain of poor roads, fragile infrastructure, erratic water supply and inadequate drainage. She has solemnly promised to prioritize these. The question is whether she has the powers required to deliver the goods.


In most global cities, the mayor is far more than a ribbon-cutter with a press microphone. In New York, the mayor runs the city government by controlling policing, public schools, transport, housing and sanitation, backed by a gargantuan municipal budget. When services fail, accountability is direct and brutal as voters know whom to blame.


In London, the mayor, who is directly elected, oversees citywide transport, policing priorities, housing programmes and long-term planning. While borough councils handle local services, strategic direction and public responsibility rests at the top.


Berlin’s governing mayor combines city and state authority, wielding control over policing, education and infrastructure in a metropolis of nearly four million people. Even Jakarta, long plagued by congestion and flooding, empowered its governor to push through mass transit projects and coastal defences.


In each case, mayors propose budgets, appoint senior officials and set policy priorities and the buck stops with them.


Mumbai alone persists with the fiction that ceremonial leadership can substitute for executive authority. This authority rests with the municipal commissioner appointed by the Maharashtra government.


The imbalance would be comic if it were not so consequential. The Brihanmumbai Municipal Corporation’s budget for 2025–26 stood at Rs. 74,427 crore, making it one of Asia’s wealthiest civic bodies and richer than several Indian states. Yet the mayor has no role in preparing this budget, reallocating funds or enforcing spending priorities. She cannot appoint or discipline officials. She cannot direct engineers to fix roads or planners to rethink drainage.


The result is institutionalised confusion. When roads crumble or water mains burst, responsibility dissolves into a fog of committees, commissioners and state directives. The very idea of democratic accountability where citizens can reward competence and punish failure is quietly suffocated.


This arrangement suits those in power rather well. State governments retain control over Mumbai’s immense resources without bearing full political cost. Likewise, political parties campaign on civic promises knowing that delivery is optional. Voters are offered mayors as mascots rather than managers.


Mumbai does not lack money, talent or ambition. What it lacks is honesty about who actually runs it. And until that question is answered, mayoral promises will continue to remain hollow speeches delivered from a chair with no legs.

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