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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

Diego Garcia: The Eye of a Geopolitical Storm

Writer: Sumant Vidwans
Sumant Vidwans
Jun 15, 2025
4 min read

What started in the late 1960s as a Cold War strategy left generations of Chagossians exiled from their homeland — a reality still unaddressed despite a historic sovereignty deal.

On May 22, 2025, the UK and Mauritius signed a deal to end a long-standing colonial dispute over the Chagos Archipelago. Sovereignty transfers to Mauritius, marking a key decolonisation milestone, while military access is preserved. Diego Garcia, hosting a major US-UK base, stays under British control for 99 years, with possible extension.


While officials in Port Louis celebrate and policymakers in London declare a new chapter, the displaced and exiled Chagossian community finds little to celebrate. Their concerns remain sidelined in a geopolitical arrangement with far-reaching implications — not just for the region’s strategic landscape but also for human rights and historical accountability.


In the late 1960s and early 1970s, nearly 2,000 Chagossians were forcibly evicted for a US-UK military base on Diego Garcia. The archipelago was separated from Mauritius in 1965, just before Mauritius gained independence, to maintain UK strategic control amid Cold War tensions.


Mauritius long maintained that the UK’s separation of the Chagos Archipelago was illegal and breached international decolonisation principles. In 2017, the UN General Assembly asked the International Court of Justice to issue an opinion on the legality of the UK’s continued administration of the islands.


In 2019, the ICJ concluded that the UK had violated international law and that decolonisation remained incomplete. A subsequent UNGA resolution reinforced this, calling for the territory’s decolonisation and the return of the islands to Mauritius.


Diego Garcia was established as a forward base to counter the growing Soviet influence in the Indian Ocean. It later became vital to US and UK military operations in Iraq, Afghanistan, and, more recently, maritime missions across the Indo-Pacific. Today, it remains a key hub for surveillance, logistics, and regional security, highlighting its ongoing geopolitical importance.


The 2025 UK–Mauritius Agreement

The May 2025 agreement formally transferred sovereignty of the Chagos Archipelago to Mauritius, though Diego Garcia will remain under British military control for an initial 99-year lease, ensuring uninterrupted joint operations.


The UK will pay Mauritius just over £3 billion (approx. $3.8 billion or Rs 31,500 crore) over the lease period, with annual payments of around £165 million (approx. $210 million or Rs 1,375 crore) in the early years, dropping to £120 million (approx. $150 million or Rs 1,000 crore) later. While financially substantial, critics argue no sum can compensate for the moral and historical debt to displaced Chagossians.


Chagossian Voices and Human Rights Concerns

The agreement’s omission of return or compensation provisions has angered the Chagossian community. They argue it ignores the injustices faced by generations who remain stateless, disenfranchised, and exiled. With no legal path to resettlement or citizenship, many fear it ends any real hope of return. Human rights groups have echoed these concerns, urging the UK and Mauritius to establish a parallel mechanism focused on displaced Chagossians’ rights.


UK Prime Minister Keir Starmer called the agreement a pragmatic compromise that safeguards national security while resolving longstanding legal and diplomatic issues. He emphasised that Diego Garcia remains central to the UK’s Indo-Pacific strategy and the Five Eyes intelligence alliance.


Critics, particularly from the Conservative opposition, accused the government of giving up sovereign territory and burdening taxpayers with a costly, uncertain deal. They also voiced concern over potential Chinese influence via its growing presence in Mauritius.


Mauritius, by contrast, hailed the deal as a milestone in its post-colonial journey. Authorities plan to raise the national flag ceremonially across the archipelago, marking restored territorial integrity. Observers say the deal may boost Mauritius’s standing in regional bodies like the Indian Ocean Rim Association and strengthen ties with India.


Geopolitical Flashpoints

Strategically, the deal enables Western powers to retain uninterrupted access to a key naval outpost in the Indian Ocean. With rising threats to maritime trade from piracy, unrest, and global rivalries, Diego Garcia’s importance has grown. Continued military presence ensures rapid deployment and seamless intelligence sharing in the region.


India welcomed the agreement, seeing the sovereignty transfer as a counter to China’s naval expansion in the Indian Ocean. Closer India–Mauritius ties, through aid, maritime cooperation, and diplomacy, align with India’s Indo-Pacific strategy.


However, concerns remain. Some experts warn that large UK payments may make Mauritius more open to Chinese influence. With Beijing expanding across Indian Ocean ports — from Sri Lanka to East Africa — fears of strategic encroachment are not unfounded.


Australia and other Five Eyes members support continued operations at Diego Garcia, highlighting its role in regional stability, counter-terrorism, and deterrence. They view the deal as a blueprint for balancing decolonisation with defence continuity.


Successful implementation depends on ratification, smooth transition, and effective oversight. The deal may boost Mauritius’s regional role, but unresolved Chagossian grievances could spark fresh legal challenges. Political shifts, especially closer ties with China, may also reshape strategic dynamics. While the agreement offers a short-term balance, its long-term viability remains uncertain.


(The writer is a foreign affairs expert. Views personal.)

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