top of page

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

Indian Science Funding Comes Full Circle

Jun 18
4 min read

ANRF reconnects modern India with an ancient tradition which posits that the pursuit of knowledge is a responsibility shared by the entire nation.

AI generated image
AI generated image

The Anusandhan National Research Foundation (ANRF) is often seen as a new experiment in science funding. In reality, it represents the return of a long Indian tradition in which governments, industry, philanthropy and society collectively supported the pursuit of knowledge.


For most of India’s history, knowledge creation was supported by a diverse ecosystem of patrons. Kings, communities, religious institutions, merchants, philanthropists and governments all contributed, in different ways and at different times, to the advancement of learning. The period after Independence, when government became the overwhelmingly dominant patron of science, was historically unusual.


Ancient centres of learning such as Nalanda, Takshashila and Vikramashila flourished through combinations of royal patronage, endowments and community support. Throughout much of Indian history, rulers, institutions and society shared responsibility for nurturing scholarship and learning.


Even during the colonial period, some of the most inspiring examples of scientific institution-building emerged through philanthropy and public initiative rather than government action alone. The Indian Association for the Cultivation of Science (IACS), established in Kolkata in 1876 by Dr. Mahendra Lal Sircar through public subscriptions and philanthropy, sought to create opportunities for Indians to conduct original scientific research. More than half a century later, it became the site of C. V. Raman’s pioneering work that led to India’s first Nobel Prize in science. A similar spirit inspired Prof. Shankar Purushottam Agharkar to establish the Maharashtra Association for the Cultivation of Science (MACS) in Pune on 5 October 1946. Built with modest resources and strong community support, MACS reflected the belief that scientific advancement required active participation from society. It would later evolve into today’s Agharkar Research Institute.


Perhaps the most powerful example is the Indian Institute of Science. Conceived through the vision of Jamsetji Tata and realized through the combined support of philanthropy, the Maharaja of Mysore and the Government of India, IISc was founded in 1909 and admitted its first students in 1911. During a voyage in 1893, Tata and Swami Vivekananda discussed India’s future and the need to build national capabilities in science and industry. Although Vivekananda did not directly participate in the institution’s establishment, his ideas formed part of the intellectual environment that inspired its creation.


IISc embodied an early multi-stakeholder model of institution-building. An industrialist’s philanthropy, princely patronage, government support and intellectual leadership converged to create what would become India’s premier research university.


These examples remind us that Indian science was never funded exclusively by governments. It often flourished because multiple stakeholders invested in the creation of knowledge.


Dramatic Shift

Independence brought a dramatic shift. Faced with poverty, food shortages, disease and technological dependence, India adopted a state-led model for scientific development. Prime Minister Jawaharlal Nehru placed science at the centre of nation-building, and the Scientific Policy Resolution of 1958 formally established that the State must play a leading role in supporting scientific research.


This model was both justified and necessary. Independent India inherited limited industrial capacity, modest philanthropic resources and enormous developmental challenges. Building scientific capability on a national scale required investments that only the State could make.


The results were remarkable. Public investment built one of the largest scientific systems in the developing world and enabled achievements across agriculture, healthcare, nuclear science, space technology and several strategic sectors.


Today’s India is very different. It is among the world's largest economies. Its private sector is globally competitive. Philanthropic giving has expanded significantly. Yet India’s research and development expenditure remains at about 0.65 percent of GDP, well below that of many technologically advanced nations. More than 70 percent of India’s R&D expenditure still comes from government sources, unlike in many advanced economies, where industry contributes the larger share.


Some argue that industry already funds the research it needs and that publicly funded institutions should increasingly sustain themselves through commercialization. While both arguments have merit, they do not fully address the needs of a vibrant scientific ecosystem.


The most transformative discoveries often arise from questions whose practical applications are not immediately apparent. When J. C. Bose investigated radio waves or C. V. Raman studied the scattering of light, few could have predicted the technologies that would eventually emerge from their work. Curiosity-driven research, long-term investigations and emerging fields often require support that extends beyond immediate commercial or governmental priorities.


History suggests that societies achieve their greatest scientific advances not when responsibility is assigned exclusively to one sector, but when governments, universities, industry, philanthropy and citizens collectively invest in creating knowledge.


Vital Project

Ironically, the period from 1947 to 2023, when government became the dominant patron of science, may prove to be the exception rather than the rule in the long history of Indian knowledge creation.


That is precisely where ANRF becomes important. Of the Rs. 50,000 crore envisaged for ANRF during 2023–28, Rs. 14,000 crore is expected from government sources, and Rs. 36,000 crore from industry, philanthropy, public sector enterprises and other non-government partners. The architecture itself reflects a principle deeply embedded in India’s history that the advancement of knowledge is a shared national responsibility.


By bringing together government, academia, industry and philanthropy, ANRF seeks to expand the community of institutions and individuals invested in advancing knowledge.


The history of science funding in India can be viewed as three broad phases. Ancient and medieval India relied on rulers, institutions and society. Independent India relied primarily on the State. The ANRF era seeks to combine the strengths of both approaches through a partnership among government, industry, philanthropy, academia and society.


For centuries, India’s great centres of learning and scientific achievement were sustained by a broad coalition of patrons. By uniting government, academia, industry and philanthropy in a common national endeavour, ANRF gives that tradition a contemporary form.


(The writer is an ANRF Prime Minister Professor at COEP Technological University, Pune, and former Director of the Agharkar Research Institute, Pune. Views personal.)

Comments


bottom of page