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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

Maharashtra’s Persistent Politician

Writer: Kiran D. Tare
Kiran D. Tare
Dec 6, 2024
4 min read
Devendra Fadnavis

In Indian politics, comebacks are as rare as they are celebrated. Devendra Fadnavis, now firmly ensconced as Maharashtra’s Chief Minister for a third term (technically his second major term), has proven himself an exception. The 53-year-old has rewritten the playbook for survival and success in India’s most industrialised state. A consummate insider, Fadnavis has defied political gravity, brushing off casteist vitriol, internal rivalries and coalition quagmires. His elevation underscores the Bharatiya Janata Party’s (BJP) evolving ethos that loyalty, competence and electoral muscle are prized over ideology and patronage.


Fadnavis’s journey to becoming a three-time Chief Minister is a narrative of remarkable milestones. He holds several records that set him apart from any of his predecessors. Notably, he is the first Deputy Chief Minister in Maharashtra’s history to have previously served as the Chief Minister and then reclaimed the top post. Additionally, he is the first non-Congress leader to achieve the distinction of being Chief Minister three times. Under his leadership, the BJP accomplished an impressive electoral feat: securing a hat-trick of more than 100 seats in successive state elections since 2014. These records underscore his undeniable imprint on Maharashtra’s political landscape.


Fadnavis’s comeback is also a symbolic victory against targeted caste-based animosity. During his political career, he has faced relentless criticism and attacks aimed at his Brahmin identity. Yet, the voters of Maharashtra have shown that they rally behind a leader who is targeted unjustly. This phenomenon reflects a broader rejection of caste-based hatred in the state’s politics, affirming that merit and leadership transcend such divisive tactics. The electorate’s support for Fadnavis highlights their faith in his vision and ability to deliver, rather than succumbing to polarizing narratives.


In his new term, Fadnavis faces the formidable challenge of steering Maharashtra through a complex set of socio-economic issues which call for urgency.


Fadnavis inherits a state grappling with economic stagnation and a battered reputation. Maharashtra, once India’s industrial crown jewel, has seen investment flows drift southward to Karnataka and Tamil Nadu. Perceptions of political instability during the Uddhav Thackeray-led coalition have exacerbated this trend. Fadnavis must rekindle investor confidence, expedite stalled projects, and chart a path for sustained growth in agriculture, industry, and infrastructure.


Maharashtra’s farmers need sustainable solutions to recurring droughts, price volatility, and access to credit. Fadnavis must prioritize reforms that increase productivity and ensure fair remuneration.


Revitalizing Maharashtra’s industrial sector is crucial. By attracting investments and creating a business-friendly ecosystem, the state can reclaim its status as India’s industrial powerhouse. Urban and rural infrastructure development must be accelerated to cater to growing population needs. Projects like the Mumbai Metro, coastal roads, and rural connectivity will have to remain high on the agenda of the ‘Mahayuti 2.0’ under Fadnavis.


Addressing the needs of marginalized communities, ensuring healthcare access, and improving education standards will solidify social cohesion and lastly, Maharashtra’s fiscal health requires prudent management. Striking a balance between welfare spending and revenue generation will be essential for sustainable development.


Fadnavis’s leadership will be judged on how effectively he can address these challenges while maintaining Maharashtra’s economic and social stability.

The BJP’s decision to elevate Fadnavis once again is a clear message to its cadre and beyond: loyalty and merit will always be rewarded. Fadnavis’s unwavering commitment to the party, even during challenging times, has set an example for others within the organization. His elevation reflects the party’s belief in nurturing talent from within and empowering its leaders based on performance rather than expediency.


However, his image remains a double-edged sword. Fadnavis must ensure that he empowers the loyal workers who form the backbone of the BJP. During his first stint as Chief Minister, he was often criticized for being disconnected from the party’s grassroots cadre. This term presents an opportunity for him to rectify that perception and build stronger ties with the party workers. While he has outmanoeuvred rivals, his alliances with defectors and powerbrokers have drawn criticism. This time, with no immediate challengers within the BJP, Fadnavis must focus on reshaping his legacy. Steering clear of opportunistic associations and empowering grassroots workers will be crucial to avoiding the missteps of his earlier tenure.


In a state where Sharad Pawar looms large as a political adversary, Fadnavis must remain vigilant. The NCP (SP) patriarch, renowned for his tactical nous, will exploit any fissures within the Mahayuti coalition.


Fadnavis’s political story has always been one of persistence over privilege. His rise from the municipal corridors of Nagpur to the chief minister’s office in Mumbai has been marked by resilience. Today, Maharashtra’s voters demand not just political resilience but a Chief Minister capable of restoring the state’s pre-eminence on the national stage. Whether Fadnavis can rise to the occasion will define not just his career but also the BJP’s fortunes in the years to come.


Fadnavis, ever the pragmatist, seems acutely aware of this reality. His leadership will determine not only his political legacy but also the trajectory of Maharashtra’s development in the years to come. For Maharashtra’s latest Chief Minister, the future begins now.

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