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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

Mahashivratri: The wants fast

Writer: Kaustubh Kale
Kaustubh Kale
Feb 14
2 min read

Mahashivratri is associated with discipline, stillness, and control over impulses. Most people interpret fasting as a food ritual. But what if you tried a different kind of fast this year - one that improves your finances and your health? I call it as “Wants Fast” for 30 days.


The Simple Rule

The idea is simple. For one full month, you do not spend money on wants, only needs. Not as punishment, but as a reset - because in personal finance, the biggest damage rarely comes from one big mistake. It comes from small, frequent “leaks” that quietly drain your wealth.


Needs vs Wants

Let us define it clearly. Needs are essentials: groceries, medicines, fuel, rent/EMIs, electricity and phone bills, and truly necessary household and work expenses. Wants are everything else: online shopping “because it was on sale,” impulse café visits, random Swiggy/Zomato orders, unplanned outings, new gadgets/accessories, and subscriptions you do not even use.


Why It Works

This experiment works because impulse spending is emotional, not logical. We buy because we are bored, stressed, tired, or scrolling. A Wants Fast breaks that loop, and you will quickly spot patterns you never noticed before.


The 48-Hour Pause Protocol

To make it practical, follow a few rules. Start with the 48-Hour Pause Protocol. Whenever you feel like buying something non-essential, wait 48 hours. You will be shocked how many “must-haves” disappear in two days.


The One Place Investment Rule

Now here is the key upgrade for this month. Do not just save the money you avoid spending, invest it, and invest it in one place. Pick one instrument only for the entire month: one mutual fund scheme, or one good-quality stock, or one ETF (like a Nifty ETF, for simplicity). Every time you skip a want, take that exact amount (or consolidate it weekly) and invest it into that single chosen instrument.


Why Consolidation Matters

Why this “one place” rule? Because consolidation makes the result visible. When you spread savings across multiple items, you do not feel the impact. But when all that avoided spending accumulates in one mutual fund, one ETF, or one stock, you will physically see how much money was leaking from your lifestyle. Many people underestimate this until they witness the lumpsum created in just 30 days.


The Health Dividend

And yes, there is a health benefit too. A Wants Fast naturally reduces ordering out, late-night snacking triggered by scrolling, and “reward spending” that often comes with sugary drinks and junk food.Money improves, and so does your body.


The 30-Day Audit

At the end of 30 days, do a personal audit: which expenses were pure noise, and which were definitely necessary. Because fasting is not about hunger, it is about control. If you like the concept of Wants Fast, maybe extend it for a month or two more, remember - money saved is money earned. 


(The author is a Chartered Accountant and CFA (USA). Financial Advisor.  Views personal. He could be reached on 9833133605.)


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