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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

Rs. One-lakh-crore at stake

Quaid Najmi
Jan 13
2 min read

Bookies bet big on BJP in BMC polls

Mumbai: As the campaign curtains fell today for the high-stakes Brihanmumbai Municipal Corporation (BMC) elections scheduled on January 15, the underground bookie market threw up startling projections, hinting at a decisive verdict in India’s richest civic body on Friday.

 

According to illegal betting syndicates, wagers on the BMC polls have already crossed an eye-popping Rs.1 lakh crore, underscoring the intense interest of political operators, contractors and power brokers eager to capture control of the 227-ward civic giant.

 

With an annual budget of Rs. 74,000 crore, the BMC election has turned into far more than a routine municipal contest - it is a battle for political and financial supremacy in Maharashtra.

 

 

Advantage Mahayuti

Bookmakers say the ruling Mahayuti alliance appears firmly in the driver’s seat, with trends mirroring its strong performance in the November 2024 Maharashtra Assembly elections. The Bharatiya Janata Party (BJP) is tipped to emerge as the single largest party, bagging between 95 and 100 wards.

 

Its ally, the Eknath Shinde-led Shiv Sena, is projected to secure 45-50 wards, while the Ajit Pawar-led Nationalist Congress Party (NCP) may have to settle for a modest 5-7 wards. Together, the Mahayuti is expected to comfortably leap through the majority mark of 114 wards needed to control the BMC.

 

 

MVA luckless?

On the opposition side, bookies paint a sad and sorry picture. Shiv Sena (UBT), which once lorded over BMC for nearly three decades, may get deflated with only 20-25 wards, sharply undercutting its own expectations. After a two-decade separation, Raj Thackeray’s Maharashtra Navnirman Sena (MNS) is predicted to make modest gains in 7-9 wards.

 

However, politics remains unpredictable. The recent high-decibel speeches by Raj Thackeray and his nephew Aditya Thackeray at Shivaji Park - especially their aggressive attack on the Adani Group – ignited widespread debate and could arouse sections of lower-middle-class and Marathi voters.

  

Congress-VBA confusion

Following its exit from the MVA in October, the Congress tied up with Prakash Ambedkar’s Vanchit Bahujan Aghadi (VBA), but the alliance faces hurdles, claim bookies.

 

At best, the Congress-VBA could capture around 25-27 wards - a move many within political circles believe could erode the opposition’s collective ability to challenge Mahayuti.

 

Despite the multi-cornered nature of the contest and multiple parties espousing similar civic promises, bookmakers remain upbeat that the Mahayuti is stomping to a near-sweep, tightening its lasso over the country's financial centre.

 

 


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