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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

The engineer nobody touched

Writer: Rajendra Pandharpure
Rajendra Pandharpure
Apr 26
4 min read

An inquiry into Pune’s civic works lifts the veil on a sprawling nexus and a familiar political silence

Pune: The Supreme Court’s directive to the Anti-Corruption Bureau (ACB) to investigate the assets of a retired City Engineer from the Pune Municipal Corporation has sent shockwaves through the city. For the residents of Pune, the inner workings of the Construction Department and the illicit gains amassed by some of its shrewd officials are nothing new; however, this investigation has thrust the department and the corruption within it into the public spotlight.


Illicit Wealth

Social activist Tanaji Gambhire has alleged that the retired City Engineer, Prashant Waghmare, has amassed wealth amounting to a staggering Rs. 2,000 crore. When the municipal administration repeatedly failed to act despite numerous complaints regarding Waghmare’s alleged corruption, Gambhire finally knocked on the doors of the judiciary. The Supreme Court admitted Gambhire’s complaint and issued orders to investigate Waghmare’s disproportionate assets. Waghmare served as the City Engineer at the Pune Municipal Corporation from 2003 to 2026.


This marks the first instance in which the assets of the Municipal Corporation’s City Engineer are being subjected to a formal investigation. Social activists will be closely watching to see just how seriously the State Government pursues this inquiry. The reason for this scrutiny lies in the fact that Prashant Waghmare reportedly maintains "friendly" ties with "all" political leaders across the spectrum. Not a single corporator has ever forcefully exposed or scrutinized his conduct during the Municipal Corporation's general body meetings. Such was his clout that it was commonly whispered within municipal circles: “If Waghmare is involved, anything is possible,” and “No one can touch Waghmare.” Despite the Supreme Court delivering a decisive verdict regarding this Rs. 2,000 crore scandal, political leaders have maintained a conspicuous silence - a fact that has left social activists astonished.


Familiar Saga

For the city’s residents, the Municipal Corporation’s Construction Department and the irregularities plaguing it, is a familiar saga. The traffic crisis in Pune has reached a critical stage, and the corruption within the Construction Department of the Municipal Corporation is largely to blame. In the construction of most buildings, insufficient space is allocated for parking. Furthermore, builders often fail to make adequate arrangements for drinking water supply. Flat buyers are frequently left bewildered by revised building plans. Customers purchase flats under the mistaken assumption that the mere fact that a building has been erected implies its legality.


Consequently, the city's traffic infrastructure collapses. Municipal officials convey their 'messages' to builders through architects; the cost of these illicit transactions is ultimately passed on to the customer. This practice has persisted for years. It is, however, equally true that not all architects are involved in these corrupt dealings.


Pune is a major metropolis. Over the past two decades, the construction sector has boomed. The industry generates a turnover running into crores of rupees annually; the beneficiaries of this massive financial activity are not limited solely to officials within the municipal administration. Rather, a vast network comprising of certain police officers, revenue department officials, and criminal gangs is deeply entrenched in this system. There is open discussion throughout Pune regarding how certain officials within the Construction Department have acquired properties in the names of their wives or sisters. Builders frequently make donations to public institutions, thereby cementing their influence and position within the city.


Historically, rampant corruption plagued the Octroi Department within municipal corporations. With the abolition of the Octroi tax, the construction sector emerged as the new fertile ground for illicit gains. Some time ago, a controversy erupted regarding the construction of a building for a certain organization; even religious leaders joined the ensuing protests. During that episode, the name of a prominent political leader surfaced, sparking rumours of a nexus between the builder and the politician in question. Currently, the names of various political leaders are being linked to several ongoing construction projects across the city. For instance, a post office located in the city center was relocated to make way for a new construction project; the builder involved now openly boasts with evident pride that he enlisted the assistance of a Union Minister to facilitate the shifting of that post office.


Residents of Pune hope that, at the very least following this incident, there will be an improvement in the functioning of the Construction Department and the Anti-Encroachment Department. Many homebuyers find themselves stuck in various construction schemes; there are complaints that while some have already paid for their flats, they have yet to receive possession of the respective units. The State Government must look into these grievances and take steps to resolve them. With high-rise buildings springing up across the city, due consideration must also be given to infrastructure, specifically roads, water supply and drainage systems while granting permissions for such structures. The Pune Municipal Corporation was once served by a City Engineer who famously declared, “As the City Engineer, my foremost priority is to ensure that the aesthetic beauty of the city remains uncompromised.” It would be fitting to at least honour and remember his vision.

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