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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

TMC merger possible, but a LoP is unlikely

Writer: Akhilesh Sinha
Akhilesh Sinha
Jun 11
3 min read

As TMC merger speculation grows amid internal turmoil, Congress is unlikely to replace Mallikarjun Kharge with Mamata Banerjee as Rajya Sabha Opposition leader

New Delhi: After suffering a crushing setback in the West Bengal Assembly elections, Trinamool Congress (TMC) chief Mamata Banerjee is reportedly facing mounting political challenges. With defections among legislators and parliamentarians, resignations by Rajya Sabha members, and growing speculation about the future of her party, discussions in political circles have increasingly focused on a possible merger of the TMC with the Indian National Congress.

 

Alongside these merger rumors, another claim has gained traction that Mamata Banerjee could be elevated as the Leader of the Opposition in the Rajya Sabha. However, a closer look at Congress' internal political calculations suggests that such a move would be highly unlikely.

 

Long Rivalry

Since breaking away from the Congress in 1997 to form the Trinamool Congress, Mamata Banerjee has frequently positioned herself in opposition to the Congress leadership, particularly Sonia Gandhi. Whether it was national-level political decisions, discussions surrounding the presidential candidature of Hamid Ansari, efforts to marginalize Congress in West Bengal, or debates within the I.N.D.I.A. opposition alliance over accepting Rahul Gandhi as the consensus leader, Mamata has often charted an independent course.

 

Politics, however, is rarely driven by sentiment alone. Just as Congress and the Left fight each other in states such as Kerala while cooperating nationally against the BJP, Congress and TMC have remained partners within the opposition alliance despite fierce rivalry in West Bengal. Yet if a merger were ever to materialize, Congress would likely determine Mamata's role on its own terms rather than hers.

 

Merger Speculation

Amid reports of growing unrest within the TMC, Mamata Banerjee has reportedly met Sonia Gandhi twice after arriving in Delhi. Her nephew and senior party leader Abhishek Banerjee is also said to have held two meetings with Rahul Gandhi.

 

Following a recent meeting between Sonia Gandhi and Mamata Banerjee, speculation intensified that the Congress leadership had offered Mamata the position of party vice-president and Abhishek Banerjee the post of general secretary. Reports also suggest that Abhishek sought the Rajya Sabha Leader of the Opposition position for Mamata. Neither Congress nor TMC leaders have officially confirmed these claims.

 

No Replacement

Even if merger discussions are assumed to be genuine, Congress faces a major political obstacle in appointing Mamata Banerjee as Leader of the Opposition in the Rajya Sabha.

 

The position is currently held by Congress president Mallikarjun Kharge. Removing Kharge would carry significant political costs, particularly because Congress projects him as one of the country's most prominent Dalit leaders.

 

The timing makes the issue even more sensitive. Assembly elections are due next year in Punjab and Uttar Pradesh. Congress hopes to regain power in Punjab, where the government led by Bhagwant Mann has faced allegations from opponents regarding corruption and the growth of the drug trade. With Dalits constituting roughly 32 percent of Punjab's population, sidelining Kharge could send the wrong political message to a key voter base.

 

OBC Politics

Congress has recently demonstrated its sensitivity to caste equations. The party leadership reportedly implemented a rotational chief minister formula in Karnataka, replacing Siddaramaiah with D. K. Shivakumar. Siddaramaiah is widely identified with the Other Backward Classes (OBC) community.

 

In Uttar Pradesh, where OBC politics often carries greater electoral significance than Dalit politics, Congress remains heavily dependent on its alliance with the Samajwadi Party.

  

Attractive for TMC

Despite these obstacles, a merger with Congress could offer strategic advantages to Mamata Banerjee if the primary objective is preserving her party. The TMC currently has 28 MPs. Under anti-defection provisions, only 19 MPs would be required to trigger a split. Congress, by contrast, has 93 MPs in the Lok Sabha. A merger would raise Congress' parliamentary strength to 121 MPs, making it far more difficult for dissidents from the former TMC bloc to break away and form a separate group.

 

Complicating matters further, Mamata Banerjee is currently neither an MLA nor a Rajya Sabha member. According to the claims circulating in political circles, her support among TMC legislators has weakened to such an extent that even securing a Rajya Sabha seat could become challenging. That is why she is making repeated visits to the Congress high command.

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