Government May Raise EPFO Wage Ceiling to Rs.21,000, Allowing You to Retire with ₹1 Crore
Government May Raise EPFO Wage Ceiling to ₹21,000, Allowing You to Retire with ₹1 Crore
An increase in the wage ceiling could significantly boost retirement savings through the Employees’ Provident Fund.
The Indian government is considering raising the wage ceiling for contributions to the Employees’ Provident Fund Organisation (EPFO) from ₹15,000 to ₹21,000, according to a recent report. This move, if implemented, would allow employees to invest more in their provident fund and potentially retire with a significantly larger corpus.
As of now, employees earning ₹15,000 or less per month contribute 12% of their salary to the EPF, with an equal contribution from their employer. However, the employer’s share is divided, with 8.33% going to the Employees’ Pension Scheme (EPS) and the remaining 3.67% to the EPF. For instance, with a salary of ₹15,000, the employee contributes ₹1,800 to the provident fund, while the employer contributes ₹550.50 to the EPF and ₹1,249.50 to EPS.
According to reports, the government is set to raise the wage ceiling to ₹21,000, enabling employees to contribute more to their EPF accounts. Under the new limit, with a salary of ₹21,000, the employee’s contribution would rise to ₹2,520, while the employer’s EPF contribution would increase to ₹770.70, with ₹1,749.30 allocated to EPS.
Impact on Retirement Savings
For employees starting their EPF contributions at the age of 23 and continuing until retirement (35 years), the impact of the increased ceiling is significant. At the current ceiling of ₹15,000, an employee could retire with a total corpus of approximately ₹71.55 lakh including a compounded interest amount of ₹60.84 lakh over a total contribution of ₹10.71 lakh at an annual interest rate of 8.25%.
However, if the wage ceiling is raised to ₹21,000, the retirement corpus could soar to ₹1 crore, with an invested amount of ₹15 lakh and ₹85 lakh in interest. This means the employee could potentially earn an additional ₹28.45 lakh in retirement savings, just by contributing based on the new salary limit.
Enhanced EPF Withdrawal Limit
In addition to the wage ceiling hike, the government has also raised the EPFO withdrawal limit from ₹50,000 to ₹1 lakh, making it easier for employees to access funds during emergencies. Union Labour Minister Mansukh Mandaviya has emphasized that the increased withdrawal limit is especially beneficial in cases of urgent family needs.
The proposed wage ceiling hike aligns with the government’s efforts to improve the financial security of organized sector employees. By allowing higher contributions, employees can significantly boost their retirement savings. This will in turn, help in ensuring a more comfortable and secure post-retirement life. The EPFO, a statutory body under the Ministry of Labour and Employment, continues to play a crucial role in managing provident fund, pension and insurance schemes for millions of employees across India.
