12% of the basic salary of the employee goes to EPFO. Company / employer also puts the same amount in his PF account. However, out of 12 per cent of the company, 8.33 per cent goes to the employee’s pension scheme and 3.67 per cent to the EPF.
New Delhi. The government can increase the salary limit for the retirement savings scheme of the Employees’ Provident Fund Organization (EPFO). At present this limit is Rs 15,000. It is being considered to increase it to Rs 21,000. It is worth noting that in companies where the total number of employees is more than 20, the employee and the employer have to contribute their respective shares to the retirement savings scheme of PF. According to the news of The Economic Times, a committee will also be formed to decide on the salary limit.
12% of the basic salary of the employee goes to EPFO. Company / employer also puts the same amount in his PF account. However, out of 12 per cent of the company, 8.33 per cent goes to the employee’s pension scheme and 3.67 per cent to the EPF. Explain that it is mandatory for employees with a basic salary of less than Rs 15,000 to contribute to this EPFO. People with basic salary above this can voluntarily join it.
Occasional change
So far, the salary limit has been changed a total of 8 times. When the scheme was started in 1952, this limit was Rs.500. After this, in 1962 it was changed to Rs 1,000. Similarly, Rs 1,600 in 1976, Rs 2,500 in 1985, Rs 3,500 in 1990, Rs 5,000 in 1994, Rs 6,500 in 2001 and Rs 15,000 since 2014. If this time the limit becomes Rs 21,000, then 75 lakh more employees will compulsorily come under the purview of EPFO. Significantly, a total of 6.8 crore employees are registered under EPFO.
What is EPFO
It was established in 1952 and has the responsibility of providing social security coverage to the organized sector workforce. EPFO provides pension to the employees on retirement. Apart from this, a part of the amount deposited over the years is also given in lump sum. Also, EPFO provides insurance of up to Rs 7 lakh to its dependents in case of unexpected death of the employee.
Interest is received on contribution
Whatever amount is deposited in EPFO, the government pays interest on it. At present, interest is being paid on EPFO at the rate of 8.1 per cent. The amount deposited in the PF account along with the interest increases considerably, therefore Provident Fund is considered to be a great instrument of savings among the employed people.
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