Monthly Pension For 22 Crore Salaried Employees Will Increase: New Provident Fund Rules

Employees’ Provident Fund Organisation (EPFO) is planning a new pension scheme which would pay better fixed pensions to the people.

Demands have been constantly raised to increase the minimum pension under the Pension Scheme-1995 but to no avail.

The matter is also pending in the Supreme Court. 

Pension Based On Contribution

A new fixed pension scheme is being prepared by the EPFO in which the amount of fixed pension will be decided by the contribution made.

So, the beneficiary will have to contribute according to the pension they want.

With the new scheme, one can also choose the fixed pension amount.

Those self-employed will be allowed to register alongside salaried workers.

The pension amount the employee will have to contribute is determined by their income and estimated remaining length of service.

EPFO is now planning for the Employee Pension Scheme-1995 option. 

Raising The Minimum Limit

The existing amount in EPS is completely tax-free.

But the minimum pension under it is quite low, and shareholders have often called for it to be increased.

Currently the highest monthly donation limit is Rs 1250.

In such cases, EPFO is ready to offer an option to working individuals to provide them with additional pension.

EPS’ Present Rule

Employees who join the Employee Provident Fund (EPF) automatically join the EPS.

The rules state that the employee must contribute 12% of basic salary to the PF.

Apart from the employee, the same part also goes to the employer’s account.

The EPS receives 8.33% of the employer’s payment, meaning that EPS equals 8.33% of the base salary.

However, the highest pensionable salary is Rs 15,000 per month. 

In this case, a maximum of Rs 1250 per month can be placed in the pension fund.

How to Calculate Pension

Monthly Pension = (Pensionable Salary x Number of Years Contribution in EPS Account) /70 = EPS Calculation Formula

If a person’s monthly wage (average of the previous 5 years) is Rs 15,000 and worked for 30 years, his monthly pension will be (15,000 X 30) / 70 = 6428 rupees.

If the 15-thousand-rupee limit is replaced with a 30-thousand-rupee limit, you will receive a pension based on the formula (30,000 X 30) / 70 = Rs 12,857 a month.

Self-Employed Individuals

At present only the salaried class can receive a pension.

With the new law, self-employed people will be eligible to register as well.

In this case the pension amount will be decided by the person’s contribution.

This means that the individual will have to contribute according to the quantity of pension desired.

Tax-Free

The amount of EPS is now tax-free.

The present EPS-95 scheme will continue after the new rule is implemented.

That is to say, the government is preparing to provide the EPS option so that people can accordingly contribute to receive a larger pension in the future.