The central government is soon planning to increase the salary limit in the Employees' Provident Fund (EPF) scheme to Rs 21,000. This will have a direct impact on the employees' pension and provident fund (EPF). This step is being taken to strengthen the social security of employees, so that they can get better pensions and savings in the future.

What will change?

Currently, the salary limit for EPF is Rs 15,000, which was increased from Rs 6,500 in 2014. Now if the salary limit is increased to Rs 21,000, then the contribution of both employees and employers to EPF and Employee Pension Scheme (EPS) will increase.

What benefits will the employees get?

Higher pension: With the increase in salary limit, the employee's pension contribution will increase. This means that employees will get better pensions after retirement.

Better Provident Fund: Higher contributions to EPF will also increase the retirement corpus of employees, which will be beneficial for their financial security in the future.

Can there be any harm?

Salary deduction: Under the EPF Act, the employee's contribution is 12%, which will now increase based on the increased limit. For example, if an employee's salary is Rs 23,000, then his contribution to EPF will be 12%, i.e. about Rs 2,760 per month. This will reduce the net salary of the employees.

However, this increased contribution will give benefits in pension and savings in the future but for now, it will lead to a reduction in the salary of the employee.

What will be the pension figure on retirement?

Suppose, if you are 35 years old now and want to retire at the age of 58, then there will be a big difference in pension between the current limit and the new limit. If your salary is Rs 23,000 and the EPF limit increases to Rs 21,000, then your pension at the time of retirement can be around Rs 6,900, whereas earlier it would have been around Rs 4,929.

It is worth noting that the increase in salary limit will benefit the employees in the long term, especially in pension and provident funds. However, along with this, the employees will have to face a cut in salary immediately. Keeping this in mind, employees will have to revisit their financial plans and organize their savings for a better future.