SKP | Business Alerts
4 September 2014 | Volume 6 Issue 7
Wage ceiling raised for calculating contributions to Employees' Provident Fund and Employees' Pension Scheme 

Background
The Ministry of Labour & Employment issued a notification dated 22 August 2014 amending the Employees' Provident Fund Act, 1952 effective 1 September 2014. The highlights of the amendments are as follows:
 

Highlights
Changes to the provisions of the Employees' Provident Fund contribution (EPF)
  • The present basic wage ceiling of INR 6,500 per month has been raised to INR 15,000 per month for the purpose of calculating contribution to the EPF. This implies that provident fund contribution is now mandatory for all employees whose monthly basic salary is lower than or equal to INR 15,000, compared to INR 6,500 previously. 
  • Now, new entrants whose basic salary is more than INR 15,000 per month have the option to not opt for PF.
Changes to the provisions of the Employees' Pension Scheme Contribution (EPS)
  • The present wage ceiling of INR 6,500 per month has been raised to INR 15,000 per month for the purpose of calculating contribution to the EPS. As a result, the maximum limit of contribution to EPS has been raised to INR 1,250 from INR 541.
  • New entrants to the PF scheme, joining on or after 1 September 2014 and whose basic salary is more than INR 15,000 per month, will not be able to join the EPS. EPS benefit continues to remain for the employees with a basic salary of up to INR 15,000.
In addition,
  • For the purpose of calculating monthly pension, last 60 months' average EPS wages are taken into consideration. Under the new scenario, the maximum EPS wages would be INR 6,500 per month up to 31 August 2014, and INR 15,000 per month from 1 September 2014. 
  • Employees' Deposit Linked Insurance (EDLI) contribution and EDLI administrative charges will also be revised accordingly.
Illustration for employees with basic salary of over INR 15,000
Old scenario – up to 31 August 2014

EPF - Old Scenario

New scenario – effective 1 September 2014

EPF - New Scenario

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ABOUT THIS BUSINESS ALERT
This SKP Business Alert contains general information existing at the time of its preparation only. It is intended as a news update and is not intended to be comprehensive nor to provide specific accounting, business, financial, investment, legal, tax or other professional advice or opinion or services. This business alert is not a substitute for such professional advice or services, and it should not be acted on or relied upon or used as a basis for any decision or action that may affect you or your business. Before making any decision or taking any action that may affect you or your business, you should consult a qualified professional adviser and also refer to the source pronouncement/documents on which this business alert is based. It is also expressly clarified that this business alert is not a solicitation or an invitation of any sort whatsoever or a source of advertising from SKP Group or any of its entities to create any adviser-client relationship.

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