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After the necessary pension reform in government jobs through the Unified Pension Scheme (UPS), now good news can come for private sector employees as well. It has been proposed to increase the wage ceiling for the calculation of Provident Fund and Pension Contributions under the Employees' Provident Fund Organization (EPFO). Sources have said that the Finance Ministry can soon decide on the proposal received from the Labor Ministry. In this proposal, the Labor Ministry has recommended increasing the salary limit from the current Rs 15,000 to Rs 21,000.

Pension and EPF contributions will be directly affected
According to sources, "The proposal (to increase the salary limit for EPF contribution) was sent in April and the Finance Ministry will soon take a final decision on it." The salary limit for the calculation of pension in the Employees' Pension Scheme (EPS), managed by the EPFO, from September 1, 2014, is Rs 15,000. However, the proposed increase can give much-needed relief and better benefits to private sector employees. If the proposal to increase the salary limit from Rs 15,000 to Rs 21,000 is approved, it will have several significant implications on the pension and EPF contributions of private sector employees.

How is the EPS pension calculated?

A special formula is used to calculate EPS pension. This formula is - Average salary x pensionable service / 70. Let us tell you that here average salary means the employee's 'basic salary' + 'dearness allowance'. Apart from this, the maximum pensionable service is 35 years. At present, the current salary limit (pensionable salary) is Rs 15,000. Now if we calculate with these figures, then the EPS pension is currently Rs 15,000 x 35 / 70 = Rs 7,500 per month.

In-hand salary will decrease
If the salary limit is increased from Rs 15,000 to Rs 21,000, then the pension received by the employees will be Rs 21,000 x 35 / 70 = Rs 10,050 per month. That is, after the new rules, the employees will get an extra pension of Rs 2550 every month. However, one more thing to note here is that after the new rules, the in-hand salary of the employees will decrease slightly because, after the implementation of the new rules, there will be more deduction for EPF and EPS from the employee's salary than now.