PF Salary Limit: Big news has emerged for millions of PF account holders. The government is preparing to increase the salary limit. Find out how this will affect your salary.

PF Salary Limit:  There are millions of PF account holders in the country. Now, there's some good news for these employees. The government is preparing to increase the salary limit under the Employees' Provident Fund Organization (EPFO). Currently, the maximum salary limit for PF contributions is ₹15,000, which was set in September 2014. However, there are now plans to increase this limit to ₹25,000 to ₹30,000.

This means that even high-paid employees will have a significant amount covered by the PF. According to the report, this step could be taken to address rising inflation, changes in salary structures, and strengthen social security. If implemented, this change will impact millions of employed people's savings, pensions, and take-home salaries.

What will be the benefit of increasing the salary limit?

If the PF salary limit is raised to ₹25,000 or ₹30,000, the biggest benefit will be on retirement savings. Currently, employees earning more than ₹15,000 have their PF contribution calculated based on a limited amount. Once the new limit is implemented, a higher basic salary will be added to the PF, increasing the monthly deposit. This will directly impact the retirement corpus. This could also increase pension amounts.

Because pension calculations are linked to the PF structure, the interest earned on PF is considered largely tax-safe, making it a solid long-term savings. The government believes this will strengthen the social security of employees and provide them with greater financial support for their future. This will especially benefit private sector employees who have no other retirement options other than PF.

Will it be beneficial or harmful?

The increase in salary limits also means that employees' take-home pay could decrease, as both employee and company contributions to the PF will increase. For example, if your basic salary is Rs 30,000, the monthly deduction at 12% will be significantly higher than it is now. This will reduce take-home pay, which could create immediate pressure for many, especially younger employees with greater responsibilities.

They may find this change burdensome. Companies will also be burdened, as they too will have to contribute more. Some experts believe this could impact new hires and salary structures. Therefore, if the government takes this step, employees will have to re-evaluate their financial planning to balance the increased PF contribution with the reduced take-home salary.

Source: The financial express