EPFO ceiling hike: From ₹15,000 to ₹25,000, check your pension gain with this formula

The government has approved an increase in the monthly wage ceiling for mandatory EPFO coverage from ₹15,000 to ₹25,000, a move that could expand EPF and Employees’ Pension Scheme (EPS) coverage among organised-sector employees. The revised ceiling comes into effect after having remained unchanged since September 1, 2014.

Union minister Ashwini Vaishnaw said the government will spend around ₹11,339 crore every year on the measure, which is aimed at widening social-security coverage.

How will the EPS pension change?

For employees covered under EPS, pension is calculated using the formula:

Monthly EPS pension = (Pensionable salary × Pensionable service) ÷ 70

Here, pensionable salary is the average monthly basic pay plus dearness allowance during the last 60 months before exiting the pension fund.

With the ceiling increasing from ₹15,000 to ₹25,000, the maximum pensionable salary used in the calculation can rise, resulting in a higher monthly pension for eligible employees.

For example, assuming a pensionable salary of ₹25,000, the difference between the old and new ceilings can be illustrated across different service periods.

*Includes the stated two-year service bonus for 20 years or more of service.

10 years of service

At 10 years of eligible service, the estimated EPS pension rises from ₹2,143 under the ₹15,000 ceiling to ₹3,571 under the ₹25,000 ceiling. This represents an additional ₹1,429 a month.

15 years of service

For 15 years of service, the pension increases from ₹3,214 to ₹5,357, giving an additional ₹2,143 per month.

20 years of service

After applying the two-year service bonus, 20 years becomes 22 years for the calculation. The estimated pension rises from ₹4,714 to ₹7,857, a monthly difference of ₹3,143.

25 years of service

With 27 years counted for pension calculation, the pension increases from ₹5,786 to ₹9,643, resulting in an additional ₹3,857 per month.

30 years of service

For 30 years of service, counted as 32 years after the bonus, the estimated pension rises from ₹6,857 to ₹11,429. The difference is ₹4,571 a month.

The examples show the potential impact of moving the pensionable wage ceiling from ₹15,000 to ₹25,000. However, the actual pension will depend on the employee's pensionable salary, eligible service and applicable EPS rules.