In the case of an individual who joined the Employees Provident Fund (EPF) scheme after 1st September 2014, they cannot open an Employee Pension Scheme (EPS) account if their salary crosses Rs.15000. This is in the backdrop of the government amending the rules related to EPF and EPS schemes via a notification dated 22nd August 2014. The amendment became effective from 1st September 2014.
The amendment has brought about two changes in the scheme. The first change is that the monthly pay ceiling that was mandatory to join the provident fund scheme has been increased to Rs.15,000 per month, formerly the gap was Rs.6,500 per month. The second amendment forbids individuals from joining the pension scheme if their monthly pay exceeds Rs.15,000 at the time of joining the scheme.
In the EPS scheme, salary is considered a basic wage plus a dearness allowance (DA). Hence the amended rules demand that if an individuals’ basic wages plus DA exceeds Rs.15,000 a month, then he is ineligible to join the EPS scheme. Before the 22nd August 2014 notification, the wage ceiling under the EPF scheme was Rs. 6,500 per month as against the current Rs.15,000. Reasonably if an employee’s monthly pay was less than Rs 6,500 then them enrolling in the EPF and EPS schemes were mandatory. If an employee’s monthly pay exceeds Rs.6,500, they have an option to join the scheme and open both EPF and EPS account. The notification which came into effect from 1st September 2014, prevents the EPF scheme members from joining the pension scheme if monthly pay rises above Rs.15,000 at the time of joining.
As for the current rules of the EPF scheme, an employee contributes 12% of his monthly salary to the EPF scheme and the employer matches this contribution. Out of the total 24% contribution (equally shared by the employer and employee), the employee’s 12% and the employer’s 6.67% goes into the EPF account and the balance 8.67% goes into the EPF account. If the employee’s actual salary is less than Rs.15,000 per month, EPS contribution by the employer is calculated accordingly. If the individual is not eligible to open an EPS account, then the employer’s entire contribution will go to the EPF account.
The question however is, what happens if the pension scheme account was opened before September 1, 2014? Employees who are already members of pension funds before September 1, 2014, would continue to contribute to pension funds.
