The hearing in the Supreme Court has started from today regarding the removal of the cap on investment under the Employee Pension Scheme (EPS).
Now this hearing will be held on a daily basis. Presently the maximum pensionable salary is limited to Rs 15,000 per month. The matter regarding removal of this limit is pending in the court.
What is the whole matter?
On August 12, the Supreme Court had adjourned the hearing of a batch of petitions filed by the Union of India and the Employees’ Provident Fund Organization (EPFO), which contended that the pension of employees cannot be capped at Rs 15,000. At the same time, it was decided to hear the matters related to it daily from 17 August 2021.
What’s the rule now?
When an employee becomes a member of EPF ie Employee Provident Fund, he also becomes a member of EPS. The employee contributes 12% of his salary to the EPF and the same amount is also given by the employer. But, a part of the employer’s contribution is deposited in the EPS.
The contribution to the EPS account is 8.33% of the salary. However, at present the pensionable salary is considered to be maximum of Rs 15 thousand only. With this, this pension share is maximum 1250 per month.
For example,
Pankaj Mathpal, a personal finance expert and founder and CEO of Optima Money Managers, explains that according to the current rules, if the salary of an employee is Rs 15,000 or more, then the contribution will be Rs 1250 and if the salary is Rs 10 thousand then the contribution is 833. Will be Rs.
Even when the employee retires, the maximum salary for calculating pension is considered to be Rs 15,000. Accordingly, the maximum pension an employee can get under EPS is Rs 7,500.
Pankaj Mathpal says that now if the cap of Rs 15,000 is removed from the pensionable salary, then the employee can get more than Rs 7,500 pension, says Pankaj Mathpal. But, for this, the contribution of the employer to the EPS will also have to be more.
In government companies, it can be beneficial, but in private sector companies, the appointment of employees is done on the basis of CTC i.e. cost to the company. And in such a situation, if the employer contributes more to the EPS, then the contribution to the EPF will be less or else the net salary in the hands of the employee will be reduced. Whatever be the case, if I get more pension after retirement, then according to me it is good.
Calculation of
Monthly Pension After Retirement Formula for Calculation of Monthly Pension = (Average Salary X Pensionable Service)/70
Here Average Salary i.e. Basic Salary + DA is the average of last 5 years salary before leaving the job. Pensionable service i.e. period spent in service. Keep in mind that the maximum pensionable salary limit under EPS is up to Rs 15,000 per month. That is, the pension will be deducted on the same basic + DA amount, no matter how high the salary of the employee may be.
That is, if someone’s monthly average salary (average of last 5 years’ salary) is Rs 15,000 and the duration of the job is 30 years, then he will get a pension of only Rs 6,828 per month.
How will pension withdrawal limit
that is removed 15 thousand limit and your salary will pension according to the formula you have 30 thousand that will these Kk
(30,000 X 30) / 70 = L2,857
means that a monthly average salary (Average of last 5 years salary) is 30 thousand rupees and the tenure of the job is 30 years, then he will get pension of only 6,828 rupees per month.
Conditions for availing EPS
- The employee should be a member of EPF.
- The tenure of the job should be at least 10 years.
- The employee should have completed the age of 58 years. One can opt for pension on attaining the age of 50 years and also before the age of 58 years. But, in this case you will get reduced pension. For this, Form 10D has to be filled.
- The employee can contribute to the EPS even after the completion of 58 years and can start the pension either from the age of 58 or from the age of 60.
- On commencement of pension from the age of 60, enhanced pension is available at the rate of 4% per annum for the deferred 2 years.
- In the event of the death of the employee, his family is entitled to pension.
- If an employee’s service is less than 10 years, then they get the option to withdraw the pension amount at the age of 58 years.
