EPS Pension Calculator: Good news for members covered under the Employees’ Provident Fund Organisation (EPFO)! Reports suggest that the wage limit under the EPFO for deciding monthly contribution from employers may be doubled to Rs 30,000 from the current Rs 15,000.

Under EPFO rules, both the employer and employee contribute 12% of the employee’s basic pay towards provident fund and pension contributions. The entire 12% contribution from the employee goes towards the provident fund corpus. The employer’s 12% contribution is split into two parts: 8.33% is directed towards the pension corpus under the EPS-95 scheme, while 3.67% is added to the provident fund. The provident fund is provided to the employee upon retirement at the age of 58, while the pension is calculated using a specific formula.

The formula for calculating the monthly pension under the Employee Pension Scheme (EPS) is: (Pensionable Salary × Pensionable Service)/70

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Maximum pension under EPFO stands at Rs 7,500 – Check calculation

Currently, the wage ceiling under the EPFO is set at Rs 15,000, which was increased from Rs 6,500 in 2014. Based on this wage limit, the maximum pension under the Employees’ Pension Scheme (EPS) is Rs 7,500, calculated using the formula: Rs 15,000 × 35 / 70 = Rs 7,500.

Members should note that the above calculation assumes the employee receives a basic salary of Rs 15,000 throughout their entire service period. If the salary changes due to an employer salary revision or if the EPFO revises the wage ceiling, the pension amount will be adjusted accordingly. For example, for employees who were in service before September 2014, the EPFO wage limit was Rs 6,500. As a result, the pension for the years served before the wage revision will be calculated based on the Rs 6,500 wage limit, while the pension for the years served after the 2014 revision will be calculated based on the new wage limit of Rs 15,000.

Wage ceiling under EPFO to be doubled to Rs 30,000?

According to a recent Financial Express report, the wage ceiling under EPS is likely to be doubled to Rs 30,000.

The report said citing sources that discussions on raising the wage ceiling were held during the EPFO’s Central Board of Trustees (CBT) meeting on November 30. The final decision, however, is expected to be made in the CBT’s February meeting, the report said. Most members, along with the labour ministry, are in favour of doubling the current ceiling, according to sources, cited in the FE report.

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Impact on EPS pension if wage ceiling under EPFO revised to Rs 30,000

If the EPFO doubles the wage ceiling to Rs 30,000, the maximum pension eligibility would also increase to Rs 15,000, up from the current Rs 7,500. Here, the pension is calculated using the formula: Rs 30,000 × 35 / 70 = Rs 15,000.

This calculation assumes that the member’s contribution towards the Employees’ Pension Scheme (EPS) remains fixed at 8.33% of Rs 30,000 throughout the 35 years of service, from the age of 23 to 58. However, since the government typically revises the wage ceiling periodically, based on inflation and other economic factors, the pension amount would be adjusted accordingly over time.

How will the proposed wage limit impact EPF contribution?

Currently, the employee’s entire 12% contribution and the employer’s 3.67% contribution go towards the provident fund (EPF) corpus, which is given to the employee upon retirement at the age of 58. Based on the current wage ceiling of Rs 15,000, the employee contributes Rs 1,800 and the employer contributes Rs 550.50 towards EPF, making the total contribution Rs 2,350.50 per month.

If the wage ceiling is raised to Rs 30,000 and the contribution percentages remain at 12% for the employee and 3.67% for the employer, the total monthly EPF contribution would increase to Rs 4,701.

Assuming the employee contributes Rs 4,701 per month towards the EPF for 35 years, the total amount deposited by the individual for retirement would be Rs 19,74,420. With the current EPFO interest rate of 8.25% per annum, the employee could expect a total payout of around Rs 1.4 crore upon retirement.