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EPS: Who can be part of Employee Pension Scheme and who won’t be able to

An unique who joined the Employees’ Provident Fund (EPF) scheme, soon after September 1, 2014, simply cannot open an Employees’ Pension Scheme (EPS) account if his regular monthly income exceeds Rs 15,000.
This is due to the fact the authorities amended the policies similar to EPF and EPS schemes by way of a notification dated August 22, 2014 which became successful from September 1, 2014.
In this, there were being two modifications designed to the scheme.
Very first, the monthly pay ceiling up to which it was obligatory to be a part of the provident fund plan, was hiked to Rs 15,000 for each thirty day period from Rs 6,500 per month earlier. Next, people today ended up disallowed from joining the pension plan if month to month pay out exceeded Rs 15,000 at the time of signing up for the scheme.
For the purpose of EPS plan, income is regarded as as essential wage moreover dearness allowance (DA). So, in accordance to the amended guidelines, if an individual’s standard wage moreover DA exceeds Rs 15,000 a month, then he will not be suitable to join the EPS scheme.
How these changes influence your EPF contributions
Puneet Gupta, Director, EY India suggests, “Prior to the notification dated 22 August 2014, the wage ceiling beneath EPF Plan was Rs 6,500 for every thirty day period (presently Rs 15,000 for every thirty day period). This meant that if an employee’s monthly pay out was considerably less than Rs 6,500, then he/she had to mandatorily be a part of the EPF and EPS techniques. Nevertheless, if an employee’s month-to-month shell out exceeded Rs 6,500 (now Rs 15,000) before, he/she could optionally join the techniques and open both EPF and EPS account. The notification, efficient from September 1, 2014 disallows the EPF scheme member from becoming a member of the pension plan if regular pay out exceeds Rs 15,000 at the time of becoming a member of.”
As for every the existing procedures of EPF plan, an worker contributes 12% of his every month salary to the EPF scheme and an employer matches this contribution. Out of the whole 24% contribution (Employee’s 12% + Employer’s 12%), employee’s 12% and employer’s 3.67% goes into the EPF account and the balance 8.67% goes into the EPS account. The month to month EPS contribution by the employer is calculated on the employee’s true salary if fewer than Rs 15,000 and on Rs 15,000 if salary exceeds this limit. Hence, highest EPS contribution is Rs 1,250 for every month.
“If the individual is not qualified to open an EPS account, then the employer’s full contribution will go to the EPF account. Further, if the employee has an EPS account, then balance employer’s contribution over and previously mentioned the required EPS contribution (Rs 1,250) would go to EPF account,” describes Gupta.
However, what transpires if the pension plan account was opened just before September 1, 2014? Will the employer go on to lead even now?
Aarti Raote, Lover, Deloitte India says, “The notification, efficient September 1, supplies that the pension contributions for new EPF associates would apply only for individuals staff whose pay out at the time of signing up for provident fund is much less than Rs 15,000 i.e. for new staff drawing shell out in extra of Rs 15,000, the 12% of employer contribution as perfectly as the 12% of worker contribution would accrue in PF account only. Nonetheless staff members who are now customers of pension fund prior to September 1, 2014 would keep on to add to pension resources as prior to irrespective of their pay out levels.”
Now, will the EPS account go on if it was opened immediately after September 1, 2014 when the wage was under Rs 15,000 per month, and more than time it elevated to Rs 15,000 owing to position change or increment?
Raote states, “Centered on the notification, helpful September 1, the pension contributions for new EPF customers would utilize only to these whose shell out at the time of signing up for EPF is considerably less than Rs 15,000. After the employee is a member of pension funds, he will keep on to be a member even when the essential wage exceeds Rs 15 000.”
Gupta provides, “An EPF member must preserve in mind that at the time the two the EPF and EPS accounts are shut and lump-sum withdrawal has been produced from both equally the accounts, then in the potential if member joins the scheme again with every month pay exceeding Rs 15,000, he/she will not be qualified to open EPS account. Having said that, if the EPFO as a substitute of lump-sum withdrawal issues a pension plan certificate at the time of exit from the plan, then at the time of re-signing up for, the member will have to sign up for the EPS plan again even if the month-to-month spend exceeds Rs 15,000 at the time of re-signing up for.”
SC strikes down govt notification: How it impacts you
The Supreme Courtroom through a ruling struck down the August 2014 notification issued by the govt.
Gupta states, “Right after the Supreme Court docket ruling dated 1 March 2019 (which has upheld an previously Kerala High court docket ruling dated 12 October 2018) location apart the notification dated 22 August 2014, the EPFO has not put out any clarification on the enforceability of various amendments including the boost in wage ceiling built in the stated notification dated 22 August 2014. Therefore, there is no clarity irrespective of whether an employer should really disallow an individual (becoming a member of EPF scheme for 1st time) from getting member of EPS if the regular fork out exceeds Rs 15,000.”
Raote provides, “Given that the EPFO has not issued any clarification on this write-up the SC ruling, in apply, the provision of the notification dated 29 August 2014 carry on to be operative with regard to the need of not contributing to pension where the PF wages exceeds the wage ceiling at the time of original membership.”


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