Are you optinig for higher pension? Be aware about this

Employees working in the organized sector who are opting for higher pension will have to contribute 1.16% more to the Employees’ Pension Scheme (EPS). The contribution made by the government in this account will be done only on the salary up to Rs 15,000. In order to take advantage of the higher pension, 1.16% of the total share has to be deposited on behalf of the employees. The Ministry of Labour is issuing a notification that now this amount will be deducted from the contribution made by the employer.

What is rule?

In the companies that come under the purview of EPFO, 12% of the basic salary of the employee goes to the PF account. The same amount is deposited by the company. But all this money does not go to PF. Out of this 12%, 8.33% is deposited in EPS. The government also makes 1.16% contribution in this account. This contribution is made on basic salary up to Rs 15,000 only. According to this, Rs 1,250 rupees per month are deposited in the pension account of the employee. Apart from this, the government deposits 174 rupees. After the order of the Ministry of Labour, now 1.16% will be deposited from the employer’s share for higher pension. Nowadays, the package under Cost to Company (CTC) is trending in the private sector. In this, the PF on both sides is deducted from the CTC only. Obviously less amount will be deposited in the PF account of the employee.

How long can the option be exercised?

Employees who have been members of EPFO before September 1, 2014, can contribute to the pension scheme on their full basic salary. For this, they will have to fill and submit the joint declaration form with the consent of their company. Such employees can opt for higher pension till June 26, 2023. However, the maximum contribution of the government in these accounts will be Rs 174 only. The remaining amount will go from the pocket of the employee.