The Indian government is deliberating a significant increase in the wage cap for mandatory provident fund coverage, potentially extending social security to more salaried workers and impacting employer contributions, marking the first revision since 2014.
India is weighing a substantial increase in the wage ceiling for mandatory provident fund coverage, with the Finance Ministry said to have cleared a proposal to lift the threshold to ₹25,000 a month from ₹15,000. According to Moneycontrol, the move now awaits Cabinet approval and would mark the first revision to the limit since September 2014, when it rose from ₹6,500 to ₹15,000.
If approved, the change would extend compulsory coverage under the Employees’ Provident Fund and Employees’ Pension Scheme to more salaried workers whose basic pay falls below the new ceiling. At present, employees earning up to ₹15,000 a month are automatically covered, while those above that level may join only voluntarily. Businesses with 20 or more employees are required to comply, though smaller employers can opt in.
The proposed increase would also raise costs for companies, which would have to make mandatory provident fund and pension contributions for a larger pool of staff. The government, too, could face a higher bill through its share of pension funding. Under the current structure, employers contribute 8.33% of basic salary to the pension fund while the government pays 1.16%. The Union Budget has set aside ₹11,144 crore for the Employees’ Pension Scheme in 2026-27.
Reports suggest the government initially examined a ceiling of ₹30,000 before settling on ₹25,000. There are also conflicting timelines in circulation: Moneycontrol said implementation is unlikely before April 1, 2027, after the Cabinet decision and the time needed for payroll and compliance changes, while other reports have suggested an earlier start date. The broader policy push reflects growing pressure to widen India’s social security net after years without an update to the wage cap.
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