Budget 2024: Govt Likely To Increase Provident Fund Limit After A Decade

PF limit: The Centre last amended the contribution ceiling for the Employees' Provident Fund in 2014, raising the amount from Rs 6,500 to Rs 15,000, effective from September 1, 2014

By : ABP News Bureau | Updated at : 04 Jul 2024 02:13 PM (IST)

Budget 2024 Govt Likely To Increase Provident Fund Limit After A Decade Budget 2024: Govt Likely To Increase Provident Fund Limit After A Decade

A Provident Fund is a savings and retirement fund backed by the central government, primarily contributed to by salaried employees and their employers. Image: PTI

Source : PTI

PF limit: The Union Finance Ministry is considering a proposal to raise the provident fund (PF) limit, which has remained at Rs 15,000 for the past decade. According to a report by CNBC Awaaz, the government may hike the ceiling to Rs 25,000. The Ministry of Labour and Employment has prepared the proposal for this increase, as per the report.

What is PF?

A Provident Fund (PF) is a savings and retirement fund backed by the central government, primarily contributed to by salaried employees and their employers. It is designed to offer financial security to employees during their retirement years and is regarded as one of the safest and most tax-effective retirement benefits for employees.

What is the proposed PF revision?

The proposed revision aims to expand the scope of social security. The Centre last amended the contribution ceiling for the Employees' Provident Fund (EPF) in 2014, raising the amount from Rs 6,500 to Rs 15,000, effective from September 1, 2014. Under the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 (EPF Act), and the Employees' Provident Fund and Miscellaneous Provisions Scheme, 1952 (EPF Scheme), both employee and employer contribute roughly 12 per cent each towards the EPF account. The entirety of the employee's contribution is allocated to the Provident Fund account, while 8.33 per cent of the employer's contribution is directed to the Employees' Pension Scheme and the remaining 3.67 per cent to the Provident Fund account.

In related developments, central trade unions have urged the government to establish a government-sponsored social security fund in the upcoming Budget to include millions of unorganised, gig, platform, and agricultural workers, as outlined in the Code on Social Security 2020.

"The Union government-sponsored social security fund for unorganised workers will provide them with defined universal social security schemes, including minimum pension and other medical and educational benefits,” said Amarjeet Kaur, General Secretary of the All India Trade Union Congress.

The trade unions highlighted the need for a social security fund for unorganised and agricultural workers, proposing special schemes to ensure occupational health and safety, particularly for waste recyclers, salt pan workers, and glass bangle makers. This statement followed a meeting with Union Finance Minister Nirmala Sitharaman in June.

News reports suggest that once the fund is established, the Centre will be able to efficiently distribute benefits to unorganised workers, consolidating various social security schemes such as old-age pension, provident fund, health, housing, and education into one comprehensive system. This restructuring aims to streamline the delivery of benefits through the social security fund.

Following the absorption of the Unorganised Workers' Social Security Act in 2008, Section 141 of the Code on Social Security 2020 outlines the creation of the social security fund, which will receive financial support from the central and state governments, corporate social responsibility funds, and contributions from aggregators or through penalties imposed under the code.