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Revised FAQs for higher pension benefit under the Provident Fund law
The EPFO in its circular[1] dated 13 December 2023 has issued the revised FAQs for implementation of judgment of Hon'ble Supreme Court dated 4 November 2022 on higher pension. The circular provides clarity on following key aspects:
- Requirement to obtain permission under Para 26(6) to claim higher pension option – the FAQs clarify that higher pension application will not be rejected even where such permission is not obtained by the employee. The Regional Provident Fund Commissioner is required to obtain required details from the employer to substantiate that the contributions were made on higher salary (full basic salary exceeding the ceiling limit) in the past so that it can be confirmed that the employee is eligible for higher pension option.
- Calculation of pensionable salary for calculation of higher monthly pension – the FAQs clarify that an employee who is eligible for monthly pension after 1 Sep 2014, last 5 years’ average basic salary will be considered for determining pensionable salary for calculation of monthly pension payout.
The formula for calculation of monthly pension is: (Pensionable salary X Pensionable service)/70.
- Higher pension in future – the FAQs clarify that for a member retiring in future (say for example 2030), the pension will be calculated based on the provisions of the Pension Scheme that will exist as on the date of commencement of pension.
- No set off of arrears higher pension payout against higher contributions – the FAQ clarifies that for an individual eligible for higher monthly pension payout from the EPFO for the past period as arrears – such arrears of pension will be paid to the individual in accordance with the existing process. This will assist EPFO to comply with TDS requirement on such arrears pension payout. Such arrears will not be adjusted against dues if any from the individual for reallocation of funds required from the Provident Fund Scheme to the Pension Scheme where the individual has already claimed lump-sum withdrawal from the Provident Funds Scheme or funds in the Provident Fund Scheme are insufficient.
Our teams will be happy to support you on this process. You may reach out to any member of the EY PAS team or the following contacts:
Sonu Iyer
Partner, EY India
Email: Sonu.Iyer@in.ey.com
Puneet Gupta
Partner, EY India
Email: Puneet1.Gupta@in.ey.com