Higher EPS pension allowed for 2020-22 retirees

A number of employees from a company in Kerala, who are a part of the Employee Provident Fund (EPF) scheme, opted to have their salaries deducted based on their actual wages instead of the ceiling limit wages for EPS pension. Both these employees and their employers contributed to EPS based on actual wages and the Employee Provident Fund Organisation (EPFO) accepted all their contributions. All these employees retired between 2020 and 2022, specifically after September 1, 2014.

When the Employees' Provident Fund Pension Scheme, 1995, was implemented rom November 16, 1995, all of them signed up for the Pension Scheme. However, the employees were permitted to contribute to the Pension Scheme limiting their salary as Rs 5,000 or Rs 6,500 or Rs 15,000, as and when the limits were amended. Their deductions were limited to this statutory wage ceiling because the Employees' Provident Fund Organisation (EPFO) set an artificial cut-off date starting December 1, 2004.

The employees filed a case in the Kerala High Court, challenging this limitation on salary deductions based on statutory ceiling wage limit. The Kerala High Court ruled in favour of these employees, allowing deductions based on actual wages. But then, following an audit report, the government instructed the employer to restrict the employer’s share of EPF contributions to the statutory wage ceiling. The employees and their association contested this in another case at the Kerala High Court.

Through an interim order, the Kerala High Court permitted the employer to contribute on actual wages to the EPFO without considering the statutory limit. However, in the final judgement, the employees lost the case, and the employer reverted to limiting their deductions according to the statutory wage ceiling. The employees then filed a writ appeal against this judgment in the Kerala High Court.

The Kerala High Court ordered the employer to deposit the excess amount over the statutory limit in a separate account at a Nationalised Bank. If the employees win the appeal, the amount should go into their provident fund accounts with an added 9% interest.

Following this order, the employer’s Board of Directors decided to deposit the excess amount in a separate bank until the writ appeal and was resolved. Accordingly, the employer contributions in excess of the statutory limit were deposited for the period from April 2004 to October 2006.

However in 2006, the Kerala High Court dismissed the writ appeal with the observation that if an employer voluntarily pays more than the required statutorily amount, they have the choice to do so. Based on this observation, and with the permission of the Government, the employer chose to resume remitting employer contribution based on the actual wages and to transfer the amount deposited in the bank along with interest, for the period from April 2004 to September 2006.

This remittance , continued until August 2007 but was paused while waiting for further instructions from the government. Once the government gave the green light, it was decided to keep remitting EPF contributions without the wage ceiling limit from September 2007 to January 2008. Consequently the amounts which were deposited in separate bank accounts were transferred to the EPFO.

However, when these employees retired between 2020 and 2022, they were denied a higher pension. The reason given was that from April 2004 to October 2006, and again from October 2007 to February 2008, the employer paid contribution based on the statutory wage ceiling limit.

The now-retired employees stated that they have written evidence, including communications from both their employer and EPFO, indicating that their employer had actually contributed above the ceiling limit during the period from April 2004 to October 2006.

However, EPFO turned them down on the ground that neither the employees nor the employer had contributed based on actual wages as per paragraph 26(6) of EPF Scheme, 1952 for several months between 2004 and 2008, where salaries exceeded the prevalent wage ceiling of Rs 5,000 or Rs 6,500 or Rs 15,000.

The EPFO also filed a counter affidavit in the Kerala High Court saying that the employer made bulk contributions only for the months 11/2006 (November 2006) and 03/2008 (March 2008), rather than making monthly payments, which meand the payments did not properly match with each due month. As a result, the employees’ claims under the EPS Rules were rejected, and the split-up returns submitted later were not accepted.

The employer said that they made bulk deposits, which caused delays in payments due to government sanctions. EPFO passed an order rejecting the employees’s claim for higher pension on the basis of actual salary.

EPFO stated that the remittance for the wage months from 2004 to 2008 was made by the employer in bulk against the wage months 11/2006 and 03/2008, not in respective months and such bulk amounts were credited to the employees account only for the months 11/2006 and 03/2008 as arrears. Accordingly, EPFO stated that, since the apportionment of the payment against the respective due months was not done, the contribution on actual salary as per paragraph 26(6) was not remitted in respective months and the petitioners are not eligible for higher pension.

The employees filed another case in the Kerala High Court against this order and this time they won the case.

Anshul Prakash, Partner at Khaitan & Co, said to ET Wealth Online: "EPFO had rejected the employees’ joint applications on the ground that contributions on actual wages had not been made during certain months between 2004–2006 and 2007–2008. The Court, however, found that contributions were in fact made on actual wages, though remitted in bulk (in November 2006 and March 2008) rather than apportioned on a month-to-month basis. The Court further noted that such delay and bulk remittances arose from ongoing litigation and the requirement of prior Government sanction and were not attributable to any default by the employees or the employer. Since these contributions were ultimately accepted by the EPFO, the Court held that procedural or timing irregularities cannot justify denial of higher pension. Minor administrative lapses cannot override the substantive right to pension on actual wages."

Also read: Higher EPS pension for EPF members allowed by Punjab & Haryana High Court for pre-2014 retired employees with these three conditions

Prakash adds: "This ruling by Kerala High Court reinforces that the EPFO must prioritise substance over form. Where contributions on actual wages have in fact been made and accepted (even if remitted belatedly or in lump sum), the employees cannot be denied higher pension merely on the basis of procedural or accounting irregularities, particularly where such irregularities arose from bona fide reasons, as in this case. The judgment strengthens the principle that higher-pension rights cannot be frustrated by technicalities when the underlying statutory objective has been met."

Read below to know how the employees won the case in Kerala High Court. P.N. Mohanan, represented the employers in this case.

Employees filed a case against EPFO again for this reason
According to the employees, contributions under the EPF Scheme, 1952, at the rate of 12%, were regularly made by them, with an equal contribution by the employer, based on the actual salary drawn, until retirement, except for a brief period from April 2004 to October 2006, and from October 2007 to February 2008.

Later, contributions for these periods were made along with interest. It is therefore contended that, having accepted these contributions, the EPFO cannot deny these employees the benefit of higher pension as per paragraph 24 of the judgment in Sunil Kumar B ( [2022 (7) KHC 12]). The employees also relied on the decision of Kerala High Court in Mohanan K.S. v. Regional Provident Fund Commissioner [2024 KHC 7281: 2025 (1) KLT 28] and contended that higher pension cannot be denied on ground that remittance of contribution was made by the employer in lump sum.

Also read: EPS 95 Pension: Madras HC allows higher EPS pension for post-Sept 1, 2014 retirees under this condition

Kerala High Court said this
Kerala High Court in its judgement (WP (C) 1932 of 2025 dated February 24, 2025 said that the joint options of the petitioners (employees) were rejected by the 2nd respondent (EPFO) on the ground that the employee and employer did not contribute on actual wages for several various months for the period from 2004–2006 to 2007–2008.

However, the 2nd respondent(EPFO) does not dispute that the payment for this period was received in two bulk payments. The only contention raised is that the amount received was not appropriated to the respective months, and therefore, the petitioners (employees) are not eligible for higher pension.

In paragraph 19 of the counter affidavit filed by the 4th respondent (employer), it is stated that, as instructed by the Assistant Provident Fund Commissioner, Regional Office, Thiruvananthapuram, the 4th respondent (employer) furnished proof of remittance of both employee and employer contributions under Para 26(6) of the EPF Scheme, 1952, for the period 2004–2005 to 2007–2008 in respect of the petitioners.

The Kerala High Court said that the statement showing the month-wise break-up of the lump-sum remittance for the said period is produced as Ext. R4(c). It is said that administrative charges were also paid as provided under Para 26(6).

Admittedly, the Employees Provident Fund Organisation has received contributions from both employees and employer under Para 26(6) of the EPF Scheme, 1952, for the period 2004– 2005 to 2007–2008.

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The Kerala High Court said that paragraph 26 (6) deals with instances where employees and employers opt to contribute to the Employees' Provident Fund on wages exceeding the statutory limit. The petitioners (employees) and the 4th respondent (employer) having complied with the requirements under the said paragraph, and the Employees Provident Fund Organisation having accepted the contributions, the 2nd respondent (EPFO) cannot deny the petitioners the benefit of higher pension.

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Kerala High Court judgement
The Kerala High Court said:

• Accordingly, Ext.P15 in both writ petitions and Ext.P18 order in W.P (C) No. 1932 of 2025 and similar orders issued to other petitioners (employees) are set aside. It is declared that the petitioners (employees) are entitled to get higher pension on actual wages.
• The respondents 2 and 3 (EPFO) are directed to take consequential steps to disburse higher pension to the petitioners based on the split-up data submitted by the 4th respondent (employer) within a period of three months from the date of receipt of a copy of this judgment.
• It is made clear that this judgment will not stand in the way of respondents 2 and 3 (EPFO) initiating any proceedings against the employer in terms of the provisions of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 or the Scheme.