A. Prasad Started The Discussion:
Dear Seniors,

We are in the process of getting new registration number for PF contributions. While in discussions and finding our salary structure with 40% basic on total gross salary, the Enforcement Officer of EPFO had pointed out that there should be at least 70% of basic & DA on total gross salary. And he was telling that it is mandatory when asked about many organisations which do not follow this system. Ultimately, he said that I can maintain at least 65% and not less than that.

My question is that, whether we should structure salary of employees with 70% or 65% basic & DA on total gross salary as a mandatory? As per my observations, many companies do not follow this rule and they go according to their own policy.

Very recently, I have joined an organisation (Service sector) which is 4 years old and not maintained compliances under any law in force in Karnataka or Central laws. They have got PF registration number a couple of years ago, but not even remitted contributions and now we got notices from the PF office.

Please discuss and respond to this query urgently with your valuable comments and suggestions on the above.

Regards,
AHN
Posted 7th September 2008 From India, Mumbai
Provident Fund is contributed as percentage (12%) of Salary. Salary for this purpose includes Basic salary and Dearness Allowance. If you say that out of, say 6500 rupees paid to an employee, Rs 6000 is HRA or other allowance and only Rs 500 is the salary (basic + DA) it will be deemed as an attempt to reduce employer's contributions. That's why the Enforcement Officer has asked you to bring at least 70/ 65 % of the gross as Basic + DA. In fact, the law also requires to maintain the basic salary and dearness allowance in such proportion. But there is no hard rule to say that the Basic + DA should be 70%. Normally, the Basic Salary is the actual salary and DA is taken as a percentage of this basic. Similarly, HRA is also given as percetage of basic.

Regards,

Madhu.T.K
Posted 8th September 2008 From India, Kannur
As Madhu pointed out it is not mandatory to have 70% of gross salary as the basic & dearness allowance. Usually organization will not follow this kind because of IT. the more the allowances are the less IT can be deducted..

U too can go ahead with 40 % of Gross as basic. Regarding ur query of not remitting the contributions probably u better approach some public relation officer. They will guide u better about what to do..
Posted 8th September 2008 From India, New Delhi
except in the case of minimum wage or otherwise if it is mentioned that minimum wage is the basic , the employer can make any bifurcation which suits to its own policy where the wages are paid more than that of minimum wage.

none of the government authority can give any direction to change the same.

hope the reply suits to your requirement.

with thanks,

asitabha sanyal
Posted 8th September 2008 From India, Delhi
Here I would like to mention that what ever may be the % related to Basic, DA etc for calculation of PF contribution.. But the Admin charges on PF & EDLI are calculated based on the total gross salary of an employee. Whereas in many companies they calculate that also on the basis of total of Basic+DA which in my oipinion is wrong. Tomorrow the PF authorities may create problem. If i am wrong correct me.

Regards,

S.Kumar
Posted 8th September 2008 From India, Madras
dear
there is no rule that 70% should be basic+DA,however u haved to pay PF on minimum
wages.but if u keep 40% of total gross it seems that u want to avoid PF contribution.
suppose someone gross is 10000 than according to your concept 4000 will be basic
than where3 u will adjust rest 6000.
in my veiw 6000 should be basic and 2400 can be HRA and rest can be adjusted in other head.
your other point is little serious pls short out that recovery matter
j s malik
Posted 8th September 2008 From India, Delhi
my dear u all r right........

but actual is 50% Basic in Mumbai, Kolkatta, Chennai and Delhi and in other cities its comes to 40% of Gross
and conv all. is max Rs. 800 P M and Medical all. is Rs. 1250 P M, remaining amoutn distribute depend on company policy...... m i right
Posted 8th September 2008 From India, Ahmadabad
Dear Mr Kumar,

As per the PF Act, Wages means Basic and DA and not Gross Salary and hence there is no need to contribute Admin. / EDLI charges on Gross Salary.

The Enforcement Officer has no right to say the Basic and DA should be 70% of Gross Salary and there is no law provides for it. The normal industry standard of BP & DA is 40% on Total Gross Salary. As one of our friends rightly said, you should not have Rs.500 as Basic and Rs.6000 as HRA with total Gross Pay of rs.6500/-.

Since you are new to the PF, I suggest you to make restrict PF contributions with a max. salary of Rs.6500/- as stipulated in the Act.

A B Srinivasan
Posted 9th September 2008 From India, Madras
Thank you Mr.Srinivasan for clearing my doubt. Since yesterday I am in search of the article in support of my opinion on admin charges. If it is found I will revert back to you for further clarification with regards to the admin charges.

Regards.

S.Kumar


Posted 9th September 2008 From India, Madras
AHN 
Hi All, Thank you all for contributing your views and suggestions on this query. Regards, AHN
Posted 11th September 2008 From India, Bangalore
sir, can you tell me what any salary breakup according to govt. rule. Basic = % DA = % Sir, please tell me
Posted 6th August 2009 From India, Delhi
hi Mr. Srinivasn,

i have one doubt.

Eg: one of our employee is having BA+DA of rs. 10,000/- and we are contributing to PF on 10000(Rs.1200 being 12% of Rs.10,000/-). and for pension fund we are contributing 8.33% of Rs.6500(i.e. Rs.541) and balance amount goes to Employees PF.

here i have the doubt that, for calculating EDLI, and EdLI administration charges, should we consider Rs.6500 or Rs.10,000.

waiting for early reply


Posted 7th August 2009 From United States, New York
hi Mr. Srinivasn,

i have one doubt.

Eg: one of our employee is having BA+DA of rs. 10,000/- and we are contributing to PF on 10000(Rs.1200 being 12% of Rs.10,000/-). and for pension fund we are contributing 8.33% of Rs.6500(i.e. Rs.541) and balance amount goes to Employees PF.

here i have the doubt that, for calculating EDLI, and EdLI administration charges, should we consider Rs.6500 or Rs.10,000.

waiting for early reply

manoj
Posted 7th August 2009 From United States, New York
Dear Mr. Prasad,

Recently we had a PF inspection at our office. We maintained all the relavant document in clear manner but we are following 50% basic and DA on gross. Pf officer said strictly we have to follow minimum 65-70% then we finally said ok we will follow this eventhough we paid 70000 Rupees for non maintaining 70% on gross, they asked 140000 but we paid 700000 with the help pf enforcement officer. for example if you ask there is any rule for 70% simply they say there is no rule but they will catch you some other way. Now we restructured all the basic things like 60% basic. So try to formulate 60% of basic on gross. There is no way to escape from PF official this is my real time experience.
Posted 7th August 2009 From India
Even if EPF is contributed on Rs 10000, EDLI (like EPS) is contributed on a salary of Rs 6500 only. Similarly administrative charges on EDLI is alos calculated on Rs 6500. Regards, Madhu.T.K
Posted 7th August 2009 From India, Kannur
Mr.Kumar,in my opinion the admin charges on PF &EDLI is calculated on earned basic+da # pf wages# but not on total gross salary which can prove to be huge burden on employers contribution Kareem
Posted 20th July 2010 From India, Calcutta
AHN 
Dear friends,

Thank u all for your responses and the suggestions. I am sorry for the late reply as it happened to see just now when I spotted the replies under my subscribed discussions.

Best wishes!

Regards,
Prasad
Posted 23rd July 2010 From India, Bangalore
Dear All,

According to my observation the bifurcation of gross amount will be like as follows-
Basic+DA 50%of gross
HRA 20%of gross
CONVEYANCE 6%of gross
MEDICAL 10%OF GROSS
EDUCATION 1%
OTHER ALLOWANCES 13%OF GROSS .
Correct me if i am wrong.I have a question to all my seniors- how to show bonus in the salary statement.I studied that bonus % will be 8.33%of 3500 or rs100 whichever is more.Kindly help me....



Thanks
Ritu Sinha
KCPL
Posted 17th October 2012 From India, Mumbai
Hi can some one help.an employee in her agreement is mentioned 35000 in hand salary.we paid her 35000 without TDs deductions as company was newly formed in sept 2012.she is terminated due to some reasons by me.now she argues on gross salary of 38500 as I don't fall under Tds deduction as employee if crossing 2 lacs then the Tds deduction starts.how can I counter attack this employee
Posted 13th February 2013 From India, Mumbai
You are wrong kumar,

Admin charges on PF is calcuated on bases of BAsic +DA used for calculation of PF contribution. and Administartion charges on EDLI is calculated on 6500 or Basic+DA, which ever is less.

Admin charges not calcuated on Gross salary. why should employer pay simply on higher salary, without getting any benefits like increase in LIfe insurance or increase in pensions..





Posted 27th March 2013 From United States, New York
HI frnds im fresher i need your assistance i want to know if one person salary is 20000 per month how to caliculate basic da hra
Posted 18th May 2016 From India, Visakhapatnam



 
 
 
 







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