We have to compusorly deduct the PF on the notice pay. Because when the candidate completes his notice period he may get his salary at the time of F&F settlement time. Till the employee works for our company we just need to deduct the PF. Its manadatory & till now ther was no rule like exempting from PF at the time of notice period.
For the benefit of all, I hereby qoute the Bombay High Court Judgement in the matter of "India United Mills Ltd. v. RPFC" that a pyment made in lieu of notice by way of consideration for terminating the contract of employment of a permanent employee does not constitute "basic Wages" under section 2(b) of the PF Act.
The Hon'ble court stated that the expression 'emoluments which are earned by an emplyee while on duty' represents the amounts actually earned by by an employee kduring the period of his employment while he is actually on duty. The payment in question is not a payment earned for duty done. It is not a payment earned while on duty. It is a payment by way of consideration for terminating the contract of employment of a permanent employee without notice. The payments made cannot in any sence be regarded as representing 'emoluments earned while on duty and are not and do not consitute 'basic wages' within the meaning of the definition given in the Employees' Provident Funds Act, 1952, and no percentage thereof is payable by way of provident fund contribution.
Therefore the emoluments towards notce pay do notattract pf.
Hope the above clarification will close the matter for further discussion.
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