In our organization, most of the employee salaries are above ₹20,000 per month gross. Recently, the PF has issued a circular stating that PF contributions must be deducted on the gross amount. Is it valid for us to deduct only the minimum of ₹6,500 gross, i.e., only ₹780 per month, instead of deducting on the gross ₹20,000?
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From India, Thana
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From India, Thana
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Hi PF is calculated on the Basic wages & not on the gross pay. Once again there is ceiling for 6500/- So you shall restrict for the same.
From India, Bangalore
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From India, Bangalore
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Hi Mr. Thakur. I am sorry. Even there should be Ceiling limit. Do you have any Circular or PDF on the same? Can you please share the same?
From India, Bangalore
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From India, Bangalore
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I saw the news in today's TOI. [Save more in provident fund, but take home less as salary - The Times of India](http://timesofindia.indiatimes.com/business/india-business/Save-more-in-provident-fund-but-take-home-less-as-salary/articleshow/17563456.cms)
Pon
From India, Lucknow
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Pon
From India, Lucknow
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Hi, Actually when we have an Inspection from the PF Department, they intimate that other than HRA all the allowance should deduct the PF amount...
From India, Chennai
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From India, Chennai
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Though all other allowances except HRA can be treated as part of basic wages, the wage limit for computing contribution will not increase; it will remain the same at Rs. 6,500 per month. Therefore, the contribution can be limited to Rs. 6,500 per month.
B. Saikumar
HR & Labour Law Advisor
Mumbai
From India, Mumbai
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B. Saikumar
HR & Labour Law Advisor
Mumbai
From India, Mumbai
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Dear Friends,
Let me clear the confusion. Today, we received news from the Times of India newspaper stating that the wage ceiling is 6500/-. However, there is no clear message regarding whether the employer also has to deposit 12% of the gross amount in respect of the employees. Employee PF contributions will be deducted from the gross salary (all allowances other than HRA), while the employer's part will be based on 6500/-, i.e., 780/-. Employer contributions above Rs. 780/- will be voluntary, depending on the employer's choice. However, the employee's choice has been closed after this news.
In the case of expats, the contribution will be 12% of the gross salary for both the employer and the employee.
Thank you.
From India, Delhi
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Let me clear the confusion. Today, we received news from the Times of India newspaper stating that the wage ceiling is 6500/-. However, there is no clear message regarding whether the employer also has to deposit 12% of the gross amount in respect of the employees. Employee PF contributions will be deducted from the gross salary (all allowances other than HRA), while the employer's part will be based on 6500/-, i.e., 780/-. Employer contributions above Rs. 780/- will be voluntary, depending on the employer's choice. However, the employee's choice has been closed after this news.
In the case of expats, the contribution will be 12% of the gross salary for both the employer and the employee.
Thank you.
From India, Delhi
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Dear all can i know, after recent circular, what is the minimum wages on which pf to be duducted, on rs 6500/- or on entire amount, i,e 15000 or more
From India, Bangalore
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From India, Bangalore
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Dear All,
As the circular was initiated from the PF office dated 30.11.2012, which pertains to Section 7-A (Determination of money due from the employer).
One of the points mentioned in the circular, i.e., number 12, is about "SPLITTING OF WAGES," which is defined as follows:
Previously, under Section 2(b) (ii) of the Act, "commission" and "any other similar allowance" were included, encouraging the subterfuge of splitting wages to evade PF liabilities. Now, the definition of "basic wages" has been clearly outlined in the circular to include all allowances paid to employees on a regular basis as part of "Basic Wages."
Therefore, based on my understanding, the circular does not impact the maximum ceiling limit for PF calculation, i.e., 12% of basic (Max Limit 6500) as specified in para 26A of the PF scheme.
Thus, only the consideration of Basic Wages should include all allowances paid monthly but should not exceed the ceiling limit of 6500.
Please reach out if you have any queries regarding my interpretation outlined above.
Regards,
Pushkar Bisht
From India, Delhi
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As the circular was initiated from the PF office dated 30.11.2012, which pertains to Section 7-A (Determination of money due from the employer).
One of the points mentioned in the circular, i.e., number 12, is about "SPLITTING OF WAGES," which is defined as follows:
Previously, under Section 2(b) (ii) of the Act, "commission" and "any other similar allowance" were included, encouraging the subterfuge of splitting wages to evade PF liabilities. Now, the definition of "basic wages" has been clearly outlined in the circular to include all allowances paid to employees on a regular basis as part of "Basic Wages."
Therefore, based on my understanding, the circular does not impact the maximum ceiling limit for PF calculation, i.e., 12% of basic (Max Limit 6500) as specified in para 26A of the PF scheme.
Thus, only the consideration of Basic Wages should include all allowances paid monthly but should not exceed the ceiling limit of 6500.
Please reach out if you have any queries regarding my interpretation outlined above.
Regards,
Pushkar Bisht
From India, Delhi
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Dear All, Pl find attached circular from EPFO on 30 November,2012.See sr.No.12 for split of wages. Regards,
From India, Mumbai
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From India, Mumbai
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there is no ceiling on PF, Rs.6500/= ceiling is for only pension part. PF shall be calculated on 12% of gross as per lateste circular issued by EPFO on 30 Nov.2012.
From India, Mumbai
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From India, Mumbai
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Dear Firdous, Please refer Para 26A of PF scheme, It has been mentioned there. Regards, Pushkar Bisht
From India, Delhi
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From India, Delhi
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Dear All Please find attachment of Circular. Can any body tell about the minimum limits Rs.6500/- , is employee can deduct P.F. on minimum limits. Regards Kishor
From India, New Delhi
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From India, New Delhi
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The slab limit on the employer's part will remain the same, i.e. Rs. 780 (12% of Rs. 6500). But the employee's contribution will be calculated on the gross pay (less HRA). If one gets a basic of say, Rs. 15,000 and his DA is 80%, his gross pay will be Rs. 27,000. Now, the PF deduction would be on Rs. 27,000. So, Rs. 3,240 will be the employee's share and Rs. 780 would be the employer's share.
From India, Mangaluru
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From India, Mangaluru
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Sir, Let me know the PF recent amendment for deduction PF amount from gross salary Regards, S. Venkatesh
From India, Thiruvananthapuram
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From India, Thiruvananthapuram
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Why not legislatively amend the wage ceiling of Rs. 6500 of the Employees' Provident Fund & Miscellaneous Provisions Act, 1952, to Rs. 15000, as done in the ESI Act, 1948, to clear the confusion created by the recent circular of the EPFO defining the Basic wages?
Raising the wage ceiling to Rs. 6500 and the current rates of EPS shall ensure not only more savings for employees but also an increase in pension upon retirement, which is currently meager and insufficient. This adjustment serves no purpose as intended in 1995 due to the escalating inflation.
From India, Delhi
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Raising the wage ceiling to Rs. 6500 and the current rates of EPS shall ensure not only more savings for employees but also an increase in pension upon retirement, which is currently meager and insufficient. This adjustment serves no purpose as intended in 1995 due to the escalating inflation.
From India, Delhi
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if an employee basic is above 10000 form basic i should deduct or form 6500 only i have to deduct please reply then what about balance basic.
From India, Chennai
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From India, Chennai
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Dear Friends,
As per the latest circular issued by the EPFO, the EPF contribution will be one basic + DA, food allowance, and any undefined wages such as special allowance, other allowances, and commissions which are deemed as part of basic wages. Furthermore, where there is a splitting of gross wages that is unjustifiable, the allowances can be considered as part of basic wages. Apart from the above circumstances, the EPF calculations remain the same as they are.
From India, Bangalore
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As per the latest circular issued by the EPFO, the EPF contribution will be one basic + DA, food allowance, and any undefined wages such as special allowance, other allowances, and commissions which are deemed as part of basic wages. Furthermore, where there is a splitting of gross wages that is unjustifiable, the allowances can be considered as part of basic wages. Apart from the above circumstances, the EPF calculations remain the same as they are.
From India, Bangalore
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Dear all,
1) The 12% EPF (employee share) must be deducted from basic + DA (old circular). However, in the recent circular, EPF will be deducted from the gross salary only at 12%. Additionally, the employer should add the following contributions:
2) Pension contributions are at 8.33% if the wage is greater than or equal to 6500 = 541.00 or 8.33% of the gross salary.
3) Employees' Provident Fund is at 3.67% or the difference amount = employee share - pension amount (541) --> employee share (12%) + employer share (3.67%) or the difference amount + pension contribution (541.00).
The above three contributions will be paid through online ECR challan.
Regards, Ananda Raju Ramoji Group.
From India, Eluru
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1) The 12% EPF (employee share) must be deducted from basic + DA (old circular). However, in the recent circular, EPF will be deducted from the gross salary only at 12%. Additionally, the employer should add the following contributions:
2) Pension contributions are at 8.33% if the wage is greater than or equal to 6500 = 541.00 or 8.33% of the gross salary.
3) Employees' Provident Fund is at 3.67% or the difference amount = employee share - pension amount (541) --> employee share (12%) + employer share (3.67%) or the difference amount + pension contribution (541.00).
The above three contributions will be paid through online ECR challan.
Regards, Ananda Raju Ramoji Group.
From India, Eluru
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Hello all,
Today, I had a meeting with the PF Officer in Ahmedabad. He informed me that the government has just issued a notice on 30-11-2012, but the applicability is pending. Due to elections and other reasons, we will declare it later on. Every establishment covered by the PF will receive an official letter from the PF office regarding applicability and eligibility. After that, we will deduct PF from the GROSS SALARY.
Kindly wait for the letter from the PF Office.
Thank you,
Ashish
From India, Pune
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Today, I had a meeting with the PF Officer in Ahmedabad. He informed me that the government has just issued a notice on 30-11-2012, but the applicability is pending. Due to elections and other reasons, we will declare it later on. Every establishment covered by the PF will receive an official letter from the PF office regarding applicability and eligibility. After that, we will deduct PF from the GROSS SALARY.
Kindly wait for the letter from the PF Office.
Thank you,
Ashish
From India, Pune
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Khafeeman, please check that though the ceiling is Rs. 6500/- for the employer, the amount works out to 13.61% for the employer, i.e., Rs. 8845 and not Rs. 780/-. As long as the ceiling is maintained, the employer need not pay beyond Rs. 6500/- base.
From India, Nellore
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From India, Nellore
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Khafeeman, please check that though the ceiling is Rs. 6500/- for the employer, the amount works out to be 13.61% for the employer, i.e., Rs. 885/- per month and not Rs. 780/-. As long as the ceiling is maintained, the employer need not pay beyond Rs. 6500/- as a base.
From India, Nellore
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From India, Nellore
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Dear Mr. Thakur,
Please refer to your query on the above subject. Please refer to Col. No. 12 of the circular issued by CPFO Mr. R C Mishra, who retired from the services on 30/11/12. The circular was issued particularly for departmental purposes to provide steps/guidelines for conducting quasi-judicial inquiries under Sec 7A for violations of rules and non-compliance with provisions under the EPF Act - 1952.
The issue raised pertains to the splitting of wages, i.e., basic wages as defined under Sec 2(b)(II), where any commission or allowances are considered as part of wages. In this context, the Honorable Supreme Court delivered a verdict stating that all such allowances, commission, or other components of the salary paid to employees must have uniformity to be considered part of wages.
Furthermore, as you are aware, please refer to Sec 6(B) of the EPF Act - 1952, where rules describe that PF contributions are payable on Basic Wages, DA, and retaining allowances paid to employees for contribution.
From India, Chennai
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Please refer to your query on the above subject. Please refer to Col. No. 12 of the circular issued by CPFO Mr. R C Mishra, who retired from the services on 30/11/12. The circular was issued particularly for departmental purposes to provide steps/guidelines for conducting quasi-judicial inquiries under Sec 7A for violations of rules and non-compliance with provisions under the EPF Act - 1952.
The issue raised pertains to the splitting of wages, i.e., basic wages as defined under Sec 2(b)(II), where any commission or allowances are considered as part of wages. In this context, the Honorable Supreme Court delivered a verdict stating that all such allowances, commission, or other components of the salary paid to employees must have uniformity to be considered part of wages.
Furthermore, as you are aware, please refer to Sec 6(B) of the EPF Act - 1952, where rules describe that PF contributions are payable on Basic Wages, DA, and retaining allowances paid to employees for contribution.
From India, Chennai
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Hi all,
What Mr. KHAN stated is correct. Though the circular mandates a 12% contribution on the gross amount excluding HRA, this does not impose any liability on the employer. They can still continue to contribute only up to the ceiling of Rs. 6500/-, as the scheme allows the employer discretion regarding contributions exceeding the ceiling.
Sasikumar. R.
Senior Manager Legal
From India, Coimbatore
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What Mr. KHAN stated is correct. Though the circular mandates a 12% contribution on the gross amount excluding HRA, this does not impose any liability on the employer. They can still continue to contribute only up to the ceiling of Rs. 6500/-, as the scheme allows the employer discretion regarding contributions exceeding the ceiling.
Sasikumar. R.
Senior Manager Legal
From India, Coimbatore
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Dear Thakur The liability of the employer for EPF contribution is in respect of employees drawing wages(Basic +admissible allowances) upto Rs. 6500/- only. N P Singh
From India, Delhi
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From India, Delhi
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As I think, both are right, but a huge confusion is being created by EPFO only. They are trying to cover only the employees as the government has not intended to initiate any process to amend para 26 A of the EPF & MP Act, which mandates the maximum limit of Basic wages for EPF purposes.
From India, Mumbai
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From India, Mumbai
Acknowledge(0)Amend(0)PF circular kept in abeyance, says Kharge
It raised a lot of queries and caused much confusion
Union Labour and Employment Minister Mallikarjun Kharge on Thursday said the November 30 circular issued by the Employees Provident Fund Organisation (EPFO) on the inclusion of certain allowances for calculating Provident Fund contribution has been kept in abeyance.
Talking to The Hindu here, he said since there were a lot of queries and confusion on the circular issued by the Chief Commissioner of Provident Fund, the government had decided to keep it in abeyance until further order. “So the status quo will continue.”
Informed sources said though the circular — on fixing the PF contribution while calculating employees' basic wages — contained nothing new and only highlighted what was there in Section 2 of the EPF Act, there was a lot of confusion among employers.
The circular stated that all allowances, except a few, should be taken into account for calculating wages, and from that the PF contribution of employers had to be arrived at. This meant an employer had to contribute more towards PF for the employees. However, it did not clarify which of the allowances were to be taken into account for calculating basic wage.
Originally, the circular was issued to arrest the growing trend among some employers to lessen their burden on PF contribution by splitting the basic salary into various allowances and thus bringing down their contribution. This results in loss to employees.
There are over 5 crore subscribers in the EPFO and employees have to contribute a statutory minimum of 12 per cent of their basic salary towards PF and an equal amount is contributed by employers.
The circular said basic wages “encompasses all payments except the specified exclusions. All such allowances which are ordinarily, necessarily and uniformly paid to the employees are to be treated as part of the basic wages.”
PF does not cover certain “specified exclusions” like “cash value of any food concession; any dearness allowance ... all cash payments by whatever name called paid to an employee on account of a rise in the cost of living, house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment …”
warm regards
Jana Venkata Ramakrishna
09703100700
From India, Hyderabad
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Dear all,
I am not very experienced, but I still want to be part of this conversation. First of all, the ceiling of 6500 is for the pension amount. There is no such limit for PF; it is 12% of basic, simple as that.
The circular you are talking about is just a circular; there is nothing mentioned regarding implementation. As per the circular, PF will be deducted from the gross salary. In cases where the employee's salary is part of the CTC, the company will revise the salary structure and shift that extra burden to the employee. However, where an employee is simply receiving a salary with no documentation or contract (meaning labor/worker), the employer has to bear the additional burden.
From India, Delhi
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I am not very experienced, but I still want to be part of this conversation. First of all, the ceiling of 6500 is for the pension amount. There is no such limit for PF; it is 12% of basic, simple as that.
The circular you are talking about is just a circular; there is nothing mentioned regarding implementation. As per the circular, PF will be deducted from the gross salary. In cases where the employee's salary is part of the CTC, the company will revise the salary structure and shift that extra burden to the employee. However, where an employee is simply receiving a salary with no documentation or contract (meaning labor/worker), the employer has to bear the additional burden.
From India, Delhi
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Hon. Kharge is more confused because he yielded to the pressure of the contractors and industrialists. Presently, the loss made by the employer is a loss to the government in the first instance and to the employee ultimately. Hon. Kharge's stoppage is nothing but to salute the employer at the cost of the government and employees. What kind of welfare government is it? A very sad state of affairs.
From India, Nellore
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From India, Nellore
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For the last six years, if there has been any change, I am not sure, but until 2006, it was 12% of the basic salary up to a maximum limit of Rs. 6500. The employer's contribution is also 12%, up to a maximum limit of Rs. 6500.
Voluntarily, employees can choose to increase the rate of contribution. The same applies to the company; they can increase it for welfare purposes, etc.
Gross salary is never considered when calculating PF contribution; it is always based purely on the basic salary.
From Australia, Balwyn
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Voluntarily, employees can choose to increase the rate of contribution. The same applies to the company; they can increase it for welfare purposes, etc.
Gross salary is never considered when calculating PF contribution; it is always based purely on the basic salary.
From Australia, Balwyn
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The view expressed is that basic pay only counts for PF purposes. In such cases, those who have taken other components are paid more. Although the government and employees are happy, the employer is at a loss. This cannot be called back. Please proceed ahead from the standpoint of what we have now.
From India, Nellore
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From India, Nellore
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EPF-Circular-da ted-23-May-2011 -Splitting-of-M inimum-Wages-fo r-the-Purpose-o f-PF-Contributi on-Not.pdf