Hii,
Clarification on PF Changes
Current Scenario:
Currently all employees are covered under PF upto Basic of Rs 6500 per month. There are few employees who have opted for PF on full actual Basic (i.e. more than Rs 6500 per month) within the existing CTC, hence the employee as well as employer contributes 12% on full actual Basic. Our Salary Components include:
Basic : Paid Monthly on Payslip
DA : Paid Monthly on Payslip
HRA : Paid Monthly on Payslip
Conveyance : Paid Monthly on Payslip
Medical Allowance : Paid Monthly on Payslip but bills are collected annually for IT exemption
Personal Pay : Paid Monthly on Payslip
Special Allowance : Paid Monthly on Payslip
Attendance Bonus : Paid Monthly on Payslip subject to terms of settlement
Shift Allowance : Paid Monthly on Payslip subject to terms of settlement
Overtime : Paid Monthly on Payslip
LTA : Paid Annually
Bonus : Paid Annually
With the recent amendments in PF Act, we would like to clarify the following:
1. What all components attracts PF ?
2. If an employee and employer is already contributing on full basic (more than ` 6500/-), Do they need to give any declaration w.r.t new changes?
3. If an employer is currently contributing PF on full basic for e.g. Basic salary is `1,00,000/- per month , How would be the deductions treated ? ( Pension Contribution, PF admin charges, EDLI, EDLI admin Charges )
4. Can an employee and employer whose basic salary is more than `15,000/- opt for PF coverage on Full Basic
a. Existing employee who is covered upto Rs 6500 but Basic is more than Rs 15000
b. First time working and joining at Basic of more than Rs 15000
5. Your circular says paragraph 26A of the EPF scheme restricts employer contribution to 12% of Rs 15000 only even if the employee is voluntarily contributing on full Basic. Please elaborate…. Also what happens to already covered employees with full Basic where employer is also contributing 12% on full Basic.
6. Earlier we could contribute pension fund @ 8.33 % on full basic, what happens to
them now?
7. What happens to international Employees i.e expats working in India ?
From India, Bangalore
Clarification on PF Changes
Current Scenario:
Currently all employees are covered under PF upto Basic of Rs 6500 per month. There are few employees who have opted for PF on full actual Basic (i.e. more than Rs 6500 per month) within the existing CTC, hence the employee as well as employer contributes 12% on full actual Basic. Our Salary Components include:
Basic : Paid Monthly on Payslip
DA : Paid Monthly on Payslip
HRA : Paid Monthly on Payslip
Conveyance : Paid Monthly on Payslip
Medical Allowance : Paid Monthly on Payslip but bills are collected annually for IT exemption
Personal Pay : Paid Monthly on Payslip
Special Allowance : Paid Monthly on Payslip
Attendance Bonus : Paid Monthly on Payslip subject to terms of settlement
Shift Allowance : Paid Monthly on Payslip subject to terms of settlement
Overtime : Paid Monthly on Payslip
LTA : Paid Annually
Bonus : Paid Annually
With the recent amendments in PF Act, we would like to clarify the following:
1. What all components attracts PF ?
2. If an employee and employer is already contributing on full basic (more than ` 6500/-), Do they need to give any declaration w.r.t new changes?
3. If an employer is currently contributing PF on full basic for e.g. Basic salary is `1,00,000/- per month , How would be the deductions treated ? ( Pension Contribution, PF admin charges, EDLI, EDLI admin Charges )
4. Can an employee and employer whose basic salary is more than `15,000/- opt for PF coverage on Full Basic
a. Existing employee who is covered upto Rs 6500 but Basic is more than Rs 15000
b. First time working and joining at Basic of more than Rs 15000
5. Your circular says paragraph 26A of the EPF scheme restricts employer contribution to 12% of Rs 15000 only even if the employee is voluntarily contributing on full Basic. Please elaborate…. Also what happens to already covered employees with full Basic where employer is also contributing 12% on full Basic.
6. Earlier we could contribute pension fund @ 8.33 % on full basic, what happens to
them now?
7. What happens to international Employees i.e expats working in India ?
From India, Bangalore
1. As of now only Basic salary and Dearness allowance will attract PF. However, since this is a social security legislation and whatever contributed is for the welfare of the workers on their attaining the age of retirement, a wider scope for the definition can be expected. Ifso all allowances which will form part of agreement with the employee will be taken as salary for the purpose of PF contribution. In a sense it is true also because during the course of bargaining (yes bargaining between the employer and employee at the time of interview) the employee will finally settle for an amount that he would expect to get every month and that is his salary and in order to avoid statutory contributions like PF, Bonus etc and in order to reduce the employee's tax burden the same will be split in to so many particles, like Basic, DA, HRA, Medical etc etc. As far as employee is concerned he gets what he expects and that is salary. And all additional the amount of which is not fixed or quantified, like bonus which depends upon profitability of the organisation, incentive, which again depends on performance of the employee, etc are outside the scope of salary. Similarly, if you have a component called medical reimbursement or telephone reimbursement, the same will also be outside the salary because the amount is not certain but will vary as per theory.
2. If both have been contributing on salary above Rs 6500, then they can continue the process. However, if they want to have their pension Fund contribution on salary above Rs 15000 (ie, without restricting the Pension Fund contribution to 8.33% of 15000) then they have to give a declaration to the effect that they would opt for higher contribution towards pension fund. This option should be filed within six months, failing which it will be construed that their pension fund contribution will be at the rate of 8.33% of Rs 15000. In case they opt for pension contribution on salary above Rs 15000, the employee should contribute an additional 1.16% to the fund!
3. If PF qualifying salary is Rs 100000, the contribution will be Rs 12000 by the employee and Rs 10750 by the employer towards Provident Fund, Rs 1250 by the employer towards Pension Fund (if there is no option for pension fund contribution on salary above 15000), Admin charges by the employer at the same rate (1.1%) of PF qualifying salary, ie, 100000, Rs 1100, EDLI at the rate of 0.5% on Rs 15000 and the admin charges of EDLI at the rate of 0.01% on Rs 15000.
4. certainly yes. An employee whose salary exceeds Rs 15000 can become member of PF. When a new employee joins with a salary of above Rs 15000, he can be excluded as per the principle already existing after obtaining declaration in form 11 that he has not been employed earlier with PF. However, as per the earlier announcement there was a a direction that when a new employee joins with a salary of more than 15000, he can be covered by PF but he should not be covered by Pension Fund, that means the entire employer's contribution in respect of such an employee should be paid to his provident fund without dividing it as 8.33% to Pension fund and the remaining to the provident fund, just like what we do about employees whose age is 58 and above.
5. Voluntary contribution has nothing to do with this amount. It is a higher percentage as it is. You can coninue contributing at higher percentage, say, 15%/30%/100% of 15000 or 15%/30%/100% of 100000, as the case may be.
If the employer has also been contributing at higher salary (ie, above 6500 or 15000) he can either stop it and start contributing only at 12% on Rs 15000 or continue contributing on the higher salary. It depends upon how the employer welcomes it. In the case of employees whose PF qualifying salary is already above 15000, say 25000, there will not be any problem since the CTC will include employer's share at of 12% on 25000.
Employer can very well restrict his contribution to Rs 1800 (12% on 15000) because the liability of employer towards PF is limited to that.
6. You can continue to contribute pension fund at 8.33% on a maximum salary of Rs 15000. In case you think that your pension contribution should be on your actual PF qualifying salary, say, 25000, then you will have to opt for that by giving a declaration within 6 months. Also you should pay 1.16% additional contribution.
7. For international workers already there was no ceiling of salary. Their total basic +DA was subjected to PF deduction and that will continue.
Also go through my apprehensions about the new PF scheme posted a dew weeks back in the following link
https://www.citehr.com/501275-new-pf...ehensions.html
Regards,
Madhu.T.K
From India, Kannur
41932. If both have been contributing on salary above Rs 6500, then they can continue the process. However, if they want to have their pension Fund contribution on salary above Rs 15000 (ie, without restricting the Pension Fund contribution to 8.33% of 15000) then they have to give a declaration to the effect that they would opt for higher contribution towards pension fund. This option should be filed within six months, failing which it will be construed that their pension fund contribution will be at the rate of 8.33% of Rs 15000. In case they opt for pension contribution on salary above Rs 15000, the employee should contribute an additional 1.16% to the fund!
3. If PF qualifying salary is Rs 100000, the contribution will be Rs 12000 by the employee and Rs 10750 by the employer towards Provident Fund, Rs 1250 by the employer towards Pension Fund (if there is no option for pension fund contribution on salary above 15000), Admin charges by the employer at the same rate (1.1%) of PF qualifying salary, ie, 100000, Rs 1100, EDLI at the rate of 0.5% on Rs 15000 and the admin charges of EDLI at the rate of 0.01% on Rs 15000.
4. certainly yes. An employee whose salary exceeds Rs 15000 can become member of PF. When a new employee joins with a salary of above Rs 15000, he can be excluded as per the principle already existing after obtaining declaration in form 11 that he has not been employed earlier with PF. However, as per the earlier announcement there was a a direction that when a new employee joins with a salary of more than 15000, he can be covered by PF but he should not be covered by Pension Fund, that means the entire employer's contribution in respect of such an employee should be paid to his provident fund without dividing it as 8.33% to Pension fund and the remaining to the provident fund, just like what we do about employees whose age is 58 and above.
5. Voluntary contribution has nothing to do with this amount. It is a higher percentage as it is. You can coninue contributing at higher percentage, say, 15%/30%/100% of 15000 or 15%/30%/100% of 100000, as the case may be.
If the employer has also been contributing at higher salary (ie, above 6500 or 15000) he can either stop it and start contributing only at 12% on Rs 15000 or continue contributing on the higher salary. It depends upon how the employer welcomes it. In the case of employees whose PF qualifying salary is already above 15000, say 25000, there will not be any problem since the CTC will include employer's share at of 12% on 25000.
Employer can very well restrict his contribution to Rs 1800 (12% on 15000) because the liability of employer towards PF is limited to that.
6. You can continue to contribute pension fund at 8.33% on a maximum salary of Rs 15000. In case you think that your pension contribution should be on your actual PF qualifying salary, say, 25000, then you will have to opt for that by giving a declaration within 6 months. Also you should pay 1.16% additional contribution.
7. For international workers already there was no ceiling of salary. Their total basic +DA was subjected to PF deduction and that will continue.
Also go through my apprehensions about the new PF scheme posted a dew weeks back in the following link
https://www.citehr.com/501275-new-pf...ehensions.html
Regards,
Madhu.T.K
From India, Kannur
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf
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