Industrial Relations And Labour Laws
Debnath Mitra
Working As An Officer Hr
+1 Other

I know 12% of Salary is payable as PF. But this 12% is on basic salary or on gross Salary? In Tamilnadu is it 12% on gross Salary? Can any one enlighten me?
From India, Varanasi
12% is the contribution on the Basic Salary and Dearness allowance. But the basic salary has been defined in the Act as all inclusive remuneration payable as per contract of employment. Therefore, as per law it is the gross salary which will attract PF contributions. There has been confusions with regard to its treatment and all were doing it on Basic Salary and DA (if any) and there have been several court rulings on this. In order to give a clear picture on what constitutes PF qualifying salary, there has been an attempt to amend the present EPF & MP Act and to include all elements of wages except HRA (to an extent) in the PF contributing salary. Even now the legal side is very clear that PF is payable on Basic wages ( basic wage means and includes all emoluments earned by an employee as per section 2(b)) and dearness allowances.
This being a Central Act, there is no separate treatment for Tamil nadu

From India, Kannur
I am confused on the definition of "Basic Salary". As per EPFO C-III/022/3(6)2014/MH dt 18.03.2014 "Basic Wages" as defined under section 2(b) of the Act means "all emoluments which are earned by an employee while on duty or on leave... in accordance with the terms of the contract of employment... but does not include "among other things - HRA, OT allowance, Bonus, Commission or any other similar allowance payable to the employee. Does this mean HRA, Conveyance, Educational allowance, Meal allowance, Medical allowance, special allowance, Flexible allowance and compensatory allowance are not part of Basic Salary?
From India, Varanasi

Attached Files
File Type: pdf PF_not_applicable_on_CTC_18.3.2014.pdf (530.4 KB, 100 views)

There is no confusion. As per section 6 of the Act, the contribution is payable on Basic wage, dearness allowance and retaining allowance (this is applicable only when the establishment or a division is closed for the time being but some or all employees are paid remuneration just to keep them otherwise they may leave the company and will not be available when the production resumes and that is why the term allowance to retain them) if any. Now you take the definition of basic Wages as given in section 2(b). It is that wages which includes all emoluments except HRA, overtime wages, bonus or commission.

The circular also confirms the same. In the present style of salary fixation it is the employers' cost by employing an employee or CTC which is considered as part of contract of employment. In the CTC everything will be included and out of this you have to take remuneration actually payable for treatment of PF. This is a direction to the PF Commissioners/ Enforcement Officers and not to others.


From India, Kannur
Thank you very much Madhu for the clarification. I have now understood the meaning of basic salary for PF treatment.
From India, Varanasi
P.F is only deducted on Basic, DA, Retaining Allowance, Cash value of Food concession. It is a central legislation and the slab is revised as Rs. 15,000. So, P.F is only deducted on the above items only upto Rs. 15,000. Any body can deduct his wages in excess as discretionary up to a certain percentage by his own on which no contribution will be paid by the employer.
From India, New Delhi
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