Epf deduction after supreme court ruling - allowance are basic, da, hra, conveyance, medical, child, and special allowance - CiteHR
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Dear Pradip,
Keep HRA 40% for non metro and 50% for metro for the purpose of exemption under Income Tax act.

Ravi,
For Income Tax purposes - yes, the 40% or 50% rule will apply. But, if HRA is say 100% of Basic, would it be excluded from PF computation.

There is no such rule that you can keep the HRA at 40 or 50% of Basic. Even under Income Tax, we have different situations for exemption and it is not a flat 40 or 50% of basic wage. In the case of employees who reside in his own house how does it work? All that you have to note is salary is the amount agreed by the employee to do a certain work and it is that salary which is taken in to consideration when he absents without pay and it is that salary which is paid if he is on leave with pay. As such the gross salary is the salary which should qualify for PF subject to the ceiling which at the present rate is Rs 15000. After all, it is matter of Rs 1800 and I don't understand why the employers are again bifurcating this amount and showing a very small amount as basic wages and a huge amount as HRA? Is it that people work just to pay rent?
I guess people want to keep Basic low as it has Gratuity implication.
Under Payment of Gratuity Act also the meaning of Salary is the same and I am sure the next battle will be for that. Many establishments now provide their gratuity fund based on the basic salary of the employees. But under the Payment of Gratuity Act also the wages means all emoluments which an employee earns while on duty or on leave. Here also the same principle that I have explained in the previous post can be applied. That is, if the wages paid for your paid leave or the wages deducted for your unpaid leave is based on gross wages, this is the wages as per agreement and there cannot be any dilution in itand this should be the base for calculation of Gratuity also.
Dear Madhu Sir,
Can you please share different situations for claiming exemption under HRA (please mention the section) for our knowledge.

HRA is paid only to persons who work for us in the location but having his own house in some other place. Now when you hire a person, there will be an understanding that he has to stay in the location where he has to work and in order to make him available in the location we will offer, IN ADDITION TO SALARY, an amount with which he can take a house on lease. This is called HRA. Depending upon the category of employees, you can have different slabs of HRA. It can be a dormetry kind of arrangement with common bath room etc, the rent of which is paid by the employer himself, in the case of workers; it can be flats in the case of middle level employees or furnished villas for others. The cost of rent can be added to your CTC but not in GROSS SALARY. Obviously, for local employees or people from the same locality, this will not be available. That is not at all an issue also. Why we pay to to some employees? because we need them to be available in the place of operation.
In the above arrangement, if an employee could not come to office for, say, four days, due to some reasons and since he had no leave to his credit the days were marked as Leave without Pay, then he will get the HRA in full but four days salary on the basis of gross salary only be deducted. In the case of HRA as a component of gross salary he will not get it. The first case recognises that he is still in the locality though could not come to office and as such he should pay rent to the landlord in full even though he did not go to office for a few days (for the landlord whether he goes to office or not is not at all an issue). The when it is a part of gross salary he will lose it for four days. If it is lost there should be a reason. The reason is that he didnot attend to his office and as per terms and conditions of employment, HRA is a part of gross wages and that will be proportionally deducted when he is absent.
When HRA is paid over and above salary, that can be exempted from PF. But when it is included in the gross salary, it should be considered as part of PF qualifying salary

Dear all
I have a query related to new pf ruling by SC
In our company we have allowance such as basic+da, hra, conveyance, & medical allowance.
Bt only to 50% of employees we give all of the above components & remaining 50% employee only Basic +DA & hra
As per SC rule spl allowance should be included in pf calculation
But my query is in the above case should the new ruling be followed in this case? Bcoz all of the components are not universally paid to all employees
Pls guide me
Regards
Priya

The Supreme Court has never said that Special Allowance should be part of PF qualifying wages but the court has only said that special allowance paid to all employees should be part of wages and if any allowance is paid to a particular category of employees depending upon the risk involved, or special skill required to do that work, that can be excluded from wages. There can be cash handling allowance to those who handle cash, night bata for people who work in night shifts, and these are special allowances and since these are not paid to all employees you can exclude them from PF qualifying wages.
If your Basic + DA part is reasonably good, then there will not be any problem. Problem comes only when the PF qualifying salary is very low and you don't even consider dearness allowance in the salary. Obviously, a salary much lower than the statutory minimum will be under scrutiny by the EPF Authorities even though they cannot direct the employers to pay as per minimum wages.
Moreover, if the PF qualifying salary is more than Rs 15000, nothing said in the Court ruling will apply.

Dear HR fraternity,
Due to amendments / judgments on wage components, we wish to restructure the wage structure to get benefit from PF & ESI exemption, which are as follows:
Wage / Salary Components
---------------------------------
Basic
HRA
Washing Allowance (Max-1000)
We propose to restructure the total gross salary into the above three components by fixing 61%, 35% and 4% respectively.
Also we seek clarification / best advice on the other allowances such as Attendance Bonus, Night Shift Allowance, Overtime wages etc., in view of PF judgment / ESI amendment.
Regards,
Krishna Kumar


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