Dear All,
Kindly clarify whether VPF can be allowed at 100% of Basic + DA. If yes, is there a cap on 50% of deductions (including VPF) on Gross Salary? Some say that PWA is applicable only if wages are less than or equal to 18,000/- per month, and hence employees earning more than 18,000/- per month are excluded from this 50% cap on deductions from Gross Salary. It is confusing as EPF allows 100% of wages towards VPF, but PWA restricts deductions not to exceed more than 50% of Gross salary. Kindly request your clarity on this issue - whether we can allow 100% Basic plus DA towards VPF when there is a restriction in PWA.
Thanks & Regards,
Vadiraj Kulkarni
From India, Mumbai
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8Kindly clarify whether VPF can be allowed at 100% of Basic + DA. If yes, is there a cap on 50% of deductions (including VPF) on Gross Salary? Some say that PWA is applicable only if wages are less than or equal to 18,000/- per month, and hence employees earning more than 18,000/- per month are excluded from this 50% cap on deductions from Gross Salary. It is confusing as EPF allows 100% of wages towards VPF, but PWA restricts deductions not to exceed more than 50% of Gross salary. Kindly request your clarity on this issue - whether we can allow 100% Basic plus DA towards VPF when there is a restriction in PWA.
Thanks & Regards,
Vadiraj Kulkarni
From India, Mumbai
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The Payment of Wages Act (PWA) in India does indeed impose restrictions on the deductions that can be made from an employee's salary, including towards Voluntary Provident Fund (VPF). Here is the clarification regarding the applicability of the 50% cap on deductions from Gross Salary with respect to VPF:
1. Applicability of VPF: VPF can be allowed up to 100% of Basic + DA for employees. This means that employees can contribute their entire Basic and Dearness Allowance towards VPF if they choose to do so.
2. 50% Cap on Deductions: The confusion arises from the fact that the Payment of Wages Act puts a cap on the total deductions that can be made from an employee's Gross Salary. The Act specifies that deductions, including VPF contributions, should not exceed 50% of the Gross Salary. However, this 50% cap is applicable only to employees whose wages are equal to or less than INR 18,000 per month. Employees earning more than INR 18,000 per month are exempt from this cap.
3. EPF vs. VPF: While the EPF (Employees' Provident Fund) allows employees to contribute 100% of their wages towards VPF, the Payment of Wages Act sets a different restriction. Therefore, even though EPF allows full contributions, the PWA limits the overall deductions to 50% of Gross Salary for employees earning up to INR 18,000 per month.
In conclusion, for employees earning more than INR 18,000 per month, there is no 50% cap on deductions from Gross Salary when it comes to VPF contributions. They can contribute 100% of their Basic and Dearness Allowance towards VPF without any restrictions under the Payment of Wages Act. It is essential for organizations to ensure compliance with both the EPF regulations and the Payment of Wages Act to avoid any discrepancies in deductions.
From India, Gurugram
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1. Applicability of VPF: VPF can be allowed up to 100% of Basic + DA for employees. This means that employees can contribute their entire Basic and Dearness Allowance towards VPF if they choose to do so.
2. 50% Cap on Deductions: The confusion arises from the fact that the Payment of Wages Act puts a cap on the total deductions that can be made from an employee's Gross Salary. The Act specifies that deductions, including VPF contributions, should not exceed 50% of the Gross Salary. However, this 50% cap is applicable only to employees whose wages are equal to or less than INR 18,000 per month. Employees earning more than INR 18,000 per month are exempt from this cap.
3. EPF vs. VPF: While the EPF (Employees' Provident Fund) allows employees to contribute 100% of their wages towards VPF, the Payment of Wages Act sets a different restriction. Therefore, even though EPF allows full contributions, the PWA limits the overall deductions to 50% of Gross Salary for employees earning up to INR 18,000 per month.
In conclusion, for employees earning more than INR 18,000 per month, there is no 50% cap on deductions from Gross Salary when it comes to VPF contributions. They can contribute 100% of their Basic and Dearness Allowance towards VPF without any restrictions under the Payment of Wages Act. It is essential for organizations to ensure compliance with both the EPF regulations and the Payment of Wages Act to avoid any discrepancies in deductions.
From India, Gurugram
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PAYMENT OF WAGES ACT 2009.doc