Dear HR Professionals, I hope you all are doing great!
I am working as a Talent Acquisition Consultant in an emerging IT company that is headquartered in Singapore and I am deputed at the Indian branch.
My company tries to follow all the legal compliances in the respective regions in which it operates. Hence, we are trying to work our way around the PF applicability and are stuck at a point where the PF contribution needs to be decided. One of the articles I was going through said that the maximum salary considered for the PF is Rs. 15,000 per month which is a basic salary and the dearness allowance. If the above point holds valid, the maximum PF deduction will be Rs. 15,000 X 12%, amounting to Rs. 1,800/-.
However, we have employees whose salaries go well beyond the upper limit stated above. As we are in the IT industry, working with one of the booming technologies in the market, the salaries are on a higher side. Just for an example, I am sharing the salary break-up that we follow in our organization -
CTC offered: Rs. 10,00,000/- per annum
Particulars Monthly Annual
Basic Salary 40,917 4,91,000
House Rent Allowance 20,458 2,45,500
Special Allowance 15,548 1,86,580
Employer's Contribution to Provident Fund 4,910 58,920
Total A (Fixed) 81,833 9,82,000
Additional Annual Benefits
Group Insurance Premium (B) 18,000
-
Total B 18,000
Annual CTC (A+B) - 10,00,000
In the example given above, the basic salary per month is Rs. 40,197 and we do not have dearness allowance as the salary component. Hence, the PF contribution will be 12% of Rs. 40,197, amounting to Rs. 4,824/-.
You all are requested to suggest if the above calculation is correct or the PF amount should be limited to Rs. 1,800 as per the maximum limit. I would be thankful to all who can help me with this.
Thanks in advance.
From India, Mumbai
I am working as a Talent Acquisition Consultant in an emerging IT company that is headquartered in Singapore and I am deputed at the Indian branch.
My company tries to follow all the legal compliances in the respective regions in which it operates. Hence, we are trying to work our way around the PF applicability and are stuck at a point where the PF contribution needs to be decided. One of the articles I was going through said that the maximum salary considered for the PF is Rs. 15,000 per month which is a basic salary and the dearness allowance. If the above point holds valid, the maximum PF deduction will be Rs. 15,000 X 12%, amounting to Rs. 1,800/-.
However, we have employees whose salaries go well beyond the upper limit stated above. As we are in the IT industry, working with one of the booming technologies in the market, the salaries are on a higher side. Just for an example, I am sharing the salary break-up that we follow in our organization -
CTC offered: Rs. 10,00,000/- per annum
Particulars Monthly Annual
Basic Salary 40,917 4,91,000
House Rent Allowance 20,458 2,45,500
Special Allowance 15,548 1,86,580
Employer's Contribution to Provident Fund 4,910 58,920
Total A (Fixed) 81,833 9,82,000
Additional Annual Benefits
Group Insurance Premium (B) 18,000
-
Total B 18,000
Annual CTC (A+B) - 10,00,000
In the example given above, the basic salary per month is Rs. 40,197 and we do not have dearness allowance as the salary component. Hence, the PF contribution will be 12% of Rs. 40,197, amounting to Rs. 4,824/-.
You all are requested to suggest if the above calculation is correct or the PF amount should be limited to Rs. 1,800 as per the maximum limit. I would be thankful to all who can help me with this.
Thanks in advance.
From India, Mumbai
You need to understand the basics of EPF Act 1952, pl go through the sites available in the matter you will have clarity on the scope and applicability.
Notwithstanding that, the points are clarified as follows
EPF Act is applicable to employees drawing salary upto Rs. 15,000/- In case an employees starts the career with you and draws wages exceeding Rs. 15,000/- then you need not cover such employees. However before joining you if the employee was already covered then you have to continue coverage even if the employee draws wages more than Rs. 15,000/-. As regards payment of contribution, Rs. 18,00/- is the statutory limit but employees can contribute more as Voluntary contribution, as a welfare measure the employer too can make its equal contribution or limit it to Rs.18,00/-.
From India, Mumbai
1530Notwithstanding that, the points are clarified as follows
EPF Act is applicable to employees drawing salary upto Rs. 15,000/- In case an employees starts the career with you and draws wages exceeding Rs. 15,000/- then you need not cover such employees. However before joining you if the employee was already covered then you have to continue coverage even if the employee draws wages more than Rs. 15,000/-. As regards payment of contribution, Rs. 18,00/- is the statutory limit but employees can contribute more as Voluntary contribution, as a welfare measure the employer too can make its equal contribution or limit it to Rs.18,00/-.
From India, Mumbai
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf