Provident Fund (PF) is a statutory deduction to be done by employers as per the rules made by Government of India. As per the PF rules, both the employee and the employer make a contribution to the PF fund of the employee. Every month, the contributed amount gets added to the balance of the employee. The PF contributions earn a fixed interest (9% p.a.) and accumulate over the span of service of an employee. The intention is to make the employees to save for retirement, pension, etc.
In most cases, the Government (PF Board) collects this amount and keeps it in the employee's name. After an employee retires, all the contribution made by the employee along with interest is paid back to the employee. This is handled by the PF Board and the employer or company has no role to play in it.
For e.g. If my basic salary is Rs. 100/-, then I should contribute Rs. 12 as my PF. This will be deposited into my PF account. Along with my contribution, my employer also make a matching contribution of Rs. 12/- into my account. So, every month, my PF account increases by Rs. 24 (12-my contribution, 12-my employer's contribution) till the end of service.
Any salary revisions will automatically lead to changes in the PF contribution. However, if the salary changes are done to components that are not a part of basic salary, there is no impact.
According to the PF rules, all employees who draw a PF Basic of less than 7500 must contribute to PF. This is mandatory.
For employees having PF Basic more than 7500, the deduction/contribution is voluntary. If they want, they can opt for the deduction. Else, there need not be any deduction (from both the employee and employer perspective).
But in most companies, PF is applicable to all employees.
I think this answers your question
Thanks
Nivya