Is It Legal for My Company to Deduct 24% PF from My Salary? Seeking Clarity on PF Act Provisions

Hi all,

I am working in a company that deducts around 24% PF from the salary. When enquired, they said that when the salary was offered, they had calculated the 12% of PF from the employer's side in the offer made and then given us the package. So, in that case, they say now exactly 24% of PF is deducted from the salary.

Are there any provisions in the PF act for the same? Can 24% be deducted directly from the employee's salary? Can the company make this decision as a policy without the consent of the employee? Can this create a problem in the near future wherein the company refuses to pay the 12% from their side? How do we get proof that the company is depositing the employer's 12% share into the PF account?

Please answer ASAP!

Are there any provisions in the PF Act for the same?

There are no such provisions in any of the acts in PF.

Can 24% be deducted directly from the employee's salary?

Yes, when it is counted as CTC, then 24% is deducted from the employee's salary. First, find out whether they provided you with the CTC structure or gross structure.

Can the company make this decision as a policy without the consent of the employee?

When it comes to the calculation of CTC (which is common nowadays), employee consent is not needed. During joining, you always need to know the CTC (Cost to Company).

Can this create a problem in the near future wherein the company refuses to pay the 12% from their side?

No, there will be no such problems if the company submits the deducted amount to the PF office. You will have to claim your amount from the PF office, not from your company. If you withdraw after completing more than 6 months in the company, you will receive the full amount; if less than 6 months, you will get only 12%, which is your share.

How do we get proof that the company is depositing the employer's 12% share into the PF account?

The PF office sends a yearly statement of your share and the employer's share, along with the interest credited to your account. From that, you can verify. Alternatively, you can obtain the details from the PF office.

Hi Chitra,

Your reply helped me and my colleagues a lot. If required, I would like to have more information regarding the same. Please note, my company did not provide us with either the gross structure or the CTC. They just placed the offer, which the employee has to accept or decline, so we are unaware. When the salary slips are issued, we discover that there was a deduction of 24% PF from the salary.

Can we request the company to provide us with a statement or account of our CTC? Also, could you please explain the difference between the gross structure and CTC?

Moreover, if 5 people have been offered the same package but their salary breakdowns differ, for example, the salary offered is 6000, where one employee has a basic salary of 3000 while another has 2800, is that acceptable? This discrepancy would result in different PF deductions despite the same salaries for both. How does a company determine the basic salary of an employee? Is it acceptable if the gross salary among a few employees remains the same but the basics differ?

Please help!

Deducting the employer's share of the contribution is illegal under Scheme 31 of the Employees' Provident Fund Schemes, whether it is based on the gross pay offered or the CTC "shown" to you at the time of your joining.

Basic salary and other matters are purely internal affairs of the respective organization. However, for an employer, it is always desirable to have a uniform basic salary for all employees in similar positions. If the employer sets different pay levels, you cannot question it, as the employer may have identified differences in the quality of candidates that you may not be able to assess.

Regards,
Madhu.T.K

Hi Sonia,

That's good you asked. I was working for a company and then to pursue my career, I had to leave that concern. They started deducting P.F. from my third month, and it also varied every month based on my attendance. I don't remember the exact percentage; however, when I left the concern after a month, I applied for PF and got it in 1 and a half months as a lump sum. So, if they deduct 24%, they should also contribute the same. It is an equal share of both the employee and employer. So, don't worry; you will get your money once you apply. You can also get the PF number and trace out what is happening to the deducted money by directly checking it in the PF office.

Thanks,
AJITHAA HASAN

Certainly! Here is the corrected text with proper spelling, grammar, and paragraph formatting:

---

Can we ask the company to give us the statement or account of our CTC? You can always ask your company for the same.

What is the difference between gross structure and CTC? Please explain. Gross = basic + da + hra + convey + tel + food allowance + any other allowances. CTC = gross + employer's PF + employer's ESI + gratuity + other deductions.

Also, if 5 people have been offered the same package but their salary breakup is different. For example, the salary offered is 6000. Here, one employee has a basic salary of 3000, while another has 2800. Is that okay? Because then the PF deductions would differ despite the same salaries for both. How can a company decide the basic salary of an employee? Is it okay if the gross salary between a few employees remains the same but the basics differ?

Yes, as Madhu said, it's the internal matter of the company. It can give different breakups for the same package, and you can't really question that.

---

I have corrected the spelling, grammar, and formatting of the text while preserving the original meaning. Let me know if you need further assistance!

Thank you for your support. I am currently facing the same issue, but with a different question. Please address this as well.

PF Deduction Policy Change

Our company has decided to deduct PF at ₹1560/- from salaries starting from January 2014. Previously, for a few selected employees (myself included), we were asked to enroll, citing employer contribution as a benefit to the employee. Now, we are not given any choice and are compelled to contribute 24%. Could you please advise if there is an option for me to opt-out? If so, how can this be done? Or is this arrangement beneficial? Will the entire 24% go towards the employee contribution? What happens if 12% is considered as employer contribution? Will we receive the full 24% upon withdrawal?

Thank you.

EPF Contribution Legality and Opting Out

It is illegal to deduct the complete 24% of EPF Contribution from the employee's salary. Even if the employer has provided you with the earning structure as CTC, it is still illegal. However, as your query is about opting out of this facility, then yes, it is possible. If your Basic Salary is more than Rs. 6,500/-, you can deny that and submit Form-11 under EPF for Exemption from EPF.

Although opting for the EPF Scheme is always beneficial, your employer forcing the deduction of the complete 24% contribution from the employee's salary is illegal. They should only submit it as 12% EE & 12% ER. However, at the time of withdrawal, it depends on the membership period. If your membership period is less than 9.5 years, you will get the complete 24%, but after that, you will only receive 15.61%.

Now, the choice is yours.

Kind regards,
Regards

Thank you for your prompt response, Arya ji. I will try to talk about Form 11 to opt out and will update here. I say "TRY" because I think it's for reducing CTC, so they may not allow. Thank you once again.

Exclusion of Employees from PF Coverage

For employees once covered by PF, how are you going to get exclusion? For those already covered, PF should be continued even if their salary exceeds Rs 6500. The only thing is that the employer can limit his contribution to 12% of Rs 6500, but you cannot exclude them. Form 11 is the form to be collected from a new joiner to determine whether he was previously covered by PF or not so that he can be excluded if his PF "qualifying salary" exceeds Rs 6500. It is not a statutory form to be submitted to PF but is required to be produced for verification only.

Regards,
Madhu.T.K

Understanding CTC Structure and PF Deductions

In the CTC structure, the employer might have shown the employee contribution as 12%. The pay slips will not deduct the full 24%. Please review your pay slip again, as it may only show a deduction of 12%. Since the employer contribution is also considered a part of the Cost to the Company, it would have been included in the CTC.

Regards,
Pon, Chennai

Madhu ji, so you mean to say that there is no other option for me except to submit? (My gross is above 6500/-, and PF has only been deducted since July 2012 at 780/- with both employee and employer contribution of 780/-.) By the way, when you mention "illegal" here, do you mean it is punishable under the EPF Act?

Thanks...

Yes, if you have been a member of PF, then you should continue to contribute irrespective of your salary. However, I will not say that you should contribute both your share as well as the employer's share, which is illegal. As already pointed out by other members, if the employer has only included his share as part of CTC, then the question of deducting it from your salary will not arise. In such a case, you cannot say that it is illegal because the employer has not deducted his share of the contribution from your salary or recovered it from you by any other means. The employer has only stated that employing you will cost him Rs 780 over and above what has been paid to you as a salary.

Regards,
Madhu.T.K

Clarification on EPF Contribution Deductions

I beg your pardon for the mistake in my last comment. It was because I thought that the member had mentioned it would be effective from Jan 2014, whereas the member was trying to say that his employer will deduct both contribution parts from employees' salary with effect from Jan 2014. As the member is already covered under EPF since July 2012, he cannot exit from its membership once becoming a member. Although deducting the complete 24% (12% employee's share & 12% employer's share) from employees' salary is illegal.

Regards

Yes, it is illegal. Rearrange the CTC structure in such a way that it is CTC - EPF so that only 12% EPF shall be deducted and shown in the payslip. If 24% is deducted by your company and reflects on the payslip, then the license of the company can be canceled as this deduction amounts to a criminal offense. This has been quoted by LLR, Mr. H.L. Kumar, Supreme Court.

Employer Responsibility and Employee Security

When employers are not in a position to lend ears to learned advisors, the only option is to let them struggle and defend themselves. But employees will suffer. So, does it not mean that anybody with a capital fund can float a company without adhering to statutory or state acts? For any irregularities of the employer, it is the employees who suffer at the time of claim or transfer. What is the security for employees in contributing a mere Rs. 780/- to EPF? If such practices continue, then PF can be abolished, and an RD account be opened with a nationalized bank (SBI) and linked to the Aadhar card.

Regards,
Chandru

Dear Sanjay Tiwari,

Currently, my PF share is 12%, and the employer's share is 12%, making the total share 24%. Now, I wish to deduct 24% PF share from my salary and 12% employer share, totaling 36%. Can I deduct my PF share of 24%? If yes, what is the procedure and the form number I have to fill up?

Thank you.

Sanjay Tiwari
M: 9727704102

There is no specific form for higher contribution or voluntary contribution by the employee. For your office records, the HR will ask for a letter from you requesting that your share of contribution may be increased to 24% from the current 12% and with a declaration that the employer's share of contribution can be restricted to 12% only.

Madhu T K