Understanding Employer's PF Contribution: What Happens When Salary Exceeds Rs. 7,500?

Hi,

I would like to know what would be the employer's contribution towards PF if the basic salary of an employee is Rs. 10,000. Is it 12% of Rs. 10,000?

I heard that the organization is liable to contribute towards PF only a maximum of 12% of Rs. 7,500.

I also want to know if an employee does not wish to contribute to PF when their basic salary is more than Rs. 7,500, is it mandatory for the employer to contribute towards PF for that particular employee?

Kindly clarify.

Hi,

Regarding PF, if the employee's basic wages exceed Rs. 6500, there is no liability on the part of the employer to pay PF contribution. If an employee joins with a basic salary lower than Rs. 6500 but continues services with a basic salary exceeding Rs. 6500, the employer is obligated to pay PF contribution only on the Rs. 6500 amount (i.e., Rs. 780), even if the employee's basic salary is higher than that.

I hope this clarifies the matter.

Satish Raz

Hi Prathima,

The ceiling was 3500/- up to 01.10.94, then revised to 5000/-. It was further revised to 6500/- from 01.04.1995 and remains the same; there have been no further amendments.

Satish

If an employee wants to contribute 12% of the entire $10,000, then the employer has to contribute 12% of the entire $10,000.

Hi, I have a doubt regarding the contribution to PF. My doubts are:

1) Is it mandatory on the part of the employer to deduct PF of Rs. 780/- (12% on Rs. 6500 [ceiling amount]), from the salary payable to the Employee, even if the BASIC+DA exceeds Rs. 6500/-?

2) Is it mandatory on the part of the employer to contribute Rs. 884.65 (13.61% of Rs. 6500 [ceiling amount]) to the PF Fund, even if the BASIC+DA of the employee exceeds Rs. 6500/-?

Please clarify my doubts.

Regards,
Saravana

Dear,

As per the law, PF has to be deducted at 12% on Basic+DA subject to a maximum Basic & DA of 6500 if they are submitting the amount with RPFC. However, if a company manages its PF through a trust, then it can contribute towards PF at the actual Basic+DA, even if it is more than 6500.

Regards,
Nilendra

Dear all,

Kindly find the necessary files attached on the subject of PF.

Hi,

As per the PF Act, the employer has to contribute 12%, and the employee also has to contribute 12% of his (Basic + DA) towards PF. I want to know, from that 12%, is there a breakdown of 8.33% and 3.67%? What do the 8.33% and 3.67% contributions go towards?

Hi Aditi,

Following are the different Heads of the Provident Fund Account, where the money goes:

Account No. 1 (PF) - 12% (of Employee Cont. on Basic+D.A.) + [(12% of employer's Cont.) - (3.67% or Rs. 541.00, whichever is minimum)]

Account No. 2 (Admn charges on PF) - 1.1%

Account No. 10 (Pension Fund) - 8.33% (Subject to a Maximum of Rs. 541.00, Limit being Rs. 6500.00)

Account No. 21 (EDLI Charges) - 0.5%

Account No. 22 (Admn. charge on EDLI) - 0.01%

Hi all City HR members,

Thank you for informing me about the ceiling amount of PF which is Rs. 6,500/-. However, my concern is about the specific act that states the ceiling amount of PF as 6,500/-. I need this information to respond to our ex-employee. Please assist me.

Yogita

Hi Prathima Reddy & Saravana,

As per the rules, if the employee's basic is more than 6500, then the employee contribution can be limited to 6500 or for the full basic amount. Employer contribution is limited to the basic of 6500, that is, the contribution amount is 780/-, or even the employer can contribute for the full basic amount as per your question for the full 10000, that is 1200/-. This practice is in some companies. Both contributions are included in your CTC. If the employee is not contributing his share, then there is no need for employer contribution.

Cheers,
Jeevarathnam Reddy

The statutory rate of contribution is 12% on the salary limit of Rs. 6500/- per month.

Option 1:
If the establishment is ready to contribute over and above the salary limit, it can do so by contributing 12% on the total salary of Rs. 10000 or any other amount.

Option 2:
If the employee wants to contribute more than 12%, he can do so, and the company can restrict its contribution to 12% of Rs. 6500.

Option 3:
If the salary of an employee (a new employee, not an existing PF-covered employee who has received a wage increase) is more than Rs. 6500, he does not need to be a member of the PF. However, if he chooses to be a member, he must provide a letter to the management requesting that PF deductions not be made from his salary as he is earning more than Rs. 6500.

Dear Yogitha,

The PF Act only mentions the ceiling limit of salary for PF deduction. You can also refer to the website: [EPFO](http://www.epfindia.nic.in) for clarification.

Thank you.

Dear Adithisangam,

The entire amount of employee contribution towards PF will be remitted to Account No. 1. The employer contribution of 8.33% of the PF wages is to be remitted to Account No. 10, as it is termed as the Family Pension Scheme amount (FPS). The remaining 3.67% (which is the balance amount of 12% less 8.33% (FPS)) is to be remitted to account number 1 along with the employees' share, under the employer's share column.

The entire employee contribution and 3.67% of the employer's contribution will be paid back to the employee with interest at the time of their withdrawal, superannuation, or death. The amount contributed to the FPS fund will be returned to the employee in the form of a pension upon reaching their 58th year.

It is your duty to explain to the remaining employees to have their PF accumulations transferred instead of withdrawn. Only then will the pension scheme fulfill its goal.

I am a Computer Professional in the Forest Department of Haryana. The department provides me with 9000 + 500 for medical, totaling 9500/-. Can you please guide me on how to open a CPF account, the monthly subscription amount for me, and the amount required from the department? You can contact me at 9896087698.

Employer Liability for PF Contribution

Is there any liability for an employer to contribute to PF if an employee receives more than ₹6,500 salary per month while recruiting new hires?