Understanding EPF Contributions: How to Calculate for Employees Earning Over 6,500 Monthly

If an employee (having EPF benefit) drawing a salary of 10,000 (Basic + DA), then what is the calculation for monthly remittance:

1) Employee Contribution (12% of 10,000): 1,200.00
2) Employer Contribution - Pension (8.33%): 541.00 (limited to 6,500)
3) Employer Contribution - PF (balance): 659.00 (1,200 - 541)
TOTAL: 2,400.00

OR

1) Employee Contribution (12% of 10,000): 1,200.00
2) Employer Contribution - Pension (8.33%): 541.00 (limited to 6,500)
3) Employer Contribution - PF (3.67%): 239.00 (limited to 6,500)
TOTAL: 1,980.00

Please advise...

Dear,

You can do it both ways because if your basic is more than 6500, it is the choice of the employer to deduct PF or not. He can only deduct on 6500, or he can pay his share on 6500, or he can pay it in full.

Thanks,
J. S. Malik

Thank you for your reply, Malik, sir.

One more doubt in this case. Shall I calculate the above problem in the following manner:

1) Employee Contribution (12% of 10,000 (basic+DA) or 12% of 6,500 whichever is less): 780.00

2) Employer Contribution - Pension (8.33%): 541.00 (limited to 6,500)

3) Employer Contribution - PF (3.67%): 239.00 (limited to 6,500)

TOTAL: 1,560.00

Hi,

It depends on the company policy whether they want to deduct PF on the whole basic payable amount the employee is receiving in that month. If the employer contribution has a limit of 6500, the first scenario is applicable.

In the second case, if you are imposing a ceiling of 6500 on employee contributions as well, and the employer's ceiling is already set at 6500, then deduct from (12%-8.33%), which will give you 3.67%.

In my point of view, I agree with Mallikjee's statements, which means that it always depends on employers. However, according to the rule, 6500 is the limit of PF. After 6500, exempted, if employees agree to pay PF contribution on exempted salary, it's not a problem.

Sukumar Sahoo

According to our statutory auditors, in terms of the EPF Rules, in cases where employees are drawing more than Rs 6500 per month and do not opt for the PF Scheme, a declaration in the prescribed form has to be obtained from the employees.

Kindly ensure compliance before this month-end to avoid audit qualifications. As per my F&A Manager, who is a qualified CA, is there any prescribed format for the same? Can somebody upload the same ASAP, or mail me at dipakmalik@gmail.com?

I have a doubt about Arrear Calculations for PF. Please clarify the proper method of deduction in the following case where PF Basic Salary is restricted to Rs. 6500.00 -

In the month of Sept 2010, Employee Basic Salary was Rs. 6000.00. Employee PF Deduction in Sept 2010 was Rs. 720.00. In The Month Of Oct 2010, Basic Salary was Revised w.e.f. Sept 2010 to Rs. 8000.00.

In the above-given case, what would be the deduction amount towards PF -
Basic Salary in Oct 2010 - Rs. 8000.00
Basic Salary Arrear in Oct 2010 - Rs. 2000.00

1) Minimum of (Basic Salary+Basic Salary Arrears, 6500) *12% =
min((8000+2000),6500)*12% =
min(10000,6500)*12% =
6500*12% = Rs. 780.00

2) (min(Basic Salary For Oct 2010 Month,6500)*12%)+(min(Revised Basic Salary for Sept 2010,6500)*12% - PF Already Deducted in Sept 2010) =
(min(8000,6500)*12%)+(min(8000,6500)*12%-720) =
(6500*12%)+((6500*12%)-720) =
780+(780-720) =
780+60 = Rs. 840.00

Which one is the correct method?

We have 75 employees whose basic and DA wages are more than Rs. 15,000, and we have been paying PF contributions on their entire basic and DA wages. Now, my company is in a difficult financial situation, and we are unable to bear the total cost. Therefore, we want to reduce the PF contributions from the current deduction.

PF Contribution Ceiling Rule

Is there a rule to deduct only up to the PF ceiling amount of Rs. 6,500 after it has been deducted from Rs. 15,000? Also, please suggest how we can inform all employees regarding the reduced PF deduction only up to the ceiling amount.

I appreciate your valuable suggestions.

Regards,
Kasim and Balaji