Is Our PF Contribution Calculation Wrong? Seeking Clarity on Basic + DA Percentage

Hello,

We are a company paying PF at 12% on 40% of the Gross salary, i.e., basic + DA is 40% of gross. If the salary is Rs. 20,000/-, 40% of the Gross is basic + DA Rs. 8000/-. The PF inspector who had visited the factory insists that it has to be 60% of the Gross towards Basic+DA. Is his view correct as from the reading of the Act, there is no clause under the PF Act which says that one should apply a minimum of 60% of the Gross salary for contribution towards PF. Please reply to this query urgently.

Regards,
P. Bhaskaran

Dear Bhaskran,

The PF inspector cannot insist because the PF deduction upper limit is Rs 6,500, and you may set the ceiling up to the upper limit of PF deduction. In my view, he can't force you to do so.

Dear [Recipient's Name],

For the bifurcation of salary, please ensure you take care of two things:

1. Make sure that you are deducting PF based on the minimum wages of the state.
2. For higher salaries, as you have mentioned, there is no rule that basic+DA should be 60%. You can ask the inspector to provide this requirement in writing; however, it is your choice, and you can set it at 40%, which should seem reasonable.

Thank you.
J. S. Malik