Understanding PF Calculation: Employer and Employee Contribution Analysis

Our company is deducting PF on the full basic salary, and my question is how we calculate the amount for A/C no. 2, 10, & 21. (i.e., will we give the contribution based on 6500/- or the full basic salary on which PF is being deposited).

Mr. Malik & Mr. Khola, we are looking forward to your comments.

Thanks,
Sahil Kukreja

In PF, we give our contribution based on the actual amount of the basic salary. $6500 is the limit for deduction. The deduction would be 12% from your basic salary and 13.61% from the employer's side. Here, 12% is the contribution amount, and 1.61% is for administrative charges that the company must pay to maintain the account. There will not be any other deductions.

Hi Sahil,

Thank you for your query. If an employee's basic salary is ₹20,000, and both the employee and employer contribute 12% each towards the provident fund (PF), the total contribution deposited with the PF department would be ₹4,800.

Now, you are asking how to calculate the remaining 1.61% contribution. This additional contribution of 1.61% will be calculated on either the statutory limit of ₹6,500 or the actual basic salary of ₹20,000. To determine which base amount to apply this percentage to, you would need to refer to the specific rules and guidelines set by the PF department or your company's HR policies.

I hope this clarifies your query. If you need further assistance, feel free to ask.

Best regards,
Sarita

Hi,

The basic ceiling limit for PF calculation is Rs. 6,500, and administrative charges should be paid based on the calculated amount at 12%. For example, if an individual contributes Rs. 6,500, the admin charges should be calculated on 6,500. If the contribution is based on the full basic salary of Rs. 20,000, the admin charges should be calculated on 20k only.

Regards,
Dhanasekaran.

Hi,

Let us consider a salary of 20,000 per month, okay? The basic pay is 45% of 20,000, which amounts to 9,000. Therefore, you should calculate 6,500, as the maximum limit is 6,500. If the employee is interested in paying more, you can deduct more; otherwise, it should be 6,500 only. So, the basic amount is 6,500.

In this amount, 12% (which is 780 rupees) is for the employee's contribution, and the remaining 12% (also 780 rupees) is for the employer's contribution. The total amount, therefore, comes to 780 + 780 = 1,560 rupees.

Now, you need to calculate the administration charges, which are 1.10% and 0.01% of the basic salary. 1.10% of the basic (6,500) is 71.5, and 0.01% is 65. The total amount to be paid to the PF Office is 780 + 780 + 71.5 + 65 = 1,701.

I hope you have understood the calculation.

By Prasad
Email: narasimha.vs@gmail.com
Phone: 9841099760.

Dear Sahil,

If both the employer and employee contribute based on the full basic amount, you must calculate all the admin/inspection charges for the full amount itself. For example, if the basic salary is 20,000, then both the employer and employee contributions will be 2,400 each. The admin/inspection charges of 1.61% apply to the full amount of 20,000, resulting in 322.

For further clarifications, feel free to give me a call. I hope this clarifies things for you.

Jeeva
09343753361

Dear SahilKukreja,

Hi, I think you will be satisfied with the following calculations. If the salary is Rs. 20,000/- and both the employer and employee are ready to deduct PF on said salary, then it will be as follows:

Wages Worker PF Employer PF Employer FPF Total
20,000/- 2400/- 1859/- 541/- 4800/-

If only the employee is ready, then:

Wages Worker PF Employer PF Employer FPF Total
20,000/- 2400/- 239/- 541/- 3180/-

As per the limitations under PF:

Wages Worker PF Employer PF Employer FPF Total
20,000/- 780/- 239/- 541/- 1560/-

Thank you.

Hi Sahil,

You are required to pay the Admin charges of 1.1% on the Actual Basic salary for which PF Contribution is paid, i.e., on the entire 20,000/-. (This is A/c. No.2).

Whereas A/c. No. 21 (0.5%) towards EDLI (Employees' Deposit Linked Insurance) & 22 (0.01%) (Admin charges for EDLI) are required to be paid only up to 6,500/= and not on 20,000/-.

If you are already paying on the whole Basic, you may as well correct it and start paying on the restricted Basic with immediate effect.

In case your organization is large enough (say at least 50 or more), then you may opt out of EDLI payable to the EPF office and shift it to LIC, which will save your EDLI amount payable to the department, and also you get a better insurance cover than the EPF Office.

K. Ramesh, UCS