How to Calculate PF and Professional Tax When an Employee Resigns Mid-Notice Period?

Dear All,

Kindly advise me about the calculation of PF & PT at the time of resignation of an employee. For example, as per the rule, an employee needs to serve a 1-month notice period. However, if he/she served only 17 days out of the 31 days of the notice period, here is the scenario:

The company has fixed the maximum PF slab at Rs 780/- for those who are drawing more than Rs 6500/- as Basic+DA. Now, we need to pay him/her for the 14 days (31 - 17) which includes 3 days of Loss of Pay (LOP) and 14 days of Notice Period Recovery.

For those 14 days, his/her basic+DA is more than Rs 6500/-. Therefore, we have to deduct Rs 780 or calculate 780/31*14 (only the proportionate days' contribution).

Similarly, for PT, it would be Rs 200/31*14 or the full amount of Rs 200.

Please advise.

Baginesh

PF is to be deducted out of the Basic + DA of the actual salary paid only. Similarly, Profession Tax should also be deducted out of the actual salary paid for the month.

Regards,
Madhu.T.K

Dear Madhu Sir,

I have a question regarding an employee who has worked for 14 days and whose actual basic salary + DA exceeds Rs6500. Do we need to deduct the full amount of contribution for the month, which is Rs780, as the maximum PF amount fixed for those earning more than Rs6500 in basic + DA? Or should it be calculated as Rs352 (780/31*14)?

Bagi

Dear Bagi,

For 14 days only, you have to deduct PF Amount on Basic+DA at 12% only if it exceeds 6500/-

Charu

Dear Bhagi,

Although the person worked for 14 days, the basic salary for 14 days exceeds Rs. 6500/-, therefore, one must apply the same rule that was used to pay Rs. 780/- as PF. You have to deduct PF on Rs. 6500/-, i.e., Rs. 780/-

Similarly, for Professional Tax, after calculating the monthly gross, you need to determine which tax slab the monthly gross falls into and deduct the appropriate PT.

PT Slabs: (please verify the slabs with your accounts department)
- Up to Rs. 5000 - Nil
- Rs. 5000-Rs. 6000 - Rs. 60/-
- Rs. 6001-Rs. 10,000 - Rs. 80/-
- Rs. 10,001-Rs. 15,000 - Rs. 100/-
- Rs. 15,001-Rs. 20,000 - Rs. 150/-
- Rs. 20,000 and above - Rs. 200/-

I hope I have addressed your query. Feel free to reach out again.

Thanks & Regards,
Prachi Hardas

Dear Charu, Seema, and Prachi,

Thank you for your valuable time and suggestions. I apologize if I am wasting your time; however, I still have a doubt. Please find the attached file that I have prepared for further clarification. Kindly review the document and provide me with your feedback. Additionally, I am currently working in Bangalore and have heard that the PT slab is as follows:
- Rs. 150 for Rs. 10,000 to Rs. 14,999
- Rs. 200 for Rs. 15,000 and above

Please correct me if I am mistaken.

Bagi

Sorry, you will get PT Slab information from the Google site. In case you have any queries, please let me know.

Charu

Hi Bagi,

I have seen the calculation posted by you and also checked the Google web to understand PT Slabs in Karnataka.

As I understand, the Monthly Gross (NET BEFORE DEDUCTIONS) is Rs. 31,000/- in the given case study. Therefore, the Last Slab of PT is applicable, which is "Rs. 15,000/- and above Rs. 200/-". Consequently, you have to deduct Rs. 200/- for PT.

FYI,

Thanks & Regards,
Prachi Hardas

Dear Bagi,

PF Deduction Calculation

Deduction of PF at 12% is considered only on the earnings of basic + DA and not based on the number of working days. If the salary of basic + DA goes beyond Rs 6500, which is the ceiling for PF, within 14 days worked, you should deduct Rs 780 as PF contribution. Simultaneously, you should calculate the deduction for the remaining 17 days' wages in the Full and Final Settlement using the following formula: Gross salary / 26 * 17 days.

Notice Period and PF Calculation

There is no need to worry about PF calculation during the Notice Period. The notice period is solely based on company internal policy and not related to PF.

Regards,
K. Ganesh