Comprehensive Insights on PF Calculation, Employee & Employer Contributions, and Admin Charges

Respected seniors,

Please help me.

My name is Shalu, and I work as an HR Executive in Gurgaon. An employee's basic salary is 15000 per month, and the company deducts 15000*20% as the employee's share. However, for the employer's share, we deposit @6500 as per the pattern.

What amount should the company submit as administration charges? Is it 15000 * 13.61% or 6500 * 13.61%? I want to make the monthly PF challan, but I am confused about what entry to make.

Please tell me as it is urgent.

Hi,

Your employer is illegally deducting 20% from the employee's salary. If this issue is legally challenged, he would be in big trouble. Generally, an employee drawing a salary of more than Rs.6500.00 is not entitled to any deduction of PF. However, if the employer and employee mutually agree, a deduction can be made on the employee's salary at a rate of 12% of whatever sum of salary he is drawing. In such cases, the employer's share should only be 12% of Rs.6500.00.

An employer cannot deduct 20% from an employee's salary and falsely report that only 12% was deducted. Such actions are fraudulent, and the employer can face legal consequences.

Mohan Rao Manager HR

Dear Sir,

The employee agrees to a 20% deduction as he wants to save money. Is this fair? Does the law not allow us to deduct employees' shares exceeding 12%?

Thank you.

Hi,

I am informing you that, with mutual agreement between the employee and the employer, the employee's share can be deducted at any amount from the salary. However, the employer's share would be 12% only, and that too on the permissible limit of Rs. 6500/-. The law does not specify anywhere that the employee's share is limited to only 12%. If the employee wishes and the employer agrees, a deduction of 20% of the employee's share can be made.

What I mentioned earlier is that the employer should not deduct 20% and deposit the employee's share as 12%; that would be illegal.

Mohan Rao Manager HR

Hi,

As Mohan mentioned, if the employee is interested in saving, he can have his own contribution towards PF up to 100% of his basic salary (based on his self-interest). However, the employer is only eligible to contribute 12% of the employee's basic pay.

I would like to add to Mohan's statement that: "PF does not have any relation with the salary drawn; it is related to the number of staff working (applicable if the staff is more than 20 or based on the employer and employee's interest if the number of staff is less than 20)."

Dear Shalu,

You should submit PF administration charges of Rs. 6,500, i.e. 6500*13.61.

Best Regards,
Upendra Awana

Hello all,

For the easy calculation of PF charges with different conditions, you can use the software, which is very easy to operate. You can download the software from the following link - http://www.nextechss.com/EPF30Installer.exe.

Thanks

Hi,

Provident fund is calculated based on the gross salary of an employee, which is mandatory for all whose basic salary is less than Rs. 6500. Hence, PF is calculated at 12% of the basic salary or Rs. 780, whichever is higher.

Md. Ashfaq Ahmed
HR

As I understand, the PF deductible salary is Rs. 15,000 per month, and the employer deducts its own share at 12% on Rs. 6,500 per month (Rs. 780). For the employee, the matching contribution is Rs. 780 per month, and the voluntary PF contribution is Rs. 2,220 per month. If the treatment is in line, the administrative charges will be paid on Rs. 6,500 and not on Rs. 15,000. In my opinion, this way of treatment will be able to withstand judicial scrutiny.

Regards,
Ashok K. Ghose

I agree with what Mr. Mohan said. Any employee can voluntarily contribute more than 12% of his Basic & DA wages towards PF contribution. However, the employer's contribution is limited to 12%. In the case of EPS, the limitation would be Rs. 6,500, i.e., the contribution to EPS would work out to Rs. 541 per month.

In her first email, Shalu said the management deducts 20% as PF contribution from a particular employee. Therefore, Mr. Mohan had to say it was illegal.

Hello,

Could anyone please confirm if an employee can deduct Voluntary PF contribution more than 12% (mandatory), i.e., 12% + 15% = 27%? Additionally, does management also deposit the same ratio, i.e., 27% + administrative charges, etc.?

Please confirm as this is urgent!!!

Thanks in advance.

Best regards,
Pravin11

Re: PF CalculationPf is mandatory for both employee and employer for who’s basic salary is Rs.6,500/- or less (which is 12%). If basic salary is more than Rs. 6,500/- it is not mandatory for the employer to contribute their share to the employee, but it is up to the employer discretion whether to contribute or not.
If employee (whose basic salary is more than Rs. 6,500/-) would like to contribute more than 12% of his/her basic salary employer can deduct the same and deposit in employee share.

Hi,

As I know, administrative charges on PF will be paid on the whole amount from which PF is deducted. EDLI and administrative charges on EDLI will be paid on a maximum of Rs. 6500.00.

Regards,
Navin Chandra Pathak

Hi,

As per the rules of the Provident Fund Act, the following facts are applicable:

1) "The amount deducted from the salary of the employee is equal to the amount paid as the employee's share in the PF Challan!"

2) The employer should not deduct more than 12% of the allied salary (i.e., Basic + DA). If the company wants to deduct more, it must be permitted by the PF Department.

3) Total contributions to PF are as follows:
- Employer Contribution (13.61%) = 8.33% (Pension Fund) + 3.67% (Provident Fund A/c) + 0.5% (Insurance Fund) + 1.1% + 0.01% (Admin Charges).
- Employee Contribution (12%) = 12% (Provident Fund A/c)

Therefore, the total contribution is 13.61% + 12% = 25.61%.

Please let me know if the above information is valuable or not.

Hi Pradeep Sharma,

The following attachment is important for you.

Please let me know if you need any further assistance.

Thank you.

What is the logic of 20%? No, this is absolutely wrong. In fact, it is clearly mentioned that the maximum limit for deducting the PF is Rs. 6500. If any employee wishes to deduct the PF (if their basic is more than Rs. 6500), it is also considered provided only their share will be deposited in that case. The employer will contribute their contribution considering the basic Rs. 6500, which please note.

Mahendra