Is PF Calculated on the Entire Basic Salary or Just a Portion? Let's Discuss!

Hi,

Hey, I want to know if PF is calculated on the basic salary. For example, if the basic salary is Rs. 15,000, is PF calculated only on Rs. 6,500 or on the whole amount of Rs. 15,000?

Regards,
Namrata

Hi Namrata,

You haven't exactly mentioned if the basic amount is Rs. 6500 or Rs. 15000. If your basic salary is Rs. 15000, then the PF deduction would be 12% of it, which is Rs. 1800. Basic salary is normally around 40%-45% of your gross pay.

Hope this helps.

Regards,
Sajal

Hi Namrata,

Regarding provident fund (PF) from the employer's side, 3.67% of the basic salary goes to PF and 8.33% goes to pension. However, while calculating based on a basic salary of Rs 15,000/-, the pension amount of 8.33% (which means 6500 * 8.33) is Rs 541.45. Since the maximum amount taken for the pension fund is Rs 541, we will consider Rs 541 for pension. For the employer's PF contribution, it will be Rs 1800 - Rs 541 = Rs 1259.

Regards, HEMANT KASKAR

Hi,

Thanks for your message. I need further clarification. Will anything exceeding the basic salary of 6500 not be considered? For example, if the basic salary is 15000, the employee's contribution would be 15000*12% = 1800, and the employer's contribution to the pension fund would be 15000*8.33% = 1249.5 and to PF would be 15000*3.67% = 551.

Does it work this way?

Hi Namratha,

This is in response to your query. I am attaching a file regarding PF calculations herewith. Once you have gone through the file, you will clearly understand how to make PF calculations. If you have any doubts about making PF calculations, please revert to me.

Regards,
Krishna

Hi Krishna,

Good effort by you. As far as I am aware, PF returns need to be deposited on a yearly basis instead of half-yearly, as you mentioned in the attached sheet. I think half-yearly returns are for ESIC. Correct me if I am wrong.

Regards,
Nirmal

Hi Krishna,

In your formula, why is there a ceiling of Rs 541 in the case of the employer's pension contribution? It is not 8.33% of the respective basics either.

Regards,
Sharad

Hi,

As per the understanding of the question asked on PF, normally PF is calculated as 12% of Basic and never on total CTC. The basic salary is flexible, typically ranging from 40% to 50% of the total CTC. I hope this clarifies your query.

Best,
Bessy

Quite informative.

I guess two more points we need to share are:

1) Interest is calculated on a monthly basis.

2) Does anyone have data on the pension contribution by the employer since 1990? For example, is it still 8.33% of the base pay per month as it was in 1990?

Ravi Rao

Hi Namrata,

PF is 12% of basic, which is Rs. 1800/-. Out of this amount, Rs. 541/- goes into EPS (Employee Pension Scheme) contribution, and the remaining Rs. 1259/- goes into EPF (Employee Provident Fund).

Hello,

Employee contribution to PF will be 12% of the basic salary, i.e., Rs. 15,000. However, the employer's contribution will be 12% on Rs. 6,500, or the employer can choose to be exempt from contributing.

With regards,
Vinaykumar

Dear Namrata,

As per the PF Act, the deduction of PF on and above Rs. 6,500 is optional. It is up to the company whether they want to deduct it from the total gross salary or just on the prescribed limit of Rs. 6,500.

Thank you.

Dear Namrata,

As per your specification, the basic salary is 15,000/-. According to the PF rules, if the basic salary exceeds 6,500/-:

1) It is optional, not mandatory to contribute to PF.
2) The contribution can be restricted to 6,500/- only.
3) If both the employee and employer agree, you can contribute the full amount of 15,000/-.

Jeeva
9343753361

Hi,

I want to prepare a salary slip for my employee, and I have to show the basic as 15,000. Is it correct to show 900 as PF? I would like to understand how to show the breakup.

Thank you.