Understanding PF Coverage: Are Employees with Basic Salary Over 6,500 Included?

My company is newly registered and has more than 100 employees. The company is now covered under the PF Act. Some employees have a Basic Salary of more than 6,500, while others have less than that.

My question is: Will employees with a Basic Salary exceeding 6,500 be covered by PF as per the PF Act?

As per the act, employees whose basic salary (+DA) at the time of joining or enforcement of EPF to the establishment is more than Rs. 6,500 are not to be covered by EPF. However, it is not mandatory that these employees cannot become members of EPF. Therefore, if the employer is willing to contribute, all employees, irrespective of salary, can be covered by EPF. But remember that once covered, they will continue to be under EPF until their service with the employer.

Regards,
Madhu T.K

Yes, it is true that once PF contributions start, they cannot be stopped. Nowadays, all corporates agree to pay the full amount.

Yes, a company can give PF to its employees earning a salary more than the amount you have mentioned above. The percentage of PF is 12% of the basic pay and DA. 12% is paid by the employer and 12% by the employees themselves. The total amount is deposited in the account of the employee's PF A/C.

I am giving some details about EPF; I hope it will help you to understand it.

Note: PF is always calculated on BASIC + DA.

Total PF contribution: 25.61%.

Employers Contribution: 12% (3.67% PF + 8.33% Pension) + 1.61% Administrative charges (1.10% Adm charges + 0.50% EDLIF Charges) = 13.61%.

Note: The Pension value of 8.33% is always constant, whereas the PF value can be variable depending on the Basic & DA.

Please study the following cases:

Case 1: If Basic + DA = 6500, then the contribution will be like this - Pension 8.33% (541) and PF value will be (239).

Case 2: If Basic + DA > 6500, then the contribution will be like this - Pension 8.33% (constant value 541) and PF will be: excess amount - 541 as expense. If Basic + DA is 12000/-, then it will be like this - Pension will be 541/- and PF will be 899/- (calculation: 12000 * 12% - 541 = 899/-).

Case 3: If Basic + DA < 6500, then the contribution will be like this - Pension 8.33% and PF 3.67% of basic + DA. For example, if the basic is 5500/-, then Pension will be 5500 * 8.33% = 458 and PF will be 5500 * 3.67% = 202/-.

Employees Contribution: 12% goes to the PF amount only.

Some other useful info regarding PF:

Form No. Purpose

13 (revised) For transferring the Provident Fund account of a member from one establishment to another establishment covered under the act/scheme.

19 To be submitted by a member to withdraw his Provident Fund dues on leaving service/retirement/termination.

10-C For claiming - Refund of Employer share (with Form No. 19).

10-D To be submitted by the first claimant i.e., member or widow/widower or orphan nominee as the case may be.

31 For the use of Provident Fund members to avail advances/withdrawals as provided in the scheme.

Rate of Interest: 8.5%.

With best regards,

Vikram Singh Tawer

Hi Vikram Singh,

You have provided wonderful information about P.F. Thank you very much. I kindly request you to please continue posting useful information as and when you know.

Regards,
Sravan

Hi Vikram, I have one doubt about your explanation. In the beginning, you stated that the employer contribution would be 13.61% (including Admin Charges). However, in your calculation for CASE II, you only showed a 12% contribution. According to my understanding, the employer does not need to pay more PF (the slab of 6500/- is the maximum).

In CASE II, the employer contribution is shown as Rs. 899/-, but according to the slab of 6500/- and percentage, it should be only 884.65.

For example: 6500*13.61% = 884.65. Please clarify this as well.

Regards, Kalyani Thakur.

Hello all, herewith, I have attached an Excel file for the PF challan. For further queries:

1. PF administrative charges are calculated on the total (Basic + DA) salary.
2. In case Basic + DA > Rs. 6500, PF deduction is possible if the employer agrees to deduct the PF amount from the employee's salary. However, the maximum limit for the pension fund is Rs. 541/-, which will be on Rs. 6500/-. The balance amount is to be deposited in the PF fund.

WITH BEST REGARDS,

VIKRAM SINGH TAWER

Hi Kalyani,

Administrative charges are calculated on the total of Basic & DA. I have submitted a PF challan Excel file. Please see that. For your other query about PF deduction in the case of Basic + DA more than ₹6,500, deduction is possible if the employer agrees to deduct. However, in this case, the maximum limit for the pension fund is ₹541 (max limit ₹6,500 x 8.33% = ₹541), and the balance amount will be deposited in the PF fund. In all three conditions, I bifurcate only 12% of PF because administrative charges are calculated collectively, not individually.

I hope I have cleared your doubt.

Thanks & Regards,
Vikram Singh Tawer