Understanding EPF Contributions: What's the Monthly Limit and Salary Calculation Days?

Hi Team,

I have one doubt regarding EPF. What is the maximum EPF contributed to the employee per month? How many days in a month are considered for salary calculation?

Regards,
Dayakar

Dear Dayakar,

For EPF deduction, the ceiling basic salary limit is ₹6500. So, the maximum one can contribute is ₹780 only. If the pay of a member employee increases beyond ₹6500 after becoming a member, he shall continue to be a member, but the contribution payable in respect of him shall be limited to the monthly amount of ₹6500 only.

Regards,
Amit Seth.

Hi Dayakar,

The PF contribution is 12% of Basic salary from both the employee and employer. For the calculation, the maximum limit of Basic is Rs 6500/-. This means that even if the employee's basic salary is above Rs 6500/-, the employer is liable to contribute only on Rs 6500/-, which is Rs 780. However, if an employee desires, they may voluntarily contribute more than 12%. Apart from this, an employer also has to pay some administration charges. Let me explain the various accounts of the PF challan.

A/c No 1: PF contribution Account

A/c No 2: PF Admin account

A/c No 10: EPS account

A/c No 21: EDLIS account

A/c No 22: EDLIS admin account

PF admin charge = The employer has to pay 1.1% of the basic salary

EDLIS: The employer has to pay 0.5% of the basic salary

EDLIS admin charge: The employer has to pay 0.01% of the basic salary

The total additional percentage the employer has to pay is 1.61% of the basic salary

Therefore, the employer actually has to pay 13.61% of the Basic, while the employee has to pay only 12% of the basic.

The employee's complete 12% goes to the PF account, while the employer's 8.33% goes to the Pension fund, and 3.67% goes to the PF fund.

If you need any further clarification, please feel free to ask.

Amit Goyal

Mr. Amit Goyal,

I would like to know the difference between "Pension fund" and "PF fund". Please send the info immediately.

Regards,
Ramana Kumar

Hi,

As per the statutory requirements, PF will be calculated only on Rs 6,500 even if the salary is over Rs 6,500. That is Rs 780 from both sides, plus admin charges as I mentioned in my earlier email.

Amit Goyal

Dear Ramana,

In the Employees' Provident Fund and Miscellaneous Provisions Act, there are three funds:

1) Employees' Provident Fund
2) Employees' Pension Fund
3) Employees' Deposit Linked Insurance Scheme (EDLIS)

As I mentioned in my earlier email, the contribution percentage goes to each of these funds. According to the accumulations in the PF fund and Pension fund, it is payable to the PF member after superannuation. The Provident fund amount is payable in one lump sum, while the pension fund amount is payable on a monthly basis in the form of a pension (provided that you have not withdrawn the fund).

If you withdraw the amount from the PF, the entire amount of PF and Pension fund is payable with interest.

Amit Goyal

Hi Amit,

There is a limit and also no limit to the PF contribution that depends on the company in which he is working.

a) If an employee's salary (basic wages) is more than Rs. 6500, then we can deduct the PF on that whole amount or up to the limit that is Rs. 6500/-

b) If an employee's salary (basic wages) is more than Rs. 6500/-, then it depends on the company whether to deduct his PF or not. If you are not deducting his, then please fill Form No. 11 (very Important).

Regards,
Chandrakant V.
9820592842
(PF, ESIC, Contract Labour Act & Other Labour Laws Consultant)

Dear Amit,

Very well explained! Can you please clarify the counter queries that crossed my mind for this topic:

1. What is the significance of EDLIS? Does this get paid to the employee as well? If yes, when?
2. Can a member withdraw pension like PF before his superannuation?
3. Do the admin charges of 1.61% go to the PF and EPS bodies?

Regards,
Shilpa

Hi Shilpa,

Under EDLIS, the nominee of the PF member will receive the insurance amount. For more info, please follow this link http://epfindia.com <link updated to site home>.

Yes, of course, once a member leaves the organization, they may claim the complete amount accumulated in PF and Pension fund provided they have put in at least 6 months of service with the organization. If he or she leaves before 6 months, the pension fund amount will not be paid. Only the PF fund amount will be paid. There is one more clause that an employee should not have joined any other organization for 2 months after leaving the last organization, but this is not followed in general practice because the certificate is to be given by the last employer that the said member has not been employed for the last 2 months, and generally, all employers give this certificate after 2 months of leaving. This is not a separate certificate but part of the PF withdrawal form.

But now, the Social Security Number is coming into effect. With this SSN, every PF member will be given a unique number which will be the PF account number for the whole life regardless of the companies a member changes. Once this is operationalized completely throughout India, no member will be able to withdraw the amount before superannuation. Of course, there will be a provision of taking a loan from the PF funds.

First of all, complete 1.61% is not admin charges. 0.5% of it is EDLIS contribution which is paid by the employer only. The rest is 1.1% PF admin and % EDLIS admin that too paid by the employer only. Yes, these admin charges go to the respective PF and EPS bodies. You can't withdraw any of the parts of 1.61%.

For any further query, feel free to write.

Amit Goyal

If the employee is getting 8000 as basic pay, his PF contribution will be 6500x12% = 780, and the employer's contribution to his account will be 6500x13.61% = 885. You need to restrict the calculation to the amount 6500. Any amount above 6500 is not needed for the calculation.

Dear Amit,

Your posts were very informative and valuable.

I have a small query, according to EDLI "14. Deposit-Linked Insurance Fund Account. – The amount received as the employer's contribution and also the Central Government's contribution to the Insurance Fund under sub-section 2 and 3 of section 6C shall be credited to an account called the “Deposit-Linked Insurance Fund Account”, and all expenses towards the cost of any benefits provided by or under the Scheme shall be met out of this account.

15. Investment of moneys belonging to the Insurance Fund. – (1) All moneys standing to the credit of the Insurance Fund as on 31st March, 1997 shall be kept in deposit with the Central Government in the Public Account, and the Central Government shall allow interest at a rate not less than 8-1/2 per cent per annum.

(2) The moneys credited as contributions to the Insurance Fund on and from the 1st day of April, 1997 shall be invested as per the investment pattern notified under paragraph 52 of the Employees' Provident Funds Scheme, 1952."

Quotes that money credited..........shall be invested as per the investment pattern notified.....1952".

Could you please brief about as how can an employee get advantage of the insurance linked.

And how come an employer will link EDLI shceme with LIC or other insurance companies, what are the common procedure followed.

Regards,

Sashmita

Hi!

I need your help to understand the entire process of getting a company registered with PF.

Background:
We are a new venture coming up in retail, a 100% subsidiary of a 50-year-old company. Our employee strength is 14 today, which will soon grow to 20 in a month or so.

Now, we are looking to get a PF code. Our registered office is in Kolkata. I need to ask you where I should apply for this PF code and what is the process for this.

Regards,
EAFIL

Hi,

The maximum contribution amount is Rs. 6500 (basic + D.A) as per statutory salary per month. The salary calculation depends on wages for the worker category, which is 26 days or for staff, it is 30 days.

With regards,
Devendran.

Hi friends,

Can anyone help me with how to calculate professional tax? Also, I want to know how to break up the salary.

Meenu

Dear Eafil,

You have to apply for PF code in Calcutta region because your HO is there. Secondly, even though your present company is a subsidiary of the parent company, you can take a sub-code if needed.

However, be cautious that sometimes PF personnel may state that your company is eligible from the date of establishment because your parent company may have had more than 20 employees before your subsidiary company was established.

Regards

Hi All,

Employers can also contribute voluntarily on actual (Basic+DA) even if it is more than ₹6,500. Today, most companies are using Cost to the Company-based salary structures, where they include the employer's contribution to PF (on actual basic+DA) in the CTC of their employees.

Regards,
BS

Dear Friend,

How is the family pension amount derived? Is there any formula for that?

Regards,
S. Achuthananda

Hi,

I have a doubt regarding employee shares. In the chellan, under the employer share section, there are two columns: Account no. 10 and Account no. 1. How should I fill these? Should I divide the 12% and how? To my understanding, Account no. 10 represents the pension fund, and Account no. 1 represents the provident fund. I have heard that the employee's share of 12% goes directly to the provident fund. Can you please provide guidance on this matter?

Thank you.

Hi Maya Mathew,

Very nice question and doubt. You have left blank A/c. No. 10 column in the employee share. I think it is a mistake done by the EPFO when making the challan format. Any further queries, please post.

Regards,
Prashant Patil

Mr. Dayakar,

Your question is not clear. The employer contributes 13.61% to EPFO, out of which 1.61% is for administration charges. Regarding the remaining 12%, the division is as follows: 8.33% and 3.67%.

Regards,

Prashant Patil

Mr. Amit,

I just want one more clarification in respect of PF contribution by the employer. As we know, the rate of contribution for both the employee and the employer is 12% and 13.61%, respectively. I may be made clear whether the balance 1.61% which is contributed excessively by the employer is deducted from the employee's salary (Basic+D.A.) or contributed by himself/itself. Hope to receive any reply from your end in my following e-mail Id. Thanking you.

[Biswajit Pani]
e-mail ID: bjpani@gmail.com

Mr. Pani,

0.5% is for EDLIS contribution, which is paid by the employer only. 1.1% is for PF admin. Additionally, 0.01% is for EDLIS admin charges, which are also paid by the employer. It is important to note that we cannot withdraw any part of this 1.61%. These administrative charges go directly to the EPS and PF bodies.

This is my understanding of the topic.

Hi Divakar,

To my knowledge, the share of the employer's contribution of 13.61% is as follows:
- 8.33% towards Family Pension Scheme
- 3.67% towards Provident Fund
- 1.61% towards administration charges

Regards,
S. Achu

Hello Mr. Pani,

Dayakar has answered your query in a very accurate manner. All of 1.61% is paid by the employer only in excess of 12%.

Achu: Dayakar is absolutely correct. This 1.61% is divided into various accounts - 0.5% to EDLIS scheme, 1.1% to PF administrative charges, and 0.01% to EDLIS administrative charges.

Amit Goyal

Hi Achu and Amit,

As per your replies, I see that:
- 8.33% towards Family Pension Scheme
- 3.67% towards Provident Fund
- 1.61% towards administration charges

I think the correct values of contribution percentage for the Pension scheme and PF need to be swapped. It should be:
- 8.33% towards Provident Fund
- 3.67% towards Family Pension Scheme

Please comment.

Regards,
Bhavesh

Hi Bhavesh,

No, it is true. Out of the 12% employer contribution, 8.33% goes to the Pension fund, whereas 3.67% goes to the Provident fund. The employees' contribution of 12% completely goes to the Provident fund.

Regards,
Amit Seth.

Hi Amit,

Thank you, but if this is the case, then what would you say for the following numbers? The data is real and belongs to my salary details back in 1999-2000.

My Basic + DA was 8,200. According to my salary slip:
- Employee's contribution = 984 (12% of 8200)
- Employer's contribution to Pension = 417
- Employer's contribution to PF = 567

According to you, the employer contributes more to the Pension fund (8.33%), but my salary reveals that the employer's contribution to Pension is less than the contribution to PF.

Thank you,
Bhavesh

Hi All,

Hope everyone in this group has a sound knowledge about the Provident Fund. Considering this point, I would like to ask one simple question - Is it possible to replace EDLIS with GROUP INSURANCE SCHEME under the LIFE INSURANCE Corporation of INDIA under the PF Act? Waiting for a response...

Thanks,
Sandeep

Hi,

A lot of posts provide a limit for PF contribution as 780 per month, i.e., 12% of 6500. Is this limit correct? As per my understanding, the limit for EPF contribution is 8.33% of basic or 8.33% of 6500 per month, whichever is lower. So, if the basic salary is more than 6500 and EPF contribution is applicable, then:
- Employee contribution to EPF = 12% of actual basic and not just Rs. 780/-
- Employer contribution to EPF = 12% of actual basic minus FPF contribution, i.e., Rs. 541/- (this is not limited to 3.67% of 6500/-, i.e., Rs. 239/-)
- Employer contribution to FPF = Rs. 541/-

Please clarify.

Regards,
Manish

Dear Amit,

Is it not fully at the discretion of the employee? If the employee doesn't want any contribution from the employer towards EPS, can we receive the full amount of PF from both our contribution and the company's? Please clarify.

Santosh

Hi, EDLIS admin charge: Employer has to pay 0.01% of basic. These charges are calculated for each employee or on total wages. Thank you.