Is PF Calculated on Special Allowance? Seeking Clarity and Official Sources

Can anyone tell me if PF is calculated on special allowance or not? If yes, then please show me where this is written or from where I can get this information?

Hi,

If basic and DA exceed 6500, what do we do? In our company, only Rs. 780 is deducted from the salary of Rs. 7500. Is this correct?

Hi,

At the time of joining, if the salary (Basic + DA) is more than Rs. 6500/-, PF contributions may not be deducted and the employee will be treated as an exempted employee.

In case the employee is already a member of PF in your firm, the salary may be restricted to Rs. 6500/- to recover the PF contributions.

Regards,
Venkat

Hi,

As per the PF Act, the salary ceiling for PF is Rs 6500/-, which means that Basic+DA up to Rs 6500/- is to be considered for PF. 12% on that is Rs 780/- from the employee's salary, and the matching employer's contribution of 12% is divided into 8.33% EPS, which is Rs 541/-, and 3.67% PF, which is Rs 239.

One can make higher contributions over and above the ceiling amount of Rs 6500/-, and the company can also equally contribute on the whole amount of Basic and DA if agreed. Otherwise, the employee can contribute on the total salary (tax-free investment).

Hi, I do not agree because up to 6500/- basic+da p.f. deduction is compulsory, but above 6500/- depends on company policy. As per PF rules, after 6500/-, basic is not covered in PF, but the company can deduct PF on the total basic or on 6500/-; it's not wrong.

For example, if basic+da = 7500/-, then the company will deduct PF on the total basic or on 6500/-; this is true.

If the basic is 7500/-, then the deductions would be as follows:
- If deduction on 6500/-: 12%, 8.33%, 3.67%, 1.1%, 0.5%, 0.01% on 6500/-
- If deduction on 7500/-: 12%, 8.33%, 3.67%, 1.1%, 0.5%, 0.01% on 7500/- but the share in 8.33% is on 6500/-

For instance, if basic = 7500/-:
- 12% = 900/-
- 8.33% = 542/-
- 3.67% = 358/-

Vakil Ahmed HR Executive

1) P.F. is deducted on Basic + D.A + Cash value of Food Allowance at 12%. It is a statutory deduction. D.A. is provided only in government departments. Private companies generally do not give Daily Allowance to their employees.

2) The company pays P.F. on either actual basic or capped basic. Capped basic is decided depending on company rules; it is not restricted. It's applicable to those employees whose basic exceeds Rs. 6500 only.

3) Employers and Employee Contributions are equal in P.F., which is 12%. This means a 12% contribution from the employee and a 12% contribution from the employer. The company's contribution is split into two parts: 8.33% on the Family Pension Fund and 3.67% on the Employee Provident Fund.

4) The employer also needs to pay additional charges every month over and above the PF company contribution. The breakdown is as follows:
- 1.1% P.F. Administration Charges,
- 0.5% on Employee Deposit Linked Insurance (E.D.L.I), and
- 0.01% E.D.L.I Administration Charges.