Understanding Voluntary PF Contributions: How Are Employer Contributions and Admin Charges Calculated?

Hi,

Please let me know if an employee is drawing a basic salary of Rs. 9000/- and contributing to PF at a rate of 14% as a voluntary PF contribution, then will the employer's contribution to PF be Rs. 780/-, i.e., 12% of 6500? Also, will the calculation of EDLI, EDLI Admin, and PF admin be based on 6500/- or on the total basic salary as done in the PF challan?

Someone, please clarify.

Regards,
Team HR

PF admin charges will be calculated on PF qualifying salary, i.e., Rs. 9000 in your example, whereas EDLI and EDLI Admin charges will be calculated on Rs. 6500 only.

Regards,
Madhu.T.K

Hi,

Do we need to fill a separate PF challan for those who are contributing at a higher rate of PF? Otherwise, how shall we calculate in the same challan?

Regards,
Team HR

Dear Team HR,

Greetings of the day.

For voluntary deduction, the employer will pay only 12%, which includes Pension Fund at 8.33% and Contribution at 3.67%. Other charges like admin EDLI and inspection charges will be calculated based on the basic amount of Rs 6500/-, which is the maximum basic. For the employee, the deduction will be 12% of the basic amount, and any amount exceeding the normal contribution, i.e., 5%, will be treated as a voluntary deduction of PF. This excess amount will be calculated separately and placed in the voluntary deduction column.

Thanks and warm regards,
Pranab Chakraborty

Hi Pranab,

The answer you gave, I already know. I am asking how you will fit that into the monthly PF challan which is prepared based on the total PF qualifying salary for all employees (whose PF is deducted). Do we need to prepare a separate monthly challan for those who are contributing to a higher voluntary rate of PF? Any senior person, please clarify.

Regards,
Team HR

There is no separate challan for voluntary PF contributions, but the same challan can be used. The number of employees contributing a higher percentage is shown in the returns (12A).

It is not compulsory that the employer should not contribute at the same higher percentage as the employee who contributes at a higher percentage. However, if the employer is willing to contribute a higher percentage than 12%, he can certainly do so.

Regards, Madhu.T.K

Hi Madhu Sir,

In the same monthly PF challan, how can we accommodate voluntary contributions? For other employees, we calculate directly based on the total PF qualifying salary.

Regards,
Team HR

Dear HR Team members,

I do agree with the statement of Ms. Madhu T.K. that there is no separate challan for voluntary PF contribution, and the number of employees contributing a higher percentage should reflect in the returns (12A).

Further, please note that as per the PF Act, the member has to contribute at the rate of 10% or 12% of his basic pay, D.A., and retaining allowance if any. In case the member wants to contribute more than this, voluntarily, he can do so at any rate he desires, i.e., up to 100% of basic and D.A. However, the employer is not bound to contribute at the enhanced rate.

With Regards,

Ashish K Sharma
Sr. Manager-HR & Admn

Add-on for the above question:

If a person is making a contribution of Rs. 6500 (contribution amount Rs. 780, i.e., 12%) and a voluntary contribution of Rs. 5000 for all 12 months, how should the annual return be prepared? Account-wise, i.e., Account No. 1, 2, etc. Can anyone help by providing a worksheet?

In the challan, you can take the total of actual contributions deducted and not the percentage of qualifying salary. If the challan is system-generated, you have to program it accordingly.

Any voluntary contribution should be reflected in the Provident Fund (A/C No. 1), restricting Rs. 541 (8.33% of Rs. 6500) to the Pension Fund (A/C No. 10).

Regards,
Madhu.T.K