Understanding PF Deductions: Is It Taken from Basic Salary or Total Salary?

There is a debate going on in my office regarding PF. Is PF deducted from the basic salary or the salary drawn? Please guide.

Keya

Dear Friend,

P.F. should be deducted on Basic + DA at 12%, not on Salary Drawn. Generally, private companies do not provide DA; however, Government employees, whether State or Central, receive DA.

The employer must match the employee's contribution by paying the same percentage, which is 12%.

I hope this clarifies the matter for you.

Regards,
Sravan

Hi,

The rate of contribution is 12% of emoluments, i.e., basic wages, dearness allowance, cash value of food concession, and retaining allowances if any.

Regards,
Ashish

Dear All, Please let me know one thing: Recently, a fresher joined our company, and he says that he doesn't want his PF deduction from his salary. He says that he will provide a self-attested declaration regarding this. Can he have the right to do this? How long can he continue with the non-deduction of PF from his salary?

Thank you.

Dear Keya, PF is deducted neither on the Basic salary nor on the Gross Salary drawn. For PF deduction purposes, salary means Basic + DA. PF is deducted on (Basic + DA) * 12%. Basic + DA does not mean your Basic + DA salary fixed by the company. Basic + DA means the Basic + DA you have earned during the month. For example, your Basic salary is Rs. 5000 and DA is Rs. 2000. You have received a salary for 25 days. In this case, your Basic salary received/earned is Rs. 4167.00 and DA received/earned is Rs. 1667.00, and PF will be deducted at 12% on Rs. (4167 + 1667 = 5834). The PF deduction amount will be Rs. 5834 * 12% = Rs. 700. I hope this clears your doubt.

Regards,
Modi Ashok Kumar
[Phone Number Removed For Privacy Reasons]

Dear All,

Please let me know one thing that recently a fresher had joined our company; he says that he doesn't want his deduction of PF from his salary. He says that he will give a self-attested declaration regarding that. Please let me know if he has the right to do this. How long will he continue with the non-deduction of PF from his salary?

The deduction of PF depends on the company's policy. If, according to policy, a fresher is designated as a trainee, then no PF deduction will be made unless his training period is completed.

Regards,
Ramesh Pandey

Hi Keya,

EPF is deducted from the basic salary and not from the withdrawn salary.

Siddharth
9711560811

PF is deducted on basic salary + DA as per the definition of wages. It is a social security benefit. If DA is not included, only the basic salary should be considered. Please note that all statutory deductions are applicable on basic salary and DA under the provision of wages.

Vdpatel

Salary Breakdown and Contributions

In simple terms, the contributions are as follows:
- Basic: 4200
- HRA: 800
- Conveyance: 1000
- Other benefits: 1000
- Gross salary: 7000
- P.F. at 12% on basic: 504 (employee contribution)
- E.S.I. at 1.75% on gross: 122
- CTC: 7626
- P.F. at 13.61% on basic: 571 (employer contribution)
- E.S.I. at 4.75% on gross: 332
- Take-home: 6723

Thank you.

But the candidate is not recruited as a trainee. He stated that if he provides the declaration and does not want PF deduction along with Form-11, then he opts for non-deduction of the PF amount. Will the company consider his request? If yes, how long will he continue with non-deduction? 

Understanding PF Deduction

In every organization, PF deduction is made on Basic Salary + DA. Suppose your basic is 100.00 and DA is 500.00, the total would be 600.00. The PF Deduction (10%) would amount to 60.00. Both the Employee's contribution and Employer's contribution will remain the same. The percentage of deduction may vary from organization to organization.

Thanks,
nabolbona

Understanding EPF Coverage for Trainees

If the trainee is fresh, then he is totally exempted from the provisions of the EPF Act. If he is on the muster rolls and drawing less than ₹6,500/-, he is covered under the EPF Act. If he draws more than ₹6,500/- per month, it is his choice to be covered under the Act.

However, I have not heard that anyone said they intend to be covered under EPF. In my opinion, fresh consent is necessary to cover him under the provisions of the EPF Act if his salary is less than ₹6,500/- per month.

Once a person joins the company, if his basic salary and DA are below ₹6500, then he has to be compulsorily covered under PF, irrespective of his wishes. Further, if a person has joined a company and was previously a PF member, he has to be covered under PF membership and can limit his PF deduction to BASIC and DA of ₹6500. If a person joins a company without prior PF membership and if his Basic and DA are above ₹6500, he need not be covered under the PF and can be exempted with a declaration from the employee in FORM - 11.

Regards,
Gem Mounting up - HR Solutions

Dear Ms. Priyanka,

If that employee does not want PF to be deducted from his salary, put him in trainee.

Dear all, kindly let me know why PF is deducted at 12% and then again why it is deducted at 8.33%.

Dear Shashi,

PF is deducted at 12% on Basic + DA drawn, and the same amount is also contributed by the employer.

The employee's share of the full 12% amount is credited to the PF account.

The employer's share of 12% is divided into two parts:

1. 8.33% (credited to the Pension Fund)
2. 3.67% (credited to the PF account)

Regards,
Modi Ashok Kumar

Dear All,

Please let me know one thing: recently, a fresher joined our company and he says he doesn't want his PF deduction from his salary. He states that he will provide a self-attested declaration regarding this. Can he have the right to do so? How long can he continue with the non-deduction of PF from his salary?

Dear Ms. Priyanka,

If that employee's Basic + DA is greater than Rs. 6500, there is no need to deduct PF contribution from his salary. Otherwise, put him in a trainee status. This arrangement will make him happy, and the company will also benefit.

Regards,
Modi Ashok Kumar

What are all the documents to be collected from employees for PF and ESI deductions?

Can anyone please help me with this problem?

Thank you so much for your valuable suggestions. The CTC of that candidate is 15,000/- per month. The total PF contribution is 780+780, and the basic salary is 7,500/-. If we consider his request and do not deduct his PF amount, how much net salary will we give him?

When we deduct the PF for the same salary amount, the net salary is 13,440/-. However, in this case, if we do not deduct the PF part, his salary will be 14,220/- (when only the employee part will be given) or 15,000/- (both the employer as well as employee parts will be given).

Please suggest.

Regards,
Priyanka

Dear Mr. Kumaresank, I agree with you. But, let's take an example: One person is drawing a gross salary of Rs. 15,000 per month. The company deducts ESI at 1.75% = Rs. 263 and pays ESI Contribution at 4.75% = Rs. 713. Now, if the company increases his gross salary by Rs. 50 per month and that person comes out of ESI, the employee saves Rs. 263 (in cash) and the company saves Rs. 713 per month.

Is this a violation of any law as per your above quote? Any person cannot deny PF deduction, which is also an offense. You should be practical. The company doesn't want to lose that person, and that person doesn't want PF to be deducted. In my opinion, with the consent of both, a middle way can be chosen. The law is for the people and by the people. People are not for the law.

Best Regards,
Modi Ashok Kumar

If you are not deducting the PF, you have to pay him only the employer contribution. As you are not deducting PF from his salary, you don't have to pay the employee contribution. In your case, if his salary without PF deduction is 14,220, then you will have to pay him 15,000 after adding the employer contribution. A written declaration from the employee will suffice if he doesn't want his PF deducted. We also have one such case in our organization.

Regards,
Vidhu

Deduction of PF is mandatory as per government rules, so if your organization comes under the PF criteria, employees and employers have to pay PF. You can explain to the candidate that it's a kind of investment and will be received back in the future. Only apprentices are not considered permanent employees and, therefore, they do not need to contribute to PF.

Regards, Meghana

Hi,

What are all the documents to be collected for PF and ESI from the employees? Can anyone please help me out with this?

Thank you.

Hi,

What are all the documents to be collected for PF and ESI from employees? Can anyone please help me out with this issue?

Hi,

What are all the documents to be collected for PF and ESI from employees? Can anyone please help me out with this issue?

It is now clear that PF contribution is to be deducted on the Basic + DA earned amount during the month. In short, under the Wages Act, on which Gratuity is calculated, wages are considered, and the same is to be considered for PF deduction. In some government organizations or MNC companies, CCA is being paid to employees, which is also part of the wages. Please refer to the PF Act and decide accordingly.

Regards,
VD Patel