Is PF Deduction Optional for Salaries Over Rs. 6500? Seeking Clarity on Company Policies

What is the criteria for PF deduction? If the monthly salary of an employee is more than Rs. 6500, is the deduction of PF optional at the employee's discretion, or is it mandatory for the company to deduct PF?

Please provide the relevant section to support the response as my company is not deducting PF in some cases for employees with a salary exceeding Rs. 6500, while in other cases, PF is deducted based on a flat salary of Rs. 6500 regardless of the employee's actual basic salary.

Kindly respond with a reference to the relevant section.

Hi,

An employee whose pay, at the time he is entitled to become a member of the fund, exceeds Rs. 6500/- per month (BASIC+DA) is considered an excluded employee.

Regards

Means an employee who is working in an establishment that falls under the PF Act, but whose salary is more than Rs. 6,500, has an option to get or not to get the PF deducted at all?

Can you please tell me the relevant section or paragraph in the Act to support this?

The ceiling of Rs. 6500 is for the Employees' Pension Scheme, 1995, which is linked to the PF. There is no ceiling for PF. Employees drawing a salary of more than Rs. 6500 per month are also entitled to become a member of PF and receive a benefit of a 12% equivalent share to their respective PF accounts from the employer. There is no option for any individual employee to opt out of the PF; it is compulsory for all employees.

The ceiling of Rs. 6500 applies only to the Employees' Pension Scheme, 1995. However, employees earning more than Rs. 6500 will have to contribute a maximum of 8.33% of Rs. 6500, which is Rs. 541. In summary, all employees earning a salary of Rs. 6500 or more will only contribute a maximum of Rs. 541 to the EPS 1995. This amount is to be deducted from the 12% subscription to the PF. Every employee will contribute 12% of their basic pay + dearness allowance + dearness pay (if any) to the PF. Out of this amount, 8.33% will go to the EPS, and the remaining will go to their PF account.

For example, if an employee is earning a basic pay + dearness allowance amounting to Rs. 6500 per month, an amount of 12% will be deducted from their salary towards PF and EPS subscription. 12% of 6500 amounts to Rs. 780; 8.33% amounts to Rs. 541. This means out of the Rs. 780 deduction, Rs. 541 will go to EPS 1995, and Rs. 239 will go to the PF account of the employee. The employer will contribute Rs. 780, and the entire amount will go to the PF (employer's contribution account) of the PF.

If the salary exceeds Rs. 6500, the EPF subscription will be a maximum of Rs. 541, and the remaining amount will go to the PF.

Shyam Agrawal of Pune

Hi Shyam,

Thank you for sharing that valuable piece of information. However, I believe there may be a disconnect in your statement regarding the PF opt-out option for individual employees. You mentioned, "There is no option for any individual employee to opt out of the PF. It is compulsory for all employees."

Based on my experience as an auditor working with various clients, I have observed different practices. In some organizations, it is mandatory for all employees to have their PF deducted, regardless of their salary. Conversely, in other companies, employees with a salary exceeding Rs. 6500 have the discretion to choose whether or not to have their PF deducted. This variance has led to confusion in understanding the actual requirement.

I have been unable to find a specific text or section in the Act that definitively supports either perspective. If you could provide me with the relevant paragraph or section in the Act that clarifies this matter, I would greatly appreciate it.

Thank you for your assistance in this matter.

Best regards,
[User's Name]

Dear Mr. Shyam Agrawal,

Very good posting. Thanks. I humbly feel that the words "Employee" and "Employer" should have been interchangeably used in your mail. I think only the employer contributes towards the EPS account at 8.33% (maximum Rs. 541.00 per month) and 3.67% (maximum Rs. 239.00) in the EPF account. Employees are exempted from contributing any amount to the EPS & EDLI Scheme under the Employees' Provident Fund and Miscellaneous Provisions Act-1952 when drawing Rs. 6500.00 or more per month as PF salary. The employees contribute their 12% or 10% as the case may be, PF salary to the EPF account only.

Please rectify my views if I'm wrong.

Thanks,
R.K. SINGH
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Dear All,

I wish to consolidate the information as follows:

The employee/employer has the option to cover an employee whose salary is Rs. 6500/- or more only at the time of appointment. Once an employee is covered under the PF, he does not have the option of exemption under PF. For example, if an employee, upon joining the fund, has a salary less than Rs. 6500/-, he is covered under PF. Later, when his salary crosses Rs. 6500/-, he continues to be covered under PF, provided he can restrict his contribution to Rs. 6500/- for both PF and the Pension scheme.

The employee contributes only to PF; it is only the employer who contributes to PF, the Pension scheme, EDLIS, and administrative charges.

The employer has the option to restrict their contribution to Rs. 6500/- in spite of the employee contributing more.

12% of the salary is contributed to PF by the employee, and this percentage can be increased and decided by the employee if they want to contribute to voluntary PF.

As per Section 2(f) of the Act, these employees are exempted employees.

For further details, please email me at alexanto@gmail.com.

R. Alex Antony

HR Solutions

Chennai

98412 10995

Hi all,

I want to shed some light on the exemption part. If the new joiner does not have the membership of the PF with their previous employer or is a fresher, then they only have the option of whether to join PF or not if their wages/Basic plus DA are more than 6500/- per month. However, if they were a member of the PF in their previous employment, then there is no exemption option available to them. The exempted amount can be up to 6500/-, but the employee/employer must ensure PF membership. For exemption support, the employer should have the new joiner fill out Form 11, i.e., a declaration from the new employee stating they were not a member of the PF in their previous employment.

In my opinion, the employer should make it compulsory for all employees to be members of the PF and not offer any alternatives. The HR personnel should effectively communicate to new employees the benefits of compulsory saving with the high rate of interest available through PF membership. The employer's cost is clearly stated in the CTC of the individual.

Everything I mentioned above is supported by proof and legal opinion in writing from noted advocates in Pune, so I don't believe there are any mistakes in the information provided.

Thanks,

Ramesh

Hello Sir,


Presently I am working in leading cement Industry, Employee's Compensation Act'(Amendment)2009, No.45 of 2009, December 23 ,2009. Weather this amendment is applicable to our employees or not.

Please clarify my dought.


S VENKATESWARLU
e_mail : [Login to view]

From plain reading to EPF Act, one can understand as follows:

1) Employees drawing a salary less than Rs. 6,500/- per month are covered.
2) Employees drawing a salary more than Rs. 6,500/- can be covered if they give consent; otherwise, they are not covered.

Hi friends,

Please provide more information about ESI and PF. Also, if an employee is receiving a salary of Rs. 6500, how much will they be able to take home after contributing to ESI and PF? Friends, please send me the answer with the calculation.

Hi,

It is quite a justified article under the rule about EPF/EPS. You may go through this article without any hesitation.

Regards,
Phaiboon

Hi,

Please provide detailed guidance on the rules for carrying out a retrenchment of a group of workers and staff after completing a construction project.

Regards,
PHAIBOON

Dear Shri Abhi-rumana,

I stand corrected. Employees earning more than Rs. 6500 have the option to opt out of PF. Such employees are referred to as exempted employees.

Shyam Agrawal

I am providing abstracts of Mr. P.C.A. in this regard. Please go through the contents. The answer is always available on citehr. You people do not make an effort for an answer. Please do some exercises.

Workmen's Compensation (Amendment) Bill 2009

Dear friends,

Yesterday, Parliament passed the Workmen's Compensation (Amendment) Bill 2009, which mainly provides for the following:

a) Change of the name of the Act to Employees Compensation Act 1923

b) Enhancement in the minimum compensation payable from Rs. 80,000 to Rs. 1,20,000 (in case of death) and from Rs. 90,000 to Rs. 1,40,000 (in case of permanent disability) and funeral expenses from Rs. 2,500 to Rs. 5,000.

c) Reimbursement of actual medical expenses incurred during the treatment of injury caused during the course of employment.

d) Increase in coverage by the omission of restrictive clause in Schedule-II and inclusion of additional hazardous activities

e) Disposal of cases of compensation by the Commissioner within 3 months

f) Empower the Central Govt. to specify monthly wages for the purpose of compensation and enhance minimum rates of compensation from time to time.

A copy of the Bill is attached for your ready reference. It will become an Act after getting the assent of the President and will come into force on such date as may be specified in the notification to be issued by the Govt.

Dear Shri Ramkrishna Singhji, Shri Alex Anthony & others,

At the outset, I correct myself. The PF is not compulsory for all. An employee drawing a salary of more than Rs. 6500 may opt out of the PF if they so desire. Such an employee is called an exempted employee. In one's own interest, one should not opt out of the PF. However, we are now discussing legal provisions. So, one thing is now clear. PF is compulsory for employees drawing a salary up to Rs. 6500 per month and optional for those drawing more than Rs. 6501. Shri R. B. Narwade of Pune has further clarified that once an employee opts for PF, they cannot opt out afterwards. Those interested may please see the posting of Shri R B Narwade in this discussion.

I appreciate the posting of Shri Alex Anthony of Chennai. He has summed up the subject very nicely. Thanks, Mr. Alex Anthony.

The assertion of Shri Ramkrishna Singhji is perfectly all right. The employees do not contribute to the EPS or the EDLI schemes. Their entire contribution goes to the PF account only.

Thanks to all.

Shyam Agrawal of Pune

There are five kinds of accounts for social security. Rates are based on basic allowance plus dearness allowances (BA+DA) of particular wages per month:

1) AC 1 (PF)
- Employee share: 12%
- Employer share: 3.67%

2) AC 2 10 (Pension)
- Employee share: 0.0%
- Employer share: 8.33%

3) AC 2 (Administration Charges)
- Employee share: 0.0%
- Employer share: 1.1%

4) AC 21 (EDLI - Employees' Deposit Linked Insurance)
- Employee share: 0.0%
- Employer share: 0.5%

5) AC 22 (EDLI Administration charges)
- Employee share: 0.0%
- Employer share: 0.01%

The above rates apply to wages less than or equal to 6500, which are common for all salaries above 6500.
- Employee share: 12%
- Employer share:
- For 6500 * 3.67% i.e. 239
- For 6500 * 8.33% i.e. 541

We will discuss the forms tomorrow.

Hi friends,

I do not know whether this is right or wrong, but I have a doubt about this. In some companies, instead of contributing to EDLI, they are following the group insurance schemes of LIC. Could anyone send me information on that?

It's not the employees compensation act, its an workmen compensation act. Yes it is applicable to all the company workem as well employees who are not covered under ESI for wt ever the reason, either due to wages over and above Rs.10000/- or due to applicability of ESI act to region.
Regards / Pavan