Understanding PF Deductions: Is It From Basic or Gross Salary and How Does Employer Contribution Work?

I have a query about the deduction of the PF amount. Is it deducted from the basic salary or the gross salary? For example, if Rs. 500/- is being deducted from the employee's salary, how much will be deposited in the PF Account by the employer? Will it be Rs. 500/- from the employee and Rs. 500/- from the employer, totaling Rs. 1000/-?

Also, please explain the interest rate calculation on the PF amount if withdrawn after one and a half years.

Regards,
Janmejay Kumar
Jaipur

Hi Jay, PF is deducted on Basic. Rs 500 (Employee Contribution) will be deposited in the PF account. If Rs 500 is the contribution, then taking it as 12%, your basic is around Rs 4166. Employer Contribution will be on Basic Rs 4166 - 3.67%, i.e., Rs 152 will be deposited in your PF Account, and - 8.33%, i.e., Rs 347 will be deposited into the Pension Account. This total contribution (3.67% + 8.33%) will come as 12%. So your PF Account contribution will be Rs 500 + 152 = Rs 652. Hope I am clear.

Interest rate is declared by the Central Government every year. At present, it is 8.5% for the financial year 2010-11.

Sir,

I want to know that I resigned from a company about five years ago, but I didn't withdraw my P.F. amount until now. I want to know if there is any problem with withdrawing my PF Claim.

Hi Pramod,

In fact, it is better and suggested not to withdraw PF before 5 years because the amount withdrawn is under the taxable basket. After 5 years, it becomes completely tax-free.

Hi,

If my basic salary is $10,000 per month, what is the employer and employee contribution for PF? Can you clear my doubt here with calculation?

Thanks,
Chris

Hi Chris,

As per your Basic Salary, your Contribution is 12% - 1200 Rs and the Employer Contribution is 3.67% - 367 Rs. The total amount is 1567 Rs.

You might be wondering about the remaining Employer contribution from the 12%. The rest will be deposited into the Pension Account, which you can withdraw only upon retirement.

Hi Chris, the calculation I provided is for your understanding of the amount. However, there is a ceiling limit of 6500 Rs. Since your basic is above that, if your employer permits you to contribute more, then the above calculation will change. However, the employer is only liable to pay their contribution limited to 6500 Rs.

Case 1:
Your Contribution - 12% (Max 6500) - 780
Employer Contribution - 3.76% (Max 6500) - 239
Total - 1019

Case 2:
Your Contribution - 12% (10,000) - 1200
Employer Contribution - 3.76% (Max 6500) - 239
Total - 1439

It all depends on the organization's policy. If you have any doubts, please post them to me.

EPF Contribution Details

EPF contribution is not restricted to the basic salary. Basic, DA, Personal Pay, and other components of the salary will be considered for EPF calculation.

Up to a salary of Rs. 6500/-, the contribution is statutory. Beyond Rs. 6500/-, it depends on the employer. However, the statement that only 3.67% will go to the individual EPF account from the employer is not entirely correct.

For example, if an employee draws a salary of Rs. 10,000/- and the employer contributes to the full salary, then the total contribution will be Rs. 1200/- + Rs. 1200/- = Rs. 2400/-. The amount to the Pension Fund will be 8.33% of Rs. 6500/- (statutory), i.e., Rs. 541. The contribution from the employer at 3.67% will be Rs. 367/-. In this case, it will be Rs. 1200 - Rs. 541 = Rs. 659.

Therefore, the contribution from the employer is 3.67% of Rs. 6500/- plus 12% of the balance salary.

Regards,
Abbas. P. S., ITI LTD, Palakkad - 678 623
[Phone Number Removed For Privacy Reasons]

Dear Abbas,

As you have mentioned, it depends on the employer, but they will not contribute the complete 12%. It will be restricted by the PF Office when you submit it.

Please read this document for further clarification.

It's better to calculate the PF pension. In fact, it is another kind of looting our money.

Regards,
Anilkumar

Dear Bhandavi,

Thank you once again for your concern. I will keep in touch with you for future reference. As I am working in Qatar now, I need to update this.

Best Regards,
Nixon

Dear Bhandavi,

There is no question of restriction from EPF to contribute 12% on the full salary. Presently, I am experiencing it. In your attached document, it is clear that after remitting Rs. 541/- (8.33% of 6500/-), the balance of the full amount is going to the individual account.

Abbas.P.S

Sir,

I want to know the PF & ESIC last challan date of every month. I also want to know what is the PF monthly returns date. What is the last date for submitting our monthly ESIC & PF challan cheque?

On the main query of Mr. Janmejaikumar, I agree with the viewpoints of Mr. Bhandhavi R and with Mr. Govind Negi being correct as per provisions.

Dear Bhandhavi,

I have edited my write-up on EDLI. Earlier, for the first Rs. 35,000, it was actual and 25% in excess. Now, for the first Rs. 50,000, it is actual and 40% in excess. However, I have mistakenly written 25% for amounts beyond Rs. 50,000. Kindly take note.

Abbas.P.S

Dear Friends,

A lot of thanks to Bhandavi, Chris, and Abbas. I am now clear about PF contributions.

Thanks once again,
Janmejay

What is the minimum employee rate to contribute to the PF? How many minimum employees should be there in a company to deduct PF?

Please explain.

Hi Kavita,

It will depend on the organization category. Some should have a minimum of 20, and some 5. Please visit the EPF site [EPFO](http://epfindia.nic.in) for more information. Thank you.

Dear All, Can anyone tell me how we can calculate the FINAL amount of PF? My last basic was 6000, and 12% of this was PF, i.e., 720. I worked there for 9 months. I had also submitted the PF withdrawal form. But I want to know how to calculate/credit how much the final amount for PF including interest. If anyone knows this, please let me know.

Thanks & Regards, Darshan Palkar

Dear Darshan, According to your Basic Salary Rs. 6000.00 P.M. Your Provident Fund deducted is Rs. 720.00 P.M. and Total Amount Deposited to P. F. Department Rs. 1,440.00 P.M. (720.00 deducted from your salary and Rs. 720.00 from the Employer). For the Nine Months, Your Total Amount Deposited in the PF Department is Rs. 14,400.00 (1440.00 x 9 = 12,960.00). Interest Rate is 8.5 percent P. A. Calculated every six months. That would be around 550.00. That means You will get Rs. 13,510.00. It will take 45 days or more to clear and will come directly into your saving bank account from the SBI Bank. Hope this information will help you.

With Regards, Akhilesh

Dear Mr. Darshan, You are not applicable for Pension right now. When your account exists up to 9 yrs, then only the PF account bifurcated into two categories: 1. EPF and 2. Pension. EPF is 15.67% and 8.33% is pension. So if your account is below 9 yrs, then withdrawal amount is 24%. (means amount Rs. ?)

With Regards, G.R. Vishaka Guru

Please clear Vishakhar Guru? Thanks On Exiting query anybody want to add something because my query is the same, friends. Darshan will get approximately Rs. 13,510.

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Re: PF Contribution Amount Calculation

Hi Chris, As per your Basic Your Contribution is (12%) - 1200 Rs Employer Contribution - (3.67%) - 367 Rs Total - 1567 Rs You might be thinking what about the rest of the Employer contribution out of 12%. Well, the rest will be deposited into the Pension A/c which you can withdraw on retirement only. Retirement means exactly what? That means he cannot withdraw both sides 12%+12% = 24% + 8.5% = ? after one/two years of service. When he will get/claim the remaining 8.67%, please clear these, it's confusion, that's why I posted existing references.

Thanks, Nushad

Dear Nushad, so many quotations are furnished by you. Accordingly, it is difficult to understand what you aim for with this. However, I shall comment on the PF deposit cited above.

Here, only the final salary is given as Rs. 6000. From the final salary, PF statement preparation is not possible. We have to get monthly salary details throughout his service.

Assuming that the salary for the 9 months is uniform, viz. Rs. 6000, after the 9th-month remittance, the employee's contribution with interest will be Rs. 6666, and the employer's contribution with interest will be Rs. 2038. (Note that interest is monthly compounding). I shall insert an Excel sheet for this calculation. Entry of corresponding monthly salaries will give the output.

In addition, he is eligible to get a withdrawal benefit of Rs. 6120, i.e., Factor as per Table D for service x last drawn salary. Here, 9 months will be rounded up as 1 year. Its equivalent factor is 1.02. 6000 x 1.02 = 6120.

Now, what are the remaining doubts? Please make it clear.

Regards,
Abbas.P.S, ITI LTD, PALAKKAD - 678 623

Clarification on Contribution and Credit Amounts

Please explain in detail who is not the exacts.

Case 1: Contribution Breakdown

- Your Contribution: 12% (Max 6500) - 780
- Employer Contribution: 3.76% (Max 6500) - 239
- Total: 1019

What amount is credited to my bank account, only 1019 or a total of 1560? If it is 1019, then when will I get the remaining 541? I am not qualified for a pension. Please, can anyone explain? Thanks.

Candidates are confused because they do not exactly know how much amount is credited to their bank account, 12% + 3.67% or Total 24% at a time.

Regards

Thanks, Abbas, for your help. Please explain in detail.

Case 1: Contribution Details

Your Contribution - 12% (Max 6500) - 780
Employer Contribution - 3.76% (Max 6500) - 239
Total - 1019

What amount is credited to my bank account, only 1019 or the total 1560? If it is 1019, when will the remaining 541 be credited? I am not qualified for a pension. Can anyone explain, please? Thanks.

Candidates are confused because they do not exactly know how much amount is credited to their bank account - 12% + 3.67% or Total 24% at a time.

Dear Nushad, In the above case, the employee's contribution is Rs. 780, and the employer's contribution is Rs. 239 (total Rs. 1019) to the PF account. This accumulation can be withdrawn through Form 19.

A balance of Rs. 541 will go to the pension account. If you are not eligible for a pension due to insufficient minimum service, you can either apply for a scheme certificate or for a withdrawal benefit. A scheme certificate can be used later either to add to future service or to obtain a withdrawal benefit.

Please note that the accumulation in PF and in the pension fund is computed using different methods. In PF, the present annual interest of 8.5% will be monthly compounded and rounded to the nearest rupee separately for both employee and employer contributions. However, in EPS, the withdrawal benefit is calculated by multiplying a factor stipulated in Table D by the last drawn salary. For 1 to 9 years of service, the factors are 1.02, 1.99, 2.98, 3.99, 5.02, 6.07, 7.13, 8.22, 9.33, respectively.

For example, if your service is 6 years and 7 months and the last drawn salary is Rs. 6500; your service will be rounded to 7 years. The factor as per Table D, 7.13, will be multiplied by the salary of 6500, resulting in Rs. 46345.

In other words, the withdrawal benefit is Rs. 46345/-

Regards, Abbas

For both the Scheme certificate and withdrawal benefit from EPS, form 10-C has to be used. For withdrawal benefit, the calculation is not based on interest accumulation like the PF amount. There is a factor stipulated in Table D that will be multiplied by the last salary drawn (subject to ceiling). The factors for 1 to 9 years are 1.02, 1.99, 2.98, 3.99, 5.02, 6.07, 7.13, 8.22, and 9.33 respectively. I have already provided an example of this. Please review it.

As per the rules, PF is entitled from the very first day of employment. If there is any delay, it may be due to procedural delays followed by the employer.

Regards,
Abbas

Deductions on Basic Salary of ₹8000

If a person is receiving a basic salary of ₹8000, please advise on the deductions to be made by both the employee and the employer. Kindly show your calculations as per A/C 1, 2, 10, 21, 22.

Regards,
ROHAN

Please never ask about the final PF amount you will get by quoting your last drawn basic. There are a number of things that actually affect the calculation:

1. The Basic might have changed from time to time.
2. The PF calculation depends on the employer.

Example of PF Contribution Calculation

For example, if the Basic is 12,000 Rs, then the employee contribution will be 1,440 Rs. However, when it comes to employer contribution, there are three cases:

Employer contribution gets deposited into two accounts: Pension and PF.

Case 1 - 8.33% of 6,500 Rs = 541 Rs into pension and 3.67% of 6,500 Rs = 239 Rs into PF. Here, the employer has restricted their contribution to 6,500 Rs basic.

Case 2 - 8.33% of 6,500 Rs = 541 Rs into pension and 1,440 Rs - 541 Rs = 899 Rs into PF. Here, the pension is restricted, but more is contributed into PF.

Case 3 - 8.33% of 12,000 Rs = 1,000 Rs into pension and 3.67% on 12,000 Rs = 440 Rs into PF. Both are not capped to the maximum limit.

Depending on these scenarios, your PF balance can change. So please see what your employer is following.

I wanted to know what the maximum limit is for the deduction for PF. For example, if someone has a salary of 50,000 and their basic salary is 18,000, what percentage of their salary is deducted for PF?

Thank you.
Regards

Is PF Contribution Mandatory for Salaries Above Rs. 15,000?

Is PF contribution mandatory if anyone's salary is above Rs. 15,000 (basic Rs. 7,500)?

I want to know how this calculation has come on my PF. I was getting a gross salary of 25k, and 1247 was deducted as PF. The company's letter stated that the employer's contribution would be 1396 for PF every month. I worked for 5 months and now have joined a new company. When I checked my PF account, it shows the following: the account balance of EE amount is 3436, and ER amount is 1801.

I need clarification on this. Please help.

Hi,

I have completed 38 months in my company, and my basic salary is 6500. Now, I want to withdraw my PF. Could you please let me know how much my total PF would be?

Regards,

Hi, my basic salary is $9200 per month. I have resigned from a company after 2 years and 4 months of service. I want to know how much PF amount I will receive.

At my PF account, it shows 58,800, and in the pension, it reflects 38,000. I am resigning this month. How much amount will be credited to my account? Can you explain this to me?

Hi,

I have worked in more than 6 companies, and almost I have withdrawn all PF. So as you mentioned, there will still be 8% of the Pension amount which I can withdraw only at my 50s. Is my understanding correct? Also, as I have so many PF accounts, will it be difficult to claim? Is there any way to transfer the pension amount to the current PF Account even if the PF amount is withdrawn?

Thank you.