Understanding PF Deductions: Is It Based on Full Salary or Days Worked?

If my basic salary + DA is $10,000 and my attendance is 25 days, PF will be deducted on which amount? Is it on $6,500 or based on the number of days attended?

Employee contributions will be deducted based on the actual earned basic in a particular month.

Regards,
Ashok.

The statutory ceiling limit is Rs. 6500. If your employer depends on this amount, its pro-rata calculation subject to attendance will be taken into account. If it is actual, the same manner it will be calculated. The only change will be replacing Rs. 6500 with the actual salary.

Regards,
Abbas.P.S

Your PF contribution would be Rs. 1040, and the employer's contribution would be Rs. 676 for this particular month.

Thank you.

PF Deduction Policy

PF deduction is based on the company's policy. Some companies follow 12% of basic + DA, while others follow 12% of basic + DA subject to a maximum of Rs. 780/- (statutory ceiling Rs. 6500/-). Nowadays, it is part of the CTC, and hence whatever was agreed upon at the time of employment has to be followed.

Regards,
BHAVAN

It is based on the company policy. As rightly pointed out by Bhavan, companies actually include this element (whether it will be on ₹6,500/- or wages earned).

In other words, if the company contributes on ₹6,500/-, the employer contribution for the difference (Wages earned - ₹6,500/-) will actually be paid to you in some form as it is built into the CTC by the company. CTC is nothing but the cost to the company, which includes all wages, benefits, and welfare facilities that the company incurs for that particular employee.

Trust the matter is clarified.

Regards,
M.V.KANNAN

I think everybody has given their opinions, and most of them are correct. It depends upon the company policy whether to deduct 12% or the legal maximum limit of Rs. 780.

Best regards,
Pradeep

Hi Ravi, his basic salary is 10,000 Rs per month. If there are 30 days in a month, it means his one-day salary is 10,000/30 = 333.33. Now, he was present for 25 days, which means his basic for 25 days is 333.33 * 25 = 8,333.33. His PF contribution is 1,000, but the employer's maximum contribution is only 780. There was a calculation mistake as it should have been 1,040.

Other comments are correct.

The ceiling limit of PF is Rs. 6,500, and its 12% is Rs. 780. However, if the employer wishes, they may contribute based on the actual salary. Therefore, if the salary is Rs. 10,000, the employer may remit Rs. 1,200. There is no restriction to limit it to Rs. 780.

Regards,
Abbas. P. S.

Employer and Employee Contributions Under the PF Act

As per the practice under the PF Act, employees' contributions are deducted from their actual earnings (Basic + DA + other components, if any, depending on the nature of their business) in a particular month (LOP accounted for). However, the employer's contribution can be made in two ways. It can either be equal to the employee's contribution (12% of earnings) or based on restricted wages capped at Rs 780 (in accordance with company policy).

Please let me know if you need further clarification or assistance on this matter.

Best regards,
[Your Name]

Dear Ashok Babu, you have mentioned that "As per the practice on the PF Act, the employee's contribution has been deducted from their actual earnings (Basic + DA + other components, if any, by the nature of their business) in a particular month (LOP accounted). However, the employer contribution has been made in two ways, either equally to the employee (equal contribution of 12% on earnings) or on the restricted wages limited to Rs. 780/- (purely based on the company policy).

I didn't see this provision in the said PF Act. As per the Act, for both the employee and employer, the contribution up to a ceiling salary of Rs. 6500, which amounts to Rs. 780, is only statutory. This means that beyond this limit, the contribution is optional for both the employee and employer. However, according to you, it is mandatory for the employee and optional for the employer. This is contradictory. Please check and correct.

Regards, Abbas.P.S