Understanding PF Deduction and Salary Calculation under EPF Act

My basic salary is Rs. 34,000, but my company is deducting PF amount of Rs. 780 instead of 12%. I want to understand the situation.

The policy is to deduct either 12% on a basic salary of $6,500 or on a basic salary of $34,000, depending on what the company follows.

As per PF law, the maximum ceiling for PF deduction is Rs. 6,500. Therefore, the employer is deducting based on that limit.

Dear Santanu Reddy,

As per the Employees' Provident Fund (EPF) & Miscellaneous Provisions Act, 1952, the ceiling limit for monthly salary is Rs. 6,500. Therefore, the statutory deduction of 12%, i.e., Rs. 780, is applicable. Contribution on the actual salary above the ceiling limit is optional.

Abbas.P.S

Dear Santanu,

The basic wage ceiling for deducting PF is Rs. 6,500/- per month (as per the Employees' Provident Fund & Miscellaneous Provisions Act, 1952). If the basic is less than or equal to Rs. 6,500/-, then PF will be calculated at 12% on the actual basic. If the basic is more than Rs. 6,500/-, then the company may deduct the PF at 12% on Rs. 6,500/-. It is optional on the part of the company to deduct it on the actual basic.

Hope it's clear.

Dear Santanu,

I would like to inform you that as per the PF Act of 1952, the maximum ceiling for basic wages is Rs. 6,500. Therefore, your PF is being calculated based on Rs. 6,500.

It will completely depend on the employer if they want to calculate your PF deduction on Rs. 34,000. However, in this scenario, the pension amount will be calculated based on Rs. 6,500 (which amounts to Rs. 541), and the remaining amount will be included in the EPF. This is because in the EPS, no one can contribute more than Rs. 541.

I hope your doubts are clear now. If you have any remaining questions, please feel free to drop me an email at ssmbahr@gmail.com.

Thanks & Regards,
Sunil Sharma

Dear Mr. Santanu,

According to the PF Act of 1952, PF is mandatory for employees whose basic salary is up to Rs. 6,500. Your basic salary is Rs. 34,000, but your PF is calculated based on Rs. 6,500.

Kushal P.S. Mahur
Asst. Manager HR
9717482231

It depends on the company, i.e., they will deduct on the full basic + DA. Otherwise, as per the PF & Misc. Prov. Act, Rs. 6500.00 is the ceiling limit, so they are deducting 12% of your side on Rs. 6500.00.

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

Dear Mr. Nandy,

As per the provisions of the Employees Provident Fund Act 1952, the deduction is made correctly on the ceiling limit, i.e., considering the ceiling basic of Rs. 6,500/-, which seems to be okay. You (Employee) can, however, contribute at any higher percentage if you so wish, but for that, you first have to apply to the respective Regional Provident Fund Commissioner.

It is recommended that investment in one's Employees' PF account is not only a safe investment but also can be thought of as a moderately yielding one and subject to inclusion in Standard deductions under section 80(C) of the Income Tax Act as amended from time to time.

Thanks and regards,
Arun Dixit

Hi Santanu,

As per PF law, if your basic salary is above Rs. 6,500/-, then you are not eligible for PF deduction. However, since your company still wants to provide you with the benefit of PF, they have frozen your basic salary to Rs. 6,500/- and deducted 12% on that, which amounts to Rs. 780, and this is absolutely correct.

Thanks,
Francis

Your company is paying PF contribution of 12% on Rs. 6500, which is the wage ceiling as per the PF Act. In such cases, an employer is not required to pay their own share of contribution above the wage ceiling of Rs. 6500.

Hi Ashish,

As per the P.F. Act, the maximum liability of the employer is $780.00 on a maximum ceiling of $6,500. Therefore, it is at the organization's discretion if they are interested in contributing more. There is no law enforcement on this matter.

Regards,
Ashish

If the basic exceeds 6500/-, then the PF deductions are deposited with a company PF fund. If the PF is calculated on a basic of Rs. 34,000/-, then it will be deposited with the fund; otherwise, vice versa. Your company may not have the above said fund.

Amrender

Kushal PS Mahur
9717482231

Dear sir,

I want to know about the notice period. In our company, we have a notice period of 3 months, or we have to pay the salary of 3 months. In this situation, what will be the salary? Is it basic only, or do they count all allowances? Is there any law for that?

Please help.

Hiren

Section 6 of the Employees Provident Fund & Miscellaneous Provisions Act says:

Section 6. Contributions and matters which may be provided for in Schemes. – The contribution which shall be paid by the employer to the Fund shall be ten percent. Of the basic wages, dearness allowance and retaining allowance, if any, for the time being payable to each of the employees whether employed by him directly or by or through a contractor, and the employee's contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten percent of his basic wages, dearness allowance and retaining allowance if any, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section:

Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words “ten percent”, at both the places where they occur, the words “12 percent” shall be substituted:

Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for rounding off of such fraction to the nearest rupee, half of a rupee, or quarter of a rupee.

Explanation I – For the purposes of this section dearness allowance shall be deemed to include also the cash value of any food concession allowed to the employee.

Explanation II. – For the purposes of this section, “retaining allowance” means allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.

I hope this will explain the whole scenario to you. you can get your contribution enhanced to whatever you like but the Employer's contribution shall restrict to Rs. 780.00 unless employer also agree to contribute a higher amount.

Dear,

The information mentioned by Sharma Sunil is correct. If the basic salary is more than 6500/ or much more, then the PF will be calculated based on the same if the employer desires to do so.

In this scenario, the basic salary is 34000/, so accordingly, 12% will be deducted. However, 8.33% - which is equivalent to an amount of 541 - is the maximum contribution payable towards pension, and the remainder will be added to the EPF.

I hope this clarifies the matter. If not, please feel free to reach out to me via email at karamchhillar@gmail.com.

PF act is applicable only for Rs. 6500 & act says that employer liability is to pay PF is only for Rs. 6500
Employer have some choices if employees basic is more then Rs6500
· He can deduct PF on actual basic Like u have Rs. 34000
· He can deduct PF on 6500
· Or he can not deduct PF because PF act is applicable only on Rs 6500 act did not says to deduct pf on basic above then Rs6500 its not mandatory.
But Sir keep In our mind that the above conduction are applicable only when ur PF Basic is more then Rs6500
THanks
Kudeep SHarma
+91 9910148454

It's all upon company policy, but as per rules, the maximum basic salary for PF deduction is $6,500.

Please let me know if you need any further assistance.

I am Santosh Tambe, HR Officer. I want the answer for PF rule. Suppose my basic salary is 34,000. My question is: is the PF deduction of 780 for the employer compulsory? Please explain, as I do not understand the rule for PF deduction.

@Santanu,

The P.F. deduction is at 12% of Basic+D.A. Normally, the gross monthly salary consists of Basic+D.A.+HRA+Allowances. In your case, your gross monthly salary is Rs. 34,000/-. Hence, you need to check what your Basic salary is out of that. I am sure it will be Rs. 6,500/-. Therefore, the PF is deducted only on this Basic amount. The irony is, in earlier days, the Basic component was kept low so that the Employer contribution towards PF, ESIC, Gratuity, etc., was low. Now, it's the other way round. It is kept above Rs. 15,000/- to avoid the ESIC & PF regulations.

@Jayashree,

Your clarification is ambiguous. For the last many years, my Basic salary has been much more than Rs. 20,000/-, and all my past employers have deducted on that amount at the appropriate rate (earlier 8.33% and now 12%). Hence, I do not think it may be voluntary for the organization to contribute the applicable rate only on Rs. 6,500/- irrespective of the Basic+DA. Please clarify.

Regards:

The Employees Provident Fund & Miscellaneous Provisions Act, 1952 covers employees drawing a salary of Rs 6500 per month (w.e.f. 1-06-2001). The rate of contribution is 12 percent of the basic, DA, and retaining allowance, if any. The rate of contribution is, however, 10 percent in the case of covered establishments employing less than 20 persons, sick industrial companies as defined under section 3 of the Industrial Companies Act, any establishment which has accumulated losses equal to or exceeding its entire net worth at the end of the financial year, and jute, beedi, brick, coir, and guar gum industries. Therefore, whatever deductions are made from your salary towards PF, it is in accordance with the provisions of the law, and the employer is obliged to contribute the same amount. If you want to contribute anything over and above, it is purely optional.

Dear Santanu,

As per the PF Act, the ceiling for the calculation of PF contribution is Rs. 6,500/-. Therefore, your PF deduction is Rs. 780/-, which is 12% of Rs. 6,500/-. However, you have the option to voluntarily contribute 12% of Rs. 34,000/- minus Rs. 780/-, resulting in Rs. 3,300. This choice can help increase your permissible savings for income tax purposes.

The company will only contribute Rs. 780/- (Rs. 239/- towards PF and Rs. 541/- towards EPS) as they have opted to adhere to the mandatory limits.

I hope this clarifies the situation for you.

Regards,
Kosal Raj

I think a lot of suggestions are being posted for any question, but still, a doubt remains for the correct answer. Can there be any legal expert on cite hr who will provide us with the correct answer citing the relevant LAWS or the case citation in this regard? Following practice in one company or the others does not show the picture of the statute. So many suggestions make us confused. I think Mr. Khosla and some other senior legal experts can take this initiative to come forward and suggest any way out and make us feel that we are following the statute.

Dear Santanu,

As per the PF Act, the standard deduction for PF is restricted to Rs. 6500/-, and accordingly, the employer has deducted 12% on Rs. 6500/-, which works out to Rs. 780/-. This is correct.

Regards, Rangarajan 9741155458

My question is: if assuming that for the last 3 to 4 years, the company has been calculating PF on the basic salary, i.e., Rs. 34,000/-, and then they begin deducting PF based on the ceiling amount, i.e., Rs. 6,500/-, what should the company do and what should the employees do? Please provide your valuable advice.

Dear Avdhoot,

Nothing to do. At one stage, the employer was in a position to contribute at a higher salary. Accordingly, he contributed. Now the situation has changed. There may be queries from the auditors or the financial position may decline. This change could be due to his adamant stand that henceforth no higher contribution is to be paid for a salary beyond Rs. 6,500. Whatever the reason may be, there is no claim for the employees for amounts over and above the ceiling limit.

Abbas.P.S

Mr. Kushal PS Mahur,

Please advise which section of the PF Act, 1952 provides a limit of Rs. 6,500/-

Gaurav Bansal

Dear Shantanu,

As per the act, the basic limit is 6500/-, so the act can't force the employer to deduct the PF based on your actual basic salary (if the basic salary is more than 6500/- Rs.). Therefore, the employer is ensuring minimum compliance as per the act.

Regards,
Rahul Singh Rathour
Assistant Manager - HR

As per the EPF Act of 1952, the maximum ceiling of basic wages, i.e., Basic + DA, is Rs. 6500/-, with a contribution of 12% from both the Employee and Employer shares (8.33% for the Pension fund and 3.67% to our share). For the rest or balance of Basic + DA, the option is left with the employer for deduction or payment into the PF. Even then, the pension fund contribution would be based on Rs. 6500/- at 8.33%, which equals Rs. 541/-. There is nothing wrong in this as per the act.

Regards

Dear sir,

The notice period for an executive in most companies is typically set at 3 months or 90 days. If you wish to leave the organization, you are required to work for the full 3 months or provide payment in lieu of the notice period, which amounts to 3 months of basic salary plus any applicable DA. In case you are receiving leave encashment or other allowances, the notice period also applies to these allowances.

Thank you,
yvrao

Permanent employees resign from their jobs and give a one-month notice period. If they are absent due to sickness or other reasons within that month, does their notice period remain the same?

Please respond.