Understanding PF Contributions: How Small Teams Can Navigate Employer and Employee Requirements

Hi All,

Can anyone give an answer to the following questions related to PF?

1) What is the minimum contribution that the employer and employee have to make?
2) If an organization has fewer than 20 people, how can they avail PF benefits?
3) What does putting a cap on PF contribution mean?

I need details on PF as my organization is planning to start this benefit. Currently, we have only 10 people on our team.

Regards,
Gunjan

Hi Gunjan,

The PF contribution should be 12% of basic + DA. If the organization's strength is more than 10 and it is using power (electricity), it comes under the purview of the EPF Act.

Hi All,

Can anyone give an answer to the following questions related to PF?

1. What is the minimum contribution that the employer and employee have to make?
The minimum contribution that both the employer and employee have to make is 12% of your wages (Basic + DA) each. Of this, 8.33% of the employer's contribution will go to the Pension fund subject to a maximum of Rs. 541/-.

2. If an organization has fewer than 20 people, how can they avail PF benefits?
The EPF Act, 1952 stipulates that you must subscribe to PF if your employee strength exceeds 20. However, there is no restriction even if the employee strength is less than 20; you can register with PF authorities and take membership for your employees. Once you have registered with PF, you cannot revert.

3. What do you mean by putting a cap on PF contribution?
I'm afraid I didn't understand the concept of "putting a cap on PF contribution."

I need details on PF as my organization is planning to start this benefit, but as of now, we only have 10 people in strength.

Regards,
Gunjan

Hi,

Can I know what forms need to be submitted to the PF Office for the closing of PF, PF loans, and transfer of PF account to another account?

Vasanthi
Chennai

Hi Ms. Vasanthi,

For closing a PF account, you have to submit Form-19 for PF and Form 10-C for EPS (Pension).

For transferring the PF account, you have to submit Form-13.

For loans and other matters, you have to submit Form-31.

Regards,
Kanaka - Chennai

Hi Kanaka,

This is Vasanthi. Thank you for the information. Could I have your email ID and full details, such as where you are working in Chennai?

I am looking forward to your reply.

Vasanthi
Cell No: 98408 63066

Hi Gunjan,

Gautam and Niranjas have already answered your questions, and both of them have provided their explanations in a very nice way. To address your last question on the Cap on PF contribution: You are aware that the minimum contribution from both the employer and employee sides is 12%. The contribution is restricted; the limit is Rs. 6500. For example, let us say that an employee, X, is drawing a basic salary of Rs. 10,000. When calculating the consolidated PF contribution, his basic salary will be considered based on Rs. 6500 (not Rs. 10,000), and the ceiling limit is Rs. 541.

Understand one thing here: Don't get confused! The employer's 12% contribution is divided into 8.33% and 3.67%. So, if the basic salary is Rs. 7000 and the contribution is Rs. 840, then it will be split as Rs. 541 and Rs. 299. Hope you have understood.

Regards,
Sadashiv Rao 😊

Dear Mr. Sadashiv Rao,

For your information, the cap of 6500 (restricted salary) for contribution in the Pension scheme was removed in 1999. I believe there was an article in the Times of India on this. Now, the employee whose basic is more than 6500 may contribute more than 541 into his Pension fund and draw a better pension at the end of his service.

You may check this out with your regional provident fund commissioner.

Dear Mr. Ghouse,

Thank you very much for enlightening me. It is good that you have sent this email; otherwise, the person to whom I had sent the email would have ended up receiving the wrong information.

I am not based in India now. Since I have handled these matters when I was working there, I am trying to assist people with statutory-related queries. However, I always advise individuals to cross-check with another experienced person so that their doubts are fully clarified. I appreciate your efforts on the same. Keep in touch!

Thanks once again.

Regards,
Sadashiv Rao

Dear Gunjane,

Regarding your PF query:

1. Presently under the EPF & MP Act and the scheme framed thereunder, two rates of contributions are applicable, i.e., 10% and 12%. The rate of 10% contribution is applicable only to the establishment/industry specifically notified for this purpose under the scheduled head. I am not aware of your organization. For the minimum rate of contribution, please refer to the schedule under the EPF & MP Act, 1952.

2. The Act is applicable throughout India. However, the scheme is applicable where the employment strength is more than 19 employees. An organization can opt for voluntary coverage under the scheme. In this case, all employees are required to submit their consent in writing for the deduction of EPF contribution from their monthly salary, and the employer also agrees in writing to pay the employer's contribution along with the statutory administrative and insurance charges towards the fund. The employer has to provide some other information on the Coverage Proforma to the Regional Provident Fund Commissioner to obtain the employer's code under the EPF & MP Act and Scheme. If the Regional PF Commissioner is satisfied, they may issue an employer code to the establishment/organization/factory to comply with the provisions of the Act.

3. Putting a cap on PF contribution means an employee may opt for a voluntary rate of contribution (higher than 12% rate), but the employer is not bound to pay a contribution of more than Rs. 6500.00 of Basic + DA.

I hope this information meets your requirements.

Regards,

Anil Anand

Dear Mr. Ghouse,

It was nice to know that the cap of Rs. 6500 has been removed. However, I would like to inquire about the current ceiling. I have learned that the ESI limit has been increased to INR 10000. Could you please confirm what the final cap is currently for PF?

Looking forward to your reply.

Thanks,
Prabin

Hi all,

Can anyone send me details regarding PF, ESI, gratuity, and the various forms associated with it? Please send the blank forms' format to my email address: prabinkp@yahoo.com.

Please send them ASAP.

Thanks,
Prabin

Hi Vinod,

I would like to know whether an employee gets tax benefits on both the employee and employer contributions to PF or not. Please correct me if I'm wrong.

Hope to hear from you soon.

What if that employer contribution is a part of my CTC? Then it means I have to unnecessarily pay tax on that employer contribution, isn't it?

Hi All,

Can anyone give an answer to the following questions related to PF:
1) What is the minimum contribution that the employer and employee have to make?
2) If any organization has fewer than 20 people, how can they avail PF benefits?
3) What does putting a cap on PF contribution mean?

I need details on PF as my organization is planning to start this benefit. Currently, we only have 10 people on staff.

Regards,
Gunjan

Do your homework. Kindly check the Employees' Provident Fund and Miscellaneous Provisions Act, 1952 at http://www.vakilno1.com/bareacts/employeepfact/employeepfact.htm. You will find answers to all your queries and concerns.

Regards,
Sanjeev Sharma

Hi,

We have started our PF account a few months late. Is there any way to exempt the employees who have left the organization by this time even though they were part of the period?

Which form should be filled to exempt an employee and what are the formalities? Also, if an employee is joining in the middle of a month, should we deduct the amount from their first month's salary?

Maya

One thing that can be noticed is that the given percentage of contribution differs from what has been mentioned as the contribution part. If we calculate on the basis of Basic, the amounts come as follows:

1. 583.1 on 8.33%
2. 256.9 on 3.67%.

In the case of seasonal and sick industries, the contribution differs from the mentioned contribution. Additionally, in some cases, the restriction of Rs. 6500/- is exempted.

Best Regards