Confused About PF Deductions on My Salary – Can Someone Explain How This Works?

Hi Seniors, my salary is $19,838. For this amount, my company is deducting $996 as PF. How is it possible? My HR said that we are calculating it on CTC. Can anyone please clarify my doubt, please?

Thanks & Regards,
Girish
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Regarding PF calculation on the basic salary, what is your basic amount? The PF deduction is calculated at 12% of your basic salary.

For example, if your basic salary is 8300, then 12% of it would be 996.

Regards,
Somashekara

Dear Girish,

The PF limit is Rs. 6500/-. If you are getting Rs. 50,000/-, then also the deduction should be on Rs. 6500/- (Basic + DA). The calculation method is Rs. 6500 * 12% = Rs. 780. If they included admin charges (1.6%), it could be Rs. 884/- (total 13.6%). As per my knowledge, it's wrong. Please check with your HR and their policy.

I am totally in agreement with Mr. Murali. PF is always deducted based on the basic salary. If your basic salary is more than ₹6,500, it will be calculated on ₹6,500 at 13.61%, with a maximum deduction of ₹887. If they deduct more than this amount, you should discuss it with your HR department.

Dear Murli,

You are right, but it is not the case in all situations. If an employee's basic salary exceeds 6500/-, he has the option to choose. Either he can contribute 12% on 6500/-, which is Rs. 780, or 12% on the actual basic salary, i.e., 8300 X 12% = 996 (if basic = 8300/-). Furthermore, administrative charges are applicable to the employer, not the employee. Employers are required to contribute 13.61% of the basic salary to the PF department.

Correct me if I am mistaken.

Dear Girish,

PF is calculated at 12% on Basic Salary. If your basic is more than Rs. 6500/-, then the contribution can be limited to Rs 780/- or calculated on the full basic salary. In your case, it seems the PF is calculated on the full basic salary, which is Rs. 8300/- (as Rs. 996/- is deducted as mentioned by you). Please check your payslip or CTC for your basic salary and confirm.

Hope this solves the query.

Regards,

Manasi Shah
Consultant
Advent Corporate Services

Hi Seniors,

Adding to the query, from the beginning of this month, my company (a financial data service provider) circulated an email asking all employees to put their signatures on a consent form. This form states that going forward, the PF will be deducted based on the actual basic salary, and there will be no cap of 6500/-. I would like to know if there is a rule that allows for disregarding this cap. Additionally, going forward, will both the employer and employee contribute towards the PF at the same rate, i.e., 12% of the actual basic salary?

Thanks for your valuable opinions!

Shom

We refer the News of ESIC amendment in slab which was raised to a maximum slab of Rs. 15000 instead of earlier Rs. 10000 from 01.05.2010.

In this context I would like to have a suggestion to you to increase the PF slab also as the current PF slab is Rs. 6500 since long. Now due to the global financial situation it is very necessary to amend this slab because at the time of retirement at the age of 58 employee working in a private sector will get very nominal amount. It will be very hard for a person to run his family with PF amount and pension amount what he will get as per the current slab

As you are aware inflation rates are in upward trend and rates of all the necessary items has increased steeply. How can an average middle class Indian can fulfill his basic requirements from above PF amount when he retires.

I think government should change the policy and take some more effective actions keeping in mind long time inflation rate. You can understand the critical position of a person retiring at the age of 58 especially private sector employees.

Government should think about middle class family. “Poor are becoming poor day by day”

Expecting some amendments in PF slab in the new Fiscal Year.

I think you have misunderstood what HR said. If he said that it is included in your CTC, then it's OK. But if he has said that it is calculated on your CTC, then it is wrong. Therefore, clarify the same from the HR department.

Hi Lalit,

You can visit EPFO and fill in your code and employer code to know the solution. If you want to withdraw PF, you have to visit the local PF department to know the process, fill out the right form, get it signed by the HR department, and deposit the form at the PF department. Automatically, you will receive the amount from the PF department within 1 month of form submission.

Samsheen

Dear all,

The above expressions are correct. Dear Girish,

- You should see your appointment letter where the salary breakup is given.
- Also, see your pay slip, which someone has pointed out correctly.
- Though PF is restricted to Rs6500, some companies will extend the benefits even though it is more than 6500.
- PF is deducted at 12% of basic and DA (this allowance is optional, some companies may give or may not).
- There is no question of adding any admin expenses for this.
- CTC is a confused word; one should understand the same before accepting the pay package.

Hope all the points have been clarified.

Dr. Nagaraj

I totally agree with Mr. S.K. Singh; P.F. is calculated on the basic. Please check your payslip. I think your basic is Rs. 8300/-.

PF Calculation on Basic Salary

PF is calculated on the basic salary. As per government norms, the minimum PF contribution is 12% of the basic salary. The formula to calculate PF is Basic Salary * 12% = PF. However, if an employee wishes to contribute more towards PF, they can go up to 100% of their basic salary. To do this, they need to provide consent to their HR Department. Please verify this information with your HR team.

Thank you.

Hello everyone, as I am a fresher in HR, I wanted to know how to calculate all allowances in the salary structure. I want the exact percentage for basic, HRA, and Conveyance allowance. Kindly guide me on it.

Regards,
Priyanka

Hi Girish,

You don't have to break your head over this simple query. Though PF deduction is to be done on a maximum ceiling of 6500 (Basic+DA), some companies follow a procedure of deducting the PF at a flat rate of 12% on basic, irrespective of the maximum ceiling. So, it purely depends on the policy of the company. In fact, this is a benefit to the employee since some amount goes as savings and they also get tax benefits on the accumulations.

Regards, Ramakrishna Dirisala Human Resources Manager

Hi Priyanka,

First of all, I hope you understand the importance of devising the various salary components. The CTC comprises various components, viz. Basic, HRA, DA, Conveyance Allowance, Children Education Allowance, Medical Allowance, etc. Generally, it is known as FBP (Flexible Benefit Package), which is designed with the objective of having TAX savings from the salary. There is no standard way of devising the salary structure; different companies design the payroll as per their policy. However, a few basic things that we have to know are up to what extent the allowances are tax exempted. For example, medical allowance is exempted from TAX up to Rs 15,000 per annum, conveyance up to Rs 800 per month, etc. So accordingly, we have to design the other components too.

For your reference, you can find the Compensation guidelines as an attachment.

Everybody, correct me if I am wrong...!!!

Thanks and regards,

[QUOTE=Gvpcollege;1417724]Hi Seniors,

My salary is ₹19,838. For this amount, my company is deducting ₹996 as PF. How is it possible? My HR said that we are calculating on CTC. Can anyone please clarify my doubt, please?

Thanks & Regards,
Girish

Dear Girish,

The PF amount deducted from the employee is only 12% of his/her Basic. The Admin charges of 1.67% are the Employer's Contribution. The employee need not have to contribute for Admin Charges. The PF limit is ₹6,500 Basic. For this, 12% will be ₹780 only. If your basic is more than ₹6,500, the employee can decide if he/she wants to contribute 12% of that amount or only ₹780.

Please check your CTC, and if your basic is more than ₹6,500, you have the right to tell your employer that you want to contribute only ₹780.

The exact PF Calculation is as follows:

Employee Contribution: 12% of Basic if less than or equal to ₹6,500
Plus
Employer Contribution: 12% on your basic and another 1.67% on your basic for Admin Charges.

So, for example, if your basic is ₹6,500, you will have to contribute ₹780, and your employer will have to contribute ₹889. So, a total of ₹1,669 will go into your PF account every month.

Hope this will help you.

Thanks & Regards,
Malini Naveen
HR & Admin Executive

Dear All,

Can you please let me know if an employee will be given an option to choose from the below:

Either they can contribute 12% on 6500/-, i.e., Rs 780/-
or 12% on actual basic, i.e., 8300 X 12% = 996/- (if basic = 8300/-)

Then everyone would prefer to go for the 1st option, that 12% on 6500/-.

So does the company choose the option for the employee, or does the employee have the liberty to choose their own option?

Gayatri,

We cannot say that all are not the same. Few are very traditional in nature, and they love to save as much as they can. Moreover, if an employee chooses the 1st option, the employer is also liable to contribute the same amount to the PF Dept. The employee has the right to choose. But in another sense, it is almost the same for the employer as both contributions are adjusted in CTC.

My basic pay is currently restricted to Rs. 6,500. I am interested in increasing my basic pay to facilitate a higher contribution towards my PF. Thank you.

Hi Girish,

As per the PF Act, the employee's contribution is 12% of the basic salary, and the employer's contribution is 13.61%, including administrative charges. An employee can contribute more than 12% of the basic salary based on their interest, but there is a maximum ceiling amount for employers to contribute to PF, which is (Basic+DA) = 6500/-. Sometimes, an employer may set their ceiling amount at 7500/-, but that is based on the employer's interest.

As you mentioned, the employer is deducting 996 as PF. This indicates they are deducting your contribution. If they intend to deduct 996 as PF, your basic should be 8300/-. First, you can review your salary breakup. If you find that your basic is not 8300/-, ask your HR to explain the breakup.

Regards, Bhargav P

Hello Girish,

PF calculation is based on the basic salary. What is your basic salary? 12% of your basic is the PF deduction. If your basic is 8300, then 12% of it is 996.

Regards, Somashekara

Dear Sir,

Please provide me with any specific rate of HRA calculation that is reasonable under the rules and regulations. Although the standard rate of HRA calculation is 50% for metro cities and 40% for other cities, some companies or organizations calculate rates such as 20%, 25%, 26%, 30%, or even 80%. I am confused about how and on what basis they calculate these rates. Does it depend on the company and their nature for determining the HRA rate?

Please suggest me.

Thank you.

Dear Lalit,

When you leave a company, you can withdraw your PF amount after 2 months by filling out a PF withdrawal form. This form is readily available at any good stationery shop. Obtain the form, complete all the necessary details, and affix 2 revenue stamps. Have it signed by the authorized signatory of the company you left, who will fill in all the required information. Subsequently, visit the PF office in Wazirpur if you are in Delhi. Submit the form, and approximately 1 1/2 to 2 months later, you will receive a check deposited into your bank account.

Thank you.

Hi Members,

I totally disagree. As per my knowledge, PF calculation goes as below:

Employee PF = 12% of Actual Basic (regardless of wage ceiling of Rs. 6500/-)

Employer PF = 8.33% of Basic salary or maximum Rs. 541/- (Pension Fund)
3.67% of Basic salary (limited up to Rs. 6500/-, if more than Rs. 6500/-, then it will employee provident fund contribution - Rs. 541/-)
1.1% of Basic EPF Admin Charges, Contributed by Employer
0.5% of Basic EDLI account, Contributed by Employer
0.01% of Basic EDLI Admin Charges, Contributed by Employer

Employee's contribution of 12% goes to Provident Fund account and Employer's contribution of 13.61% goes as mentioned above. On successful completion of 6 months, the employee is eligible to claim Pension amount, i.e., 8.33% of the employer's share of contribution (Note: interest not applicable on Pension Fund).

Correct me if I am wrong.

Regards,
Asgar Ali

Hi all,

It has been customary for all employers across all industries, irrespective of fame and banner in society, to err or commit irreparable damages in remittance, entries, and returns. According to statistics, less than 15% of employers strictly follow compliance. What about the rest?

So, it's time to abolish such Social Security Acts and instead directly remit the EPF/ERPF into individuals' bank accounts under PF Recurring Deposit linked to the employee's salary account. The annual returns alone should be filed with the PF office. This would make the PF offices less crowded and hassle-free. Unless a new idea is activated, EPF has no purpose to serve, and as usual, a whopping unclaimed amount of money, to the tune of Rs.1200 crore, will lie in the safe vault of EPF without being utilized or approved by Parliament for other investments.

Regards,
Chandru

Dear Girish,

I agree with Manasi. To my knowledge, as all seniors have said, it's the same as what I heard on PF calculation. It depends on the company whether they use limited PF or unlimited PF calculations. In your company, it's unlimited PF calculation.

I hope your doubt got cleared by adding my point as well.

Dear Mr. Girish,

I believe there is a communication gap in this matter. I suspect they may have deducted PF as per the statute, i.e., 12% on the basic with a ceiling limit of Rs. 6500/-, and the remainder must have been deducted towards VPF. If this is the case, whatever they have deducted should be acceptable.

Please check with your employer promptly.

Regards,
Ramachandra D Joshi
Hospet, Karnataka.

Dear Girish,

First, you should provide your basic salary. If your basic is 8300/-, then your PF deduction will be at 12% on 8300, i.e., 996/- (your contribution), and PF from employer contribution will be 455/- (996-541). EPS deduction at 8.33% on 6500/- will be 541/- (from the employer).

TOTAL DEDUCTION AMOUNT: 1992/-

Thanks,
Kundan Suman

Hello Girish,

This is R.K. Murthy from essenvsp@yahoo.co.in. I agree with Mr. S.K. Singh, Senior Executive - HR - Eastern India. As explained, there is an option for PF deduction on actual basic, and Administration charges are for the employer only. Please contact your HR Department.

With regards,
R.K. Murthy
Essen & Co.,
Visakhapatnam.

I am Nishant Kumar Mishra, working as an Accounts Executive, and my company provides only the PF account number without issuing a PF slip. If we resign from our position, what is the procedure for withdrawing PF? Please clear my doubts.

Thanks with regards,
Nishant Kumar Mishra

Hi seniors, please tell me about withdrawing the PF. What will an employee get if they don't want to receive a pension? Will it be either 12% employee share + 12% employer share, or 12% employee share + 3.67% of employer PF contribution as 8.33% goes to the pension fund?

Thanks,
Samsheen

Dear Seniors, As per the current norms, is the PF contribution 12% or 12.5%?

Regards, Sanghamitra

Dear all, please tell me the TDS rate of calculation. Is there any different rate of TDS on salary based on Company nature? If so, please provide the rate for all natures of TDS for any establishment or company.

Mr. X works in a limited company and he has a CTC of 700000 (Basic - 30000, HRA - 23500, Conveyance - 13850, Children education allowances - 5650).

Based on my calculation, the taxable income is as follows:
700000 * 12 = 840000

There is no Tax on salary less than 160000 (age below 65 years).

Thus, 840000 - 160000 = 680000

Tax exemption on Rent is 11% of the total HRA received:
23500 * 11% = 2585

Therefore, 23500 - 2585 = 20915

Conveyance = 13850 - 800 (Tax exempt 800) = 13050

Children education allowance Rs. 200 (per 2 children - I am not sure, only a lump sum amount taken for consideration) for 2 children = 200 * 2 = 400

Education allowances = 5650

Total monthly salary = Basic + HRA + Conveyance:
= 30000 + 20915 + 13050 = 63965

Annual salary = 63965 * 12 = 767580

Since the Gross salary is above 500000, the Tax rate on the Total net income is 30%.

Monthly TDS deduction = 767580 * 30% / 12 = 15189

Please confirm if my calculations are correct. I would greatly appreciate anyone who can guide me to understand the TDS as it is very important to me.

Total PF rate of deduction is 25.61%. Employee share is 12% and Employer Share is 13.61%. Within the 13.61% employer share, 8.33% is for the Family Pension Fund, 1.1% for administrative charges, 0.05% for EDLI, and the remaining is the difference between the Employee's Share and the Pension Fund.

Dear Nishant,

You have to fill out Form 19 & 10C (10C is to be submitted when you have worked for more than six months in a company) two months after the date of resignation. There is no need for PF slips as they are only for confirmation of your PF account and amount, which is only in the employee's case. If your company has not submitted the Annual Return, please attach Form 3A (attested copy by the company).

Sir,

The maximum limit of Rs. 6500/- is something I am not able to understand, as all companies are deducting PF at 12% on basic, whatever the basic is. My basic is 11,000/- and the contribution is 1320/- at 12%. Then how is the maximum limit only 6500/-?

Clarification on Pension at Retirement

Can anybody please clarify what the pension is that we receive at the time of retirement? The attached article suggests that we should not consider the limit of $6,500.

Please clarify.

Thanks and Regards,
Murali Mohan Voleti
GVK, Hyderabad