Is My Friend's Salary Deduction for PF Correct? Seeking Clarity on Double Deductions

Dear Seniors,

I want to ask a query regarding PF deduction. One of my friends is working in a pharma company. His salary details are as follows:

- Basic: 2500
- HRA: 1450
- Education Allowance: 400
- Special Allowance: 3050
- Conveyance: 800
- CCA: 250
- Medical Allowance: 1250

Monthly Total and Deductions

- Monthly Total (A): 9700
- PF: 300
- Monthly Total (B): 10000
- Gross Total (A+B): 12000
- Daily Allowance: 155

I think he should get 9700/- in hand, but he receives 9400/-. Is it the right deduction or not?

When he asked his RSM, he was told that it's a PF deduction. But PF deduction should be from both sides, i.e., employee and employer, with an equal deduction.

Please suggest.

It is totally wrong and illegal. A company cannot deduct both contributions from an employee's salary.

If the salary is mentioned as CTC, the employer's PF amount will only be given in the offer letter. The employee's PF amount will not be shown, and it will be deducted from the salary. So, it is logical. CTC means the cost to the company, which is given by the company; employee deductions are not to be given. There will also be PT.

Regards,
Swarna

Dear Rani,

As Ms. Swarna advised, this is logical only. When we calculate CTC, the co-contribution would be considered. In some cases, if the company has superannuation benefits, they would also be considered. Moreover, PF is a savings for your friend. Whenever he resigns, he can withdraw the amount or transfer it.

Regards,
Raghav

CTC and PF Contribution Clarification

The CTC to the company also includes Rs. 300 contributed by the company towards the company's share of PF. Thus, the total CTC to the company becomes Rs. 10,000.

After deducting Rs. 300 each as employees' and employers' contributions to PF, the net payment of the salary is correctly paid as Rs. 9,400.

Regards,
TR Chhabria

I don't think there is anything wrong with it. His monthly gross salary is Rs. 9700, and after deducting Rs. 300, they have paid Rs. 9400. In fact, they should have deducted the ESI employee contribution of 1.75% of the gross salary. Please check.

The company has shown Rs. 120000 as CTC (it includes the Employer PF contribution also).

If you have any further queries, please let me know.

You are saying that PF deduction is one thing, and CTC is another. I understand about PF deduction. But please let me explain about CTC.

Thanks,
Bandna Rani

I would like to provide further insight in this regard. As mentioned by Shiva, I completely agree that with a monthly salary of Rs.10,000, there should be a mandatory contribution of ESIC (i.e., 1.75% from the employee's side and 4.75% from the employer's side) and PF (i.e., 12% from the employee's side and 13.61% from the employer's side). This will add up in the gross cost to the company. However, if we look at this salary structure provided by Rani, the monthly gross is Rs.10,000 [i.e., Rs.9700 (in hand) + Rs.300 (employee contribution of PF)], and subsequently, the annual amount is Rs.1,20,000. So, it is very evident that they have not included any other contribution amount here in this annual amount.

Hence, as per the above salary structure, the person should receive Rs.9700 as in-hand salary, and other deductions are apart from this salary. Although the annual gross CTC here would be Rs.1,43,400. The break-up of the salary is given below:

Salary Breakdown

Basic: Rs.2500
HRA: Rs.1450
Education Allowance: Rs.400
Special Allowance: Rs.3050
Conveyance: Rs.800
CCA: Rs.250
Medical Allowance: Rs.1250

Deductions

PF (Employee): Rs.720
ESIC (Employee): Rs.170

Total (A) Monthly Salary: Rs.10590
Total In-Hand Salary [A - (PF + ESIC)]: Rs.9700

Employer's Contribution

PF (Employer): Rs.720
ESIC (Employer): Rs.640

Total Gross Annual CTC: Rs.143400

This is a standard salary structure format. It might differ from company to company. I have tried my best to provide correct information. Any suggestions or corrections are most welcomed.

Thanks,
Regards

There is no error in his basic salary, which is Rs. 2500. Therefore, the deducted amount for PF is correct. The PF amount is deducted based on the total of Basic + DA, calculated as follows:

- 12% from the employee's side (2500 * 12/100 = 300)
- 12% from the company's side (2500 * 12/100 = 300)

This means that a total of Rs. 600 will be deposited into his PF account monthly.

Thank you.

Dear Seniors, I want to ask a query regarding PF deduction. One of my friends is working in a pharma company. His salary details are as follows:

Basic: 2500
HRA: 1450
Education Allowance: 400
Special Allowance: 3050
Conveyance: 800
CCA: 250
Medical Allowance: 1250

Monthly Total (A): 9700
PF: 300
Monthly Total (B): 10000
Gross Total (A+B): 120000
Daily Allowance: 155

I think he should get 9700/- in hand, but he gets 9400/-. Is it the right deduction or not? When he asked his RSM, he was told that it's a PF deduction. But PF deduction is from both sides, employee & employer, with equal deduction. Please suggest.

Consideration of Professional Tax

Dear, kindly consider Professional Tax of Rs. 175/- per month for deduction. Also, check the policy of Daily Allowance. Kindly study the labor laws deeply.

Regards.

Dear Zareen, Sorry for disturbing you again. I want to know how you calculated the employee PF as 720 and the employer ESIC as 640. Please explain in detail.

Understanding Salary Components and PF Deductions

I am providing below two tables showing:

1) Pay Pocket
2) CTC (Cost to the Company)

Any company, while recruiting an incumbent, will disclose the cost to the company, and the candidate has to verify the gross pay with them.

1) Salary in Pay Pocket:

- Basic: 2500
- HRA: 1450
- Education Allowance: 400
- Special Allowance: 3050
- Conveyance Allowance: 800
- CCA: 250
- Medical Allowance: 1250

Total Gross: 9700

Deductions from Salary:

- PF @ 12% on Basic only: 300

Net pay to the Employee: 9400 (Gross - deductions)

2) CTC (Cost to the Company):

- Basic: 2500
- HRA: 1450
- Education Allowance: 400
- Special Allowance: 3050
- Conveyance Allowance: 800
- CCA: 250
- Medical Allowance: 1250

Total Gross: 9700

- PF Management contribution: 300

CTC total: 10000

By examining both tables, you can understand that there is no error in the deduction of PF from the salary. The PF deducted from Basic in this case is correct. Please note that his salary is Rs. 9700 only (Basic 2500 + Allowances 7200) and NOT 10000.

Just for your information, Rs. 300 deducted from his salary will go to his PF account, and another Rs. 300 (equal amount) paid by the management as a management contribution will go to his pension account.

In his PF account, his contribution alone will accumulate with interest, and the management's contribution will NOT be added to his account.

Regards,
V. Selvaraj
Senior Executive (HR)

There is a correction in the PF Calculation. Please find the calculations:

PF Calculation

PF is calculated on Basic (i.e., Basic + DA). *Note: This might differ in the salary structure from company to company. The employer's contribution is 13.61% = 12% + 1.61% (PF Admin Charges) of Basic Salary. Though 1.61% does not include in Employee Cost to Company. Employer's PF Contribution here: Basic = 2500 + 1450 = 3950. Contribution = 12% of 3950 = Rs. 474.

ESIC Contribution

ESIC is calculated on a Monthly Salary of Rs. 9700. Employer's ESIC Contribution is 4.75% of the Monthly in-hand Salary. Contribution = 4.75% of 9700 = Rs. 640.

As per my knowledge, there is no Professional Tax applicable for Delhi state. Hope the clarification required is resolved. I would appreciate valuable inputs if there is any misunderstanding or any correction required.

Regards,

It is completely right because the deduction is done only on a basis, and the PF amount is deducted from Total A.

Best Regards,
Lakhan Trivedi
[Phone Number Removed For Privacy Reasons]

Thank you, everyone, for your replies. Now I'm able to understand the difference, and I will tell him about these deductions.

Thanks,
Bandna Rani

Going by the facts given by you, there is nothing wrong with the calculations and payment of your friend's salary.

- 12% of the basic is the employee's contribution, and the same amount is contributed by the employer. It is paid to PF authorities. Obviously, the employee's contribution is deducted from the salary, but the employer will not keep it; instead, it will be paid to PF authorities.

- If, in case you are not an HR Professional, your doubt is understandable. But if you are an HR Professional, better buckle up and update your basic knowledge.

Regards.

Please let us know if your friend's gross salary is Rs. 9700 or Rs. 10,000. If your friend's gross is Rs. 10,000, then according to the salary breakup, his basic salary is Rs. 2500, so Rs. 300 should be deducted from his salary for PF, and he gets Rs. 9700 in hand.

In the other case, if your friend's gross salary is Rs. 9700, then according to the salary breakup, his basic salary is Rs. 2500, so Rs. 300 should be deducted from his salary for PF, and he gets Rs. 9400 in hand.

Hope it's clear to you.

Regards,
Babu

Dear Seniors,

I want to ask a query regarding PF deduction. One employee has a basic salary of 10,000 and wants to contribute 10,000 towards PF. If the same is possible, please inform us about the contribution amount in PF account no-01, A/C-02, A/C-10, and A/C-22.

With regards,
Vivek Singh