Understanding PF Calculation on Basic 20000 and Employer-Employee Contributions: Insights and Guidel

My friend's company has started giving them PF recently. However, the company is calculating it on a basic of 20000 at 12%. This means the employee is giving 12%, and the employer would also give 12%, which is the same on 20000 or 6500. Is there any clause in which the company can pay on 6500, but at the same time, if the employee is paying on basic 20000?

What would be the minimum amount a company has to pay PF on basic 20000 if the company is giving less than 2400 at 12% of the basic? Is this justified under any clause? Can the company give less?

What would be the PF given on 20000 under various clauses?

It is always better to keep the percentage of PF equal for the employer and employee. Different rates of PF contributions are possible in the case of voluntary PF contribution. In this scenario, the company can contribute PF only on Rs. 6500/-, and the employee's contribution will be based on the actual basic salary. However, when filing the annual returns, it creates a lot of arithmetic problems. It is better to contribute 12% on Rs. 20000/-.

Dear Friend,

As per the PF Act, we have to pay for the ceiling amount of Rs. 6,500.00 only and we have to deduct PF only for Rs. 6,500.00. If the management decides to give more contribution to PF, it is up to the company policy. But as per the Act, we have to pay Rs. 6,500.00.

If the employee wants to contribute more to the PF, he can do so, but he has to get permission from his employer, and the same needs to be submitted to the PF authorities for information. Otherwise, during inspection periods, they will create unnecessary problems. It is not necessary for the management to give the same percentage of contribution as the employee. It is purely the willingness of the employer and employee. But as per the act, the ceiling is Rs. 6,500.00.

Regards,
Alphonse
9443625359

My dear friend,

When an employee's contribution is 12%, then the employer can also give 12%. When an employee contributes based on $6500, the employer also contributes based on $6500.

Regards,
Dattatraya

Kindly refer to the Payment of Bonus Act 1965 Sec. 31A, which has no limits on basic pay but does have a limit on the bonus, up to 20% of the total pay.

Thank you.

Dear All,

The PF ceiling limit is Rs. 6,500/- For calculation purposes, you need to calculate Pension (8.33%) on Rs. 6,500/-, i.e., 541/-, and the remainder will go to the PF fund (3.67% or the difference) from the employer's contribution only. If the basic is Rs. 10,000/-, then Employee deduction is Rs. 1,200/- (12% of Basic). The Employer contributes Rs. 541/- (EPS - 8.33% of 6,500/-) and the remainder, i.e., Rs. 1,200-541, i.e., Rs. 659/-, goes to the PF fund.

Regards,
Dinesh

Dear All,

I have read the different views. The fact is that the employee can contribute based on the salary he is earning (in this case, it is 20,000). The employer can restrict his contribution for the salary up to 6,500 (which works out to 780/-, out of which 541/- will be Family Pension and 239/- will be Employer's Provident Fund). The employer can contribute the full amount if he desires, but it is not compulsory. It is not correct that the employee has to obtain permission from the employer to contribute for more than 6,500/- salary.

Regards,
Vilas

Dear friend,

Below 6500/-, we can calculate 3.67% and 8.33%. Above 6500/-, pension is 541/- and PF is 239/-, only from the employer. Employees are required to share 12%.

Okay, bye.

Thanks & regards,
E. Ramesh
Senior Personnel Officer
Chittoor

Dear friend,

Above 6500/- salary - PF is not compulsory. It is purely based on the willingness of both the employee and the employer. Once a person enters into the PF Act, even if they earn above 6500/-, they cannot opt-out from the PF Act as long as they continue working with the same management.

PF contributions can be restricted to 6500 [basic + DA], with 12% of the PF amounting to 780/-. While an employee can suggest management deduct more than 780/-, there is no obligation for the management to match that contribution. The maximum contribution required from the management is 780/-.

That's it.

Goodbye,
S. Gopal