Can We Legally Cap an Employee's PF Contribution for a Higher Take-Home Salary?

One of our employees' PF is being deducted based on his actual salary, i.e., ₹30,000.00 (₹30,000 x 12% = ₹3,600). He is requesting to change the contribution and cap it at ₹6,500 (₹6,500 x 12% = ₹780) so that he can receive a higher take-home salary.

Can this be possible? Is there any rule or section in the PF Act regarding this?

Before deducting more than the statutory limit of deductions, you must first inform your local Regional PF office. If not, you will proceed as is. If you need to revert to the actual PF amount, i.e., ₹6,500/-, you should also request permission with an explanation letter and obtain approval. This is important because it may cause problems during the preparation of Annual Slips.

Regards,
PBS KUMAR

It is not advisable to reduce PF contribution. Section 12 of the EPF Act also supports that the employer should not reduce wages, whether expressly or implied in terms of employment.

Regards,
Rahul Bagale

PF cannot be reduced under any circumstances; it can only be increased. That is the rule. So just continue with the current subscription.

Understanding PF Contribution Limits

PF always contributes to the basic salary and not the gross. If you can reduce his/her basic salary, the PF amount can be reduced. You can balance his salary by paying the remainder as other/special allowance. However, inform him that PF is not a loss; it is saving for our retirement. If he reduces his PF contribution, the employer's contribution is also reduced. If he pays only ₹780 as PF, his employer will also contribute ₹780 instead of ₹3,600.

One of our employees has PF deducted based on his actual salary of ₹30,000.00 (₹30,000 x 12% = ₹3,600). He is requesting to change the contribution to be bound by ₹6,500 (₹6,500 x 12% = ₹780) so that he can have a higher take-home salary. Can this be possible? Is there any rule or section in the PF Act?

Let me know one thing - is the PF Employer Contribution deducted from your employees, or does the employer pay their contribution? If they indeed pay their contribution, then that's good. If not, ask them to write a letter to the PF office stating that they are not willing to go with a 12% deduction from the Basic. Request them to deduct based on the ₹6,500 wage ceiling. If you present this explanation letter in the PF Office, they will accept it. So, starting from next month, you can deduct only ₹780.

Regards,
Vinay Kumar

I think the deduction of PF at more than the statutory rate requires the permission of the employee. So, in this case, the employee is, in effect, withdrawing his permission, which I think should be allowed (at least in principle). However, the PF commissioner will look at this with suspicion, so you will need to document the same.

In addition, this will need to be consistent across the company. You cannot say that for this person, I will deduct at the statutory rate and for others on gross salary.

Dear Mr. Bhuwan, if you have made any single remittance of ₹30,000.00, then you cannot reduce the same. PF authorities will not allow this. Please check other people's contributions as it should not be discriminatory with reference to other employees, according to "Article 14" of the Indian Constitution.

Thank you.

EPF Contribution on Salaries Above Rs. 6500

First of all, the EPF & MP Act of 1952 allows for a contribution of 12% on the basic pay, with a ceiling of Rs. 6500/- per month. The question then arises regarding salaries exceeding this amount. If an employee wishes to contribute on all salary amounts above Rs. 6500, it is acceptable on their part, but this option is not mandatory for the employer. In a scenario where an employee does not wish to contribute more than Rs. 6500 willingly, there is no contravention of any rule in the said act on either the employee's or employer's side.

You only have to wait until the end of the accounting year, i.e., up to February. You can then adjust the slab starting from the salary of March itself.

Regards,
KIRAN KALE.

You have already deducted PF from his actual salary of Rs 30,000.00. So the employer can't reduce their salary. However, you can reduce the salary up to Rs 6,500 for new employees whose PF will be deducted.

With regards,
Pradip Saha