EPF Ceiling Limit
The EPF ceiling limit is fixed at ₹6,500. The employer is liable to pay contributions only on ₹6,500, regardless of the basic salary.
Calculation of Employees' Provident Fund
Let us calculate the contribution of an employee receiving a basic salary of ₹3,500.
| Contribution Towards | Calculation | Amount |
|---------------------------|--------------|--------|
| EPF Employees' share | 3500 x 12% | 420 |
| EPS Employer's share | 3500 x 8.33% | 292 |
| EPF Employer's share | 3500 x 3.67% | 128 |
| EDLI charges | 3500 x 0.5% | 18 |
| EPF Admin charges | 3500 x 1.1% | 39 |
| EDLI Admin charges | 3500 x 0.01% | 0.35 (rounded up to ₹1) |
The calculation above is straightforward with no complications.
Calculation of EPF for employees receiving a basic salary exceeding the ceiling limit of ₹6,500 involves different methods based on the company's payroll policy.
Consider an employee with a basic salary of ₹7,500. The calculation methods are as follows, ensuring EPS is calculated only up to ₹6,500 with a maximum amount of ₹541.00.
Method-1: If your company considers the total basic salary above the fixed limit of ₹6,500 for PF calculation.
| Contribution Towards | Calculation | Amount |
|---------------------------|--------------------|--------|
| EPF Employees' share | 7500 x 12% | 900 |
| EPS Employer's share | 6500 x 8.33% | 541 |
| EPF Employer's share | 7500 x 12% (-) 541 | 359 |
| EDLI charges | 7500 x 0.5% | 38 |
| EPF Admin charges | 7500 x 1.1% | 83 |
| EDLI Admin charges | 7500 x 0.01% | 0.75 (rounded up to ₹1) |
In Method-1, the employer contribution of EPS and EPF is explained. The employer contribution on the total basic salary of ₹7,500, which is 12%, amounts to ₹900.00. The EPS share is fixed at ₹541.00, with the balance of ₹359.00 going to the EPF account. The 3.67% does not need consideration here.
Method-2: Some companies calculate the employee share based on ₹7,500 and the employer share on the upper limit of ₹6,500.
| Contribution Towards | Calculation | Amount |
|---------------------------|--------------|--------|
| EPF Employees' share | 7500 x 12% | 900 |
| EPS Employer's share | 6500 x 8.33% | 541 |
| EPF Employer's share | 6500 x 3.67% | 239 |
| EDLI charges | 6500 x 0.5% | 33 |
| EPF Admin charges | 6500 x 1.1% | 72 |
| EDLI Admin charges | 6500 x 0.01% | 0.65 (rounded up to ₹1) |
Method-3: Some calculate both employer and employee shares on ₹6,500 despite a higher basic salary.
| Contribution Towards | Calculation | Amount |
|---------------------------|--------------|--------|
| EPF Employees' share | 6500 x 12% | 780 |
| EPS Employer's share | 6500 x 8.33% | 541 |
| EPF Employer's share | 6500 x 3.67% | 239 |
| EDLI charges | 6500 x 0.5% | 33 |
| EPF Admin charges | 6500 x 1.1% | 72 |
| EDLI Admin charges | 6500 x 0.01% | 0.65 (rounded up to ₹1) |
Detailed Accounts under PF
There are five accounts:
1) AC 1 (PF)
- (BA+DA) 12% → Employee share
- (BA+DA) 3.67% → Employer share
2) AC 10 (Pension)
- (BA+DA) 8.33% → Employer share
3) AC 2 (Administration Charges)
- (BA+DA) 1.1% → Employer share
4) AC 21 (EDLI - Employees' Deposit Linked Insurance)
- (BA+DA) 0.5% → Employer share
5) AC 22 (EDLI Administration charges)
- (BA+DA) 0.01% → Employer share
Regards,
Boopathi.