Confused About PF Deductions? Need Help with Salary Basis and Contract Workers!

Hi Dudes, please suggest to me. Now, I am facing a problem with PF payment. On what basis should the PF amount be deducted? Should it be paid on the gross salary or on the basic + DA? And is it compulsory to enroll everyone in PF? Does the company have to contribute to the contract workers too? Please give me some ideas, friends!

Dear Brindha and Shraddha, Also consider the below in calculating PF:

PF Calculation Cases

- Basic = 9500
- Case 1: PF = 12% x 6500 (Legally Correct)
- Case 2: PF = 12% x 9500 (Employee can choose)

In addition to 12%, we need to pay 1.61% towards administration charge as an employer. Detailed breakup is as below:

Breakdown of PF Contributions

- Employee
- A/c No 1: PF contribution Account 12
- Employer
- A/c No 1: PF contribution Account 3.67
- A/c No 2: PF Admin account 1.10
- A/c No 10: EPS account 8.33
- A/c No 21: EDLIS account 0.50
- A/c No 22: EDLIS admin account 0.01

Total: 12 + 13.61

Truly Yours,
Kumar H P

Kumar has explained very clearly about PF deductions. The employer's PF contribution may vary from 12% to 13.61% depending on the size and domain of the organization. Employers have to pay administrative charges.

Thank you so much for sharing your knowledge. It's really useful for me. However, now I am facing a situation where the provident fund (PF) mandates that we have to pay PF on the gross salary. How can I address this legally?

Thank you.

Employee contribution (12%) not only includes basic salary but also Dearness Allowance, variable Dearness Allowance, retaining allowance, cash value of food concession, and leave encashment. However, most organizations calculate contributions based only on the basic salary.

PF Payment Guidelines

PF is always paid on Basic + DA.

PF has to be mandatorily paid to all employees drawing a basic salary of less than Rs. 6500. An employee has to contribute 12% of Basic + DA, and the employer has to pay 12% on the actual basic plus 1.61% (admin charges) on the actual basic.

However, if employees are drawing a basic salary above Rs. 6500, then the employer has the option to provide PF benefits only if they wish to do so. The employer can deny PF benefits to all employees who have a basic salary above Rs. 6500, making no deduction from the employee and also making no contribution. Alternatively, the employer can allow PF deduction only from the employee (12%) and opt not to pay their contribution of 12%, but they will have to pay 1.61% of the actual basic towards admin charges. The employer can also choose to deduct 12% from the employee's basic and also contribute their share of 12% either on the minimum basic of Rs. 6500 or on the actual basic of the employee, along with a 1.61% admin charge on the actual basic.

If you still don't get it or if you are still confused, get back to me. Good luck then.

Mr. Kumar is correct. Follow him. P.F. is calculated based on Basic + D.A. If you have any doubts, just verify P.L. Malik Labour Laws.

Thank you very much. Now, please help me understand how to pay the EDLIS amount. Until now, the company was paying as an exempted concern. Now, I have learned that the accounts department is handling the EDLIS amount. How should I proceed with producing the monthly PF challan? I am so confused. Please suggest to me!

Regards,

Thanks for your explanation. It helped me a lot and paved the way for clearing many doubts. Now, please explain to me how to produce the challan. Until now, our concern was paying the monthly PF amount as an exempted company. Now, I have come to know that from the account, they are paying the EDLIS amount on a yearly basis. So, how should I react to this situation? How should I submit the forthcoming challans?

Understanding EDLI and PF Contributions

EDLI stands for Employee Deposit Linked Insurance.

As mentioned before, the employer's share includes 12% plus 1.61% of administrative charges. This administrative charge, which is always paid on the actual basic, is divided into three parts: 1.1% of 1.61% is for actual administrative charges for EPF and is deposited into account 2, 0.5% of 1.61% is the contribution for EDLI and is deposited into account 21, and the remaining 0.01% of 1.61% is for administrative charges for EDLI and is deposited into account 22.

Apart from the above three accounts, there are two more accounts: the employer contribution of 3.67% plus the employee contribution of 12% towards EPF is deposited into account 1, and the employer contribution of 8.33% towards EPS is deposited into account 10.

In the PF challan, there are different spaces provided for all the above accounts. You need to make the calculations as mentioned above and fill them into the form, submitting the same to the specified SBI branch before the 15th of every month. Failing to do so, you will be liable to pay a fine of 32% per month of default.

Hope this helps. All the best.