Confused About PF Calculation: Should Special and Food Allowances Be Included?

Good Evening, seniors, kindly guide me in the calculation of PF. Should we take special allowance and food allowance into consideration for PF calculation if his salary breakup is as follows:

Salary Breakup

- Basic: 4000
- Medical: 1250
- Conveyance: 800
- CCA: 600
- Food Allowance: 500
- Special Allowance: 850

His PF contribution is - Rs. 4000 x 12% = 480/- or 5350 x 12% = 642/-, which one is correct? I have heard that MP has declared we need to take Special Allowance also for PF calculation from now on, is it true?

Thanks & Regards,
Sheela

According to me, the first one is correct, which is 480, because PF is deducted based on the basic salary of 4000 and does not include special allowances and food expenses, as far as I know. Please let me know if you need any further clarification or assistance.

Thank you, but I have heard that the Madhya Pradesh PF officer declared that from November, we need to include the Special Allowance in Basic for PF calculation. Is it true?

Regards.

PF Deduction Clarification

Basically, PF is deducted on Basic + Special Allowance (referred to as DA) as per government rules and regulations. Therefore, discuss this with your friend as well as your senior; they will suggest the same.

Regards,
Chetan Chavan

PF Contribution Calculation

In my company, we calculate as Basic + D.A. (Special Allowance) x 12% = P.F. Contribution by Employee. Basic + D.A. (Special Allowance) x 13.61% = P.F. Contribution by Employer.

Clarification on PF Calculation and Allowances

Referring to your query, as per Sec. 2(b) of the EPF and MP Act, 1952, the term "wages" excludes:

• Cash value of any food concession.

• Cash payment by whatever name called, paid on account of a rise in the cost of living, HRA, OT, Bonus, etc.

• Any presents made by the employer.

From this context, to answer your query: You do not need to include the Food Allowance. Secondly, there is no clarity regarding the Special Allowance. You should clearly define the purpose for which this special allowance is paid. If defined and justifiable before PF Enforcement, it does not attract PF contribution. If not, it comes under the purview of Basic wages and attracts PF contribution since it is not defined.

To be precise: Wages for PF would be Basic + DA + VDA + any other allowance which is not defined.

Regards.

Regarding your query, please refer to Sec 2(b) and also Sec 6 of the EPF & Miscellaneous Provisions Act of 1952. The contributions on PF should be calculated based on the Basic Salary and D.A or any other retaining allowance. Other allowances should not be considered as part of the wage for the purpose of contribution under the said act.

Regards,
V R RAO PULIPAKA

As I know, we have to consider only the basics for PF calculation. ₹480 is the correct calculation.

EPF Deduction Clarification

Basically, the deduction of EPF is done on basic salary + DA/VDA + food conc. (if any). As far as the special allowance is concerned, it will be treated as an undefined allowance according to the Payment of Wages Act. Terms like special allowance and other allowances are not included in the definition of the same. Therefore, the Commissionerate of Labour, EPF & various other departments consider those allowances as omitted wages, which should be treated at par with basic wages. Consequently, the contribution of EPF on the same will be justified.

While this may not have been the case all the time, during EPF inspections, such allowances will be considered for the deduction of EPF.

Thanks & regards,

Sumit Kumar Saxena

[Phone Number Removed For Privacy Reasons]

Adding to your comment, if the special allowances are specifically paid to defray the special expenditure incurred by an employee due to the nature of the work undertaken or assigned by the employer, it would not attract PF as it is not the usual allowance paid to all. However, some employers have the practice of avoiding PF contributions by keeping the Basic low. For this purpose, they term it as Special Allowance, Supplementary Allowance, etc.

Hi, I am new to Indian employment policies and need information on PF and gratuity. Can someone recommend an official site that can provide me with this information? Thanks in advance.