Understanding PF Deductions: What Are the Legal Requirements for Salaries Above Rs 6500?

Clarification on PF Deductions for Salaries Above Rs 6500

I too would like to clarify a few points related to PF:

• Exemption from PF for Salaries Above Rs 6500

For those employees whose basic salary is more than Rs 6500, some companies exempt them from PF. What should be the legal procedure for this? Even if an employee opts for PF, they may not be receiving the same now.

• PF Deductions for Salaries Above Rs 6500

Secondly, for any employees whose basic salary is more than Rs 6500 (e.g., Rs 10000), what should be the deduction? Please see below the deduction and indicate which is correct:

Basic -- Rs 10000

A) PF deducted from the employee: Rs 1200
PF deducted from the employer: Rs 1200 (of which Rs 541 goes to pension and the rest to the employee’s account)

OR

A) PF deducted from the employee: Rs 780
PF deducted from the employer: Rs 780

Please provide clarification.

• Employer's Contribution to PF Charges

As per the act, I understand that 1.61% of the PF charges are to be covered by the employer. Should the same percentage be considered when calculating the CTC or not?

• Legal Requirement for PF Deductions

If an employee's basic salary is above Rs 6500, is there a legal requirement for the company to deduct only Rs 780 from their salary as PF deduction and not the original amount?

Please reply soon.

Regards,
Daya

There is nothing in the Act which says that the employer should restrict contributions to Rs 6500, but it is optional for the employer. If they are willing to contribute on a higher salary, they can do so. However, the Pension Fund contribution of 8.33% shall be calculated on a maximum salary of Rs 6500. That means if the employer is contributing Rs 1200 (12% of Rs 10000), then they can remit Rs 541 to the Pension fund and the balance, Rs 659, shall be remitted to the Provident fund along with the employee's share of Rs 1200.

Coverage and Eligibility

Regarding coverage, it is mandatory that every person whose salary at the time of joining is not more than Rs 6500 should be covered. That means, if the salary of the employee at the time of joining is more than Rs 6500, they may be excluded, provided they have never been a member of the PF or if they had withdrawn their PF benefits or are receiving a PF Pension. Here also, the company policy with regard to this social security cover is important, and if the employer is ready to extend the cover to all irrespective of salary, they can do so. An employee once covered by the Act will continue to be covered irrespective of any increase in their salary.

1.16% is the share of the Government towards the Pension fund of the member.

Regards,
Madhu.T.K

Dear Daya, In addition to Madhu, I would like to kindly request you to fill out Form-11 for excluded employees and send it to the local PF office.

Regards, Ratikanta Rath

Dear Daya,

Greetings for the day. Madhu is right that there is no hard and fast rule to restrict the EPF on Rs. 6500/-. Rs. 6500/- is the ceiling for EPS/EDLI, not for EPF. EPF deduction should be done on basic + DA/VDA + food conc. (if any).

Thanks & regards,

Sumit Kumar Saxena.

Exemptions Under EPF MISC Provisions 1952 Rules

Regarding your query on the above subject, the following points should be observed for exemptions for both employees and employers under the provisions of EPF MISC Provisions 1952 Rules.

• Exempted Employee

At the time of inception, for individuals whose wages/salaries are above Rs. 6,500 per month, there is no requirement to continue as a member under the PF Act 1952 Rules. You can exempt the employee from the PF Act (Refer Sec 43).

• Exempted Establishments

Establishments must establish a trust in accordance with the guidelines of PRFO/CPFO to provide additional benefits of the existing schemes under Sec.17(1) and to seek a Relaxation order for exemption under the EDLI Scheme of Sec 17(1) C of the EPF Act.

Regards,
V. R. RAO PULIPAKA

Procedure for Withdrawing PF Accumulations

Regarding your query about the procedure for withdrawing your accumulations from PF, please note the following points carefully:

• Withdrawal is permitted when leaving the organization due to resignation, retirement, death, permanent disability, settling abroad, or if a female employee chooses not to continue in service after marriage, etc.

• If an employee resigns, a 60-day grace period is required to withdraw the amount held by EPFO. In other cases, as mentioned above, a grace period is not necessary.

• To process the withdrawal, you must submit Form 19 & 10C along with copies of Form 5 & 10, Form 3A showing current year contribution details, and a photocopy of the first page of your SB Account Pass Book or an unused cheque to the relevant office.

• EPFO will deposit the amount directly into your bank account within 30 days if all the necessary documents are provided promptly.

Regards,
V R RAO PULIPAKA

Question: If my basic salary is Rs. 10,000, can I opt for PF deduction on Rs. 6,500 only of my basic salary? What would be my subscription? Please tell me in accordance with the law.

Mr. Madhu mentioned in the last paragraph that 1.16% is the share of the government pension fund. It's wrong; I think it is a typical error. 1.61% is correct.

Regards,
Dharani Dharan V
Manager HR
Unipel Logistics

Employee Contribution and Employer Contribution Details

Employee Contribution is Rs. 780/- if INR 6500/- as per government rule. Employer Contribution is 13.61% (Employer 8.33%, Employer Pension fund 3.67% = Total 12%, Admin charges 1.61%).

FYI,
PI
Dharani Dharan V

Clarification on Pension Fund Contribution

What I have stated about the pension fund contribution by the Central Government is correct, I believe. I don't know whether the Government has made any amendment today. The discussed share of 1.61% is not a contribution by the employer but a payment by the employer towards the administration of funds, namely Provident Fund and Employees' Deposit Linked Insurance. Contribution should be distinguished from payments, and the latter are expenses not forming part of wages. I agree that administration charges total 1.61% of PF and EDLI qualifying wages.

Please note that what I have stated is that the Government will contribute at 1.16% of wages towards employees' Pension Fund. For details, please refer to the Pension Scheme.

Regards,
Madhu.T.K

Thank you very much for your quick and valuable suggestion, especially to Mr. Madhu. While going through the whole message, one clarification remains unclear to me. I would like all of you to focus on it and provide me with your suggestions.

Clarification Needed on Administrative Charge

The point is as follows:

We all know that 1.61% is the administrative charge borne by the employer for the government. My question is whether the employee needs to bear this amount, and if the same calculation needs to be shown in the CTC, or if this part should be completely waived in the CTC as it is borne by the company.

Regards,
Daya

I hope your apprehension is whether we should include the administration charges of 1.61% in the CTC or not. In my opinion, it should not be included, even though it is a payment made by or cost incurred by the employer for the employee. If it is to be shown as a cost to the company, we will have to include costs like the costs of newspapers placed in the restroom, drinking water, electricity bills, welfare costs, and so on, because all these are incurred for the employees and to retain their labor.

Regards,
Madhu.T.K

Understanding the Structure of PF

Can anyone tell me the total structure of PF? What type of formalities need to be done, and how should one maintain it?

Regards,
Rahul

I am working for a Thailand MNC, Charoen Pokphand India Pvt Limited. I need the details of Provident Fund applicability and other clarifications such as withdrawal of PF and pension fund. Kindly share the data available with you.

Regards,
AVGN Vara Prasad

Dear Seniors, I am working for a Thailand MNC, Charoen Pokphand India Pvt Limited. I need the details of Provident Fund applicability and other clarifications such as withdrawal of PF and pension fund, in respect of international workers. Kindly share the data available with you.

Regards, AVGN Vara Prasad.

PF Contribution Structure and Required Forms

Please guide me on the PF contribution structure and the various forms required for PF contributions, withdrawals, and loans on PF.

Regards,
Rashi Agrawal

Kindly go through the EPF India website, where all your queries will be resolved. If you still face any problems, feel free to ask.

Regards,
Ratikanta Rath

I did not understand whether point #4 below has been answered. Senior members, please help me understand.

1. Is it mandatory for an organization to contribute an amount of 12% of the mentioned basic salary towards PF, OR

2. Can the organization choose to pay an amount not exceeding Rs. 780/- towards PF? In both the above cases, the basic salary of an employee is greater than Rs. 10,000/month.

Regards,

It is not necessary that the employer should contribute 12% of the full basic salary but can restrict it to 12% of Rs 6500 (i.e., Rs 780).

Madhu.T.K