Understanding PF/ESIC Deductions: Can Anyone Explain the Rules and Regulations?

Can anybody tell me the rules and regulations of PF/ESIC deduction?

Provident Fund (PF) and Employee State Insurance (ESI) Deductions

PF is deducted from employees' salary every month at 12% of the basic salary if their basic salary is up to Rs. 6500. The employer needs to pay their share of 12% separately every month through a challan.

ESI is deducted at 1.75% of the gross monthly salary of the employee. Its limit is Rs. 15000. The employer needs to pay their share of 4.75% separately every month through a challan.

Thank you.

Please check the EPFO site for EPF procedures. You can also download the Act and Rules from this site. Additionally, visit the ESIC Home Page for ESI procedures, where you can download the ESI Act.

Thank you.

Once we paid the PF amount more than the ceiling amount (Rs. 6,500/-), is it possible to reduce it to the ceiling of Rs. 6,500/-?

For example, if the wages are Rs. 12,000/-, the PF amount would be Rs. 1,440/- (calculated at 12% on the wages of Rs. 12,000). The same amount is also deducted from employees, and an equal contribution is paid by the company on their behalf.

However, considering the employees' benefit, we plan to reduce it to the maximum ceiling of Rs. 6,500/- (PF of Rs. 780 each from both sides). Obviously, the company's PF contribution amount will decrease, and the difference can also be considered in the employees' take-home pay.

Statutory Compliance and Formalities

Will there be any statutory compliance affected by this change? Can we change the maximum ceiling amount to Rs. 6,500/- henceforth? Please specify any formalities required or share your views on this.

PF Contribution Details

PF contribution by the employee is 12% of the Basic Salary, and the employer also contributes at the same rate. If the salary exceeds ₹6,500, then it's the employee's choice to contribute up to 20%, but the employer's contribution remains the same at 12%.

After preparing the salary and PF sheet for the month, the PF challan is created and deposited in the PF Office. Following that, Form 12A, Form 5, and Form 10 are deposited in the EPF Department.

If you need further clarifications, please feel free to ask.

Regards,
Ruchi

Thanks for your suggestion. Please clarify for me if the company is changing the salary structure (basic wages) for any relevant reason. At that time, where can they change/reduce the maximum ceiling limit of 6,500/- (for both the employee & employer), even if they are being paid more than 6,500/- as basic wages. This is only for PF calculation & making the payment as per the maximum ceiling for the people who are above the ceiling amount.

Will there be any questions or consequences raised by the PF office? What does the normal law say?

It would be helpful for us if anyone could clarify this for me. Thanks in advance!

ESIC Contribution Location Query

Please tell me if I am a labor contractor and have obtained an ESIC Code from Haryana (Gurgaon), but my contract is currently running in Rajasthan (Bhiwadi), where should the contributions be deposited? Please advise urgently.

Thanks,
Sanjay Kumar

My total salary is $16,000 per month, yet deductions are still being made. May I know why this is happening? I want to understand all the terms and conditions for ESIC.

Once you have become a member of the PF, even after you surpass the maximum ceiling, your PF contribution will continue.

ESI Contribution

In the case of ESI only, when the ceiling is exceeded, you do not need to pay the ESI contribution.

Regards,

Hi, I have a doubt. Please give me a clear answer.

The cutting of PF is 12% of 6500 (basic salary). My basic salary is 12000. Whether the 12% is cut from the 12000 or it is cut from 6500.