Understanding PF Contribution Limits: What Are the Minimum and Maximum Rates for Employees and Employers?

I would like to know what the minimum and maximum rates of PF contribution are by the employee and employer.

Thanks & Regards,
Swati Pandit

Hi, is the 12% employer contribution mandatory, or can we reduce the percentage?

Regards,
Sudharshan

I heard from someone in a management meeting that a person mentioned we need to plan to contribute less than 12% in employer contribution. That's why I am asking.

Thanks and regards,
Sudharshan

Provident Fund Contribution Rates

The Provident Fund (P.F.) rate of contribution is 12% by the employee on their salary, with a maximum cap set at Rs. 6500 per month. The employee has the option to contribute a higher percentage if the management agrees to it.

However, the management will only contribute 12% as a matching contribution on the Rs. 6500 per month. Some companies may offer a higher matching contribution based on their management policy.

Regards,
D. Gurumurthy
LL. HR & IR Consultant

Hello Swati, The PF rate of contribution is 12% by the employees on salary. However, there is no limit on voluntary contributions if management agrees to this contribution. The PF rate of contribution is 13.61% by the employer, which includes 12% PF and 1.61% (admin charges).

Regards, Ankur Saklani.

For employees, there is no limit, and they can contribute 100% of their basic salary plus DA. However, the employer is not obligated to contribute more than 12% of ₹6,500.

Based on your comments, I wish to update the following:

1. PF is calculated on Pay (Basic + DA) of the Gross Salary.
Note: Most companies don't entertain Dearness Allowance. In this case, you're required to calculate it from the Basic of the gross salary.

2. You're free to deduct PF from personnel salary whose Pay/Basic Salary is up to Rs. 6500/- per month.

3. Personnel withdrawing Pay/Basic Salary more than Rs. 6500/- per month are requested to fill a Declaration Form for the same.
Note: If Yes, then the deposit towards the Pension Head has to be calculated in such a manner that it shouldn't exceed Rs. 541.45/-. Explanation: 6500 is the limit for pension calculation (6500 X 8.33% = 541.45), and the remaining amount has to be deposited into the PF account.

4. Employee Contribution: 12% of the Pay/Basic Salary.

5. Employer Contribution: 13.61% (8.33% towards Pension, 3.67% towards PF, 1.10% towards ULDI (linked Insurance), and 0.51% towards administrative charge) of the Pay/Basic Salary.

Hope the above information helps you to get a clear picture of the same.

Thanks & Regards,
Ashit Prusty
Manager HR & Operation | HSPL
Cell: [Phone Number Removed For Privacy Reasons].

Clarification on EPF Contributions

There are lots of discussions in this forum, and there are many divergent views/opinions on this subject. The facts, as given on the EPFO website and clarified by the EPF Commissioner, are:

1. The employee contributes 12% of the Basic + DA. However, the employee can contribute more to the EPF. The excess over the 12% is called Voluntary PF.

2. The employer also contributes 12% + 1.61% for admin charges and the Employee Deposit Linked Insurance scheme.

3. The employer's contribution of 12% is:
(a) 8.33% for the Employee Pension Scheme. This is limited to 8.33% of a maximum of Rs 6500, which is Rs 542. The rest (exceeding Rs 542) is credited to the EPF.
(b) The remaining 3.67% is credited to the EPF.

Once you are familiar with these percentage figures and the maximum of Rs 542 for the Pension Scheme, the rest will be easy to comprehend! Remember, 12% is for both the employer and the employee, irrespective of the Basic + DA.

Regards,
Rajusiachen

PF Contribution Rates

The P.F. rate of contribution is 12% by the employee, which may be increased up to 20%. However, the employer contribution is 12% mandatory, with a maximum on Rs 6500/- per month (on both Basic and D.A.).

Please help me with the PF limit of Rs. 6500. If any one person receives Rs. 6000 while working on the company's payroll, is it necessary to deduct PF?

EPF Contribution Details

The ceiling salary limit on EPF is Rs. 6500. This means up to Rs. 6500, it is mandatory. This includes Rs. 6000 or all salaries equal to and less than Rs. 6500.

Beyond the ceiling limit, the contribution is optional for both the employee and employer, subject to the discretion of the Regional PF Commissioner.

Contribution Rates

Generally, the EPF contribution is 12% for both the employee and employer. However, in some specified areas, it is 10%. Out of the employer's contribution, 8.33% has to be credited to the Pension Fund.

The EDLI contribution is 0.5% to be remitted by the employer. In addition, the employer has to pay an administrative charge of 1.1% towards the PF account and 0.01% for EDLI.

Exempted PF Trusts

For exempted PF Trust and in lieu of EDLI, the employer need not pay admin charges. Instead, they have to remit inspection charges to EPF as 0.18% and 0.005% respectively (PF and EDLI).

Regards,
Abbas.P.S

Dear HR folks, I am new to HR, and I would like some information regarding PF. Some employers are contributing 13.61%, where 1.61% is considered as administrative charges, making it compulsory. What is the range for employees to contribute more? In other words, how much salary should be there to increase the employee's share in PF?

Updates on PF Contribution

Can you provide some updates about PF?

Thank you so much in advance.

However, as per legal compliance, an employer needs to pay only up to ₹6500 as basic pay for an employee. If the employer wishes, they can pay more. Therefore, if an employer only wants to comply with government rules, they must consider only up to ₹6500 or less as the employee's basic pay.

Thank you.

The clarification for the Admin Executive is that 8.33% of Rs 6500 is the maximum limit (Rs 542) for the Pension Scheme. The rest - 3.67% plus the excess of Rs 542 - goes to the EPF. QED!

Regards,
Rajusiachen

I suggest you go through the PF Act once, and then if you come back with your doubts, the discussion will be more fruitful.

Employer contribution to PF (including pension scheme) is 12%. In addition, the employer has to remit 0.5% towards EDLI. Besides, either 1.1% + 0.01% (subtotal 1.11%) towards admin charges or 0.18% + 0.005% (subtotal 0.185%) towards inspection charges, as the case may be, has to be remitted by the employer.

Regards,
Abbas.P.S

Employee and Employer PF Contribution Rates

Employee Contribution is 12%. Employer contribution is 13.61% (including admin charges).

PF contribution from the employer's side can also be restricted up to a maximum limit of Rs. 6500 per month.

Please note that the rate of contribution to the Provident Fund (P.F.) is 12% by the employee on the salary, with a maximum of Rs. 6500/- per month. This information pertains to a specific clause or section under the PF Act. Kindly assist me with the following queries:

1. What is the basic limit for PF deduction purposes?
2. Which clause or section specifies the Rs. 6500/- limit under the PF Act?

Thank you.

Regards,
Dinesh Bajaniya
[Phone Number Removed For Privacy Reasons]

Hi, can an employer restrict/cap its PF contribution to Rs. 1800 per month (Rs. 1800 per month from the employee + Rs. 1800 per month by the employer) even though the basic pay of the employee is significantly high (over 1 lakh per month) and the employee is also contributing towards Voluntary PF.

Hi Seniors,

I want to know if there is any capping over the contribution of PF by the employee/employer. I understand the contribution of the employee and employer stands at 12% and 13.61% (including PF, Pension, Admin charges) respectively on the base salary. However, is it feasible for any company to restrict the contribution to a certain limit, given that the basic pay of any employee exceeds 20k.

Please advise!

Hi,

We are a consulting firm. We deduct 3600 as PF. One of the employees has received a message stating that EPF contribution of Rs 2350 against her UAE number is received. They are now questioning what happened to the rest of the amount. I explained that a part of it goes towards the Pension scheme, but they are not convinced and are requesting a calculation. Could someone please help me with the calculation, as I have no idea how to do it?

Thank you.

Break-up of the EPF contribution

12% of the employee’s salary goes towards the EPF. Whereas the employer’s contribution is divided as below:

- 3.67% goes towards contribution for EPF
- 8.33% goes towards contribution for EPS
- 0.5% goes towards contribution for EDLI
- 1.1% goes towards contribution for EPF administration charges
- 0.01% goes towards contribution for EDLI administration charges

Therefore, the employer contribution is 13.61%. The premium and management charges are borne by the employer, and the maximum limit is set at 0.5% of Rs.15,000.

PF Contribution Breakdown

I presume you deduct Rs 1800, i.e., 12% on Rs 15000, and contribute the same Rs 1800, thus the total being Rs 3600, and not that you deduct Rs 3600 from the salary.

Out of the Rs 1800 payable by the employer, Rs 1250, i.e., 8.33% of Rs 15000, will go to the Pension Fund, and this will not be reflected in the contribution status. Therefore, what is reflected in the PF account is the employee's contribution of Rs 1800 plus the employer's contribution of Rs 550, i.e., 1800 minus 1250, thus totaling Rs 2350.

Regards, Madhu.T.K