Confused About PF Contributions in My Job Offer? Need Advice on Salary Breakdown

I have a query about PF. I received an offer letter from an employer with a salary breakdown that includes PF contributions from the company and PF deductions from my salary amounting to only Rs. 780. The basic salary mentioned is Rs. 18,821. Kindly advise.

Regards,
KD

If your basic salary is Rs. 18,821 per month, then I think your employer deducts the PF contribution at Rs. 6,500 from your salary. This is because the PF wages ceiling limit is Rs. 6,500, and you should clarify your doubts with the HR Department when you received your offer letter.

Regards,
Amit Kumar

I agree with Mr. Amit. According to the company policy, they deduct your PF on the ceiling amount of Rs. 6500/- at 12%. You should check with your management when they issue your appointment letter.

Regards,
G.K. Manjunath
Sr. Manager-HR

PF Contribution Details

The PF contribution constitutes 12% of the basic salary by the employer. Your contribution (deduction from salary) would match this, or you can enhance it to 20% of the basic salary. Do note that in the event you leave the company and encash this amount, the entire proceeds become taxable.

Though the basic salary is Rs. 18,821/-, you are entitled to a P.F. deduction on the P.F. ceiling amount of Rs. 6,500/-, i.e., 6,500 x 12% = Rs. 780 only as per the P.F. Act.

Regards,
D. Gurumurthy
HR/IR Consultant

It is correct. It's better to negotiate with them to have a 12% deduction from the basic. They can change, but it depends on your negotiation. You need to be firm on your demands.

It is very true that the PF wage ceiling is Rs. 6,500/- and the PF contribution is Rs. 780/- for either end. However, there is one more option by which you can make voluntary contributions from your earnings for each and every month. In that case, you can only receive your contribution with interest as you have allowed the management to deduct from your salary, but the management will only give Rs. 780/- to you from their end.

If you want to earn more interest, then make voluntary contributions to your PF account.

Regards,
Jagdeep K Vashishtha
HR Assistant ITD PCL

Commonly, company policy deducts your PF based on the ceiling amount of Rs. 6500/- at 12%. You should verify this with your management when they issue your appointment letter. For your information, as per the EPF Act, you are considered an exempted employee if you have newly joined and are earning more than Rs. 6500/- per month at the beginning of your employment. PF is not mandatory for such cases.

Regards,
R.S PAGAD ADVOCATE

It is not the policy of the company that is mandatory as per the provisions of the PF Act.

"Pensionable Salary Limit"

"The maximum pensionable salary shall be limited to [Rupees six thousand and five hundred / Rs. 6500/-] per month. Provided that if, at the option of the employer and employee, contribution paid on salary exceeding [Rupees six thousand and five hundred / Rs. 6500/-] per month from the date of commencement of this Scheme or from the date salary exceeds [Rupees six thousand and five hundred / Rs. 6500/-], whichever is later, and 8.33 percent share of the employer thereof is remitted into the Pension Fund, pensionable salary shall be based on such higher salary. Inserted ibid w.e.f 16.3.96. Subs. By GSR 774 (E) dated the 8.10.2001 (w.e.f. 1.6.2001)"

Regards,
Jagdeep K. Vashishtha

Normally, PF is deducted on Basic; everyone knows the same. For example, in Company X, A is an employee with a Basic Salary of Rs 15,000/- and a PF deduction of Rs 1,800/-. A has completed the service and resigned. In Company Y, the same employee A joined with a Basic Salary of Rs 25,000/- and a PF deduction of Rs 780/-. This is not wrong. Company X follows one method, and Company Y follows another method.

PF Deduction Guidelines

Normally, the PF Act states that if the company has more than 20 employees, PF deduction is required. However, the ceiling limit is fixed at Rs 6,500/-.

Regards,
Suresh

Hi All, you all are right. Now, don't confuse KD. KD, you are getting the right amount, and the company is deducting the correct amount. Don't worry.

Everyone can reply to this thread because everyone is aware and familiar with the PF. However, try to provide threaded answers to those with specific needs, as it can be challenging.

Thanks for all your cooperation, everyone.

Regards,
Nanasaheb
Corporate HR - Pune

What you are telling is correct. We are also trying to raise awareness about PF; we are not trying to confuse the person. Regardless of the method you follow, the final result is to deduct PF. If it is ₹780, your take-home pay is more. That KD needs to know.

Regards,
Suresh
Payroll Manager

Some companies have policies stating that your basic salary will be anything greater than Rs. 6500. They usually deduct Rs. 780, so don't worry about it. The issue regarding your basic salary and your thoughts on the 12% deduction need to be addressed. Please communicate with your HR department.

Thanks,
Tejas Chikshe
Asst. Manager - HR & Admin

You need to coordinate with the consultant or the concerned person in the PF Department to inquire why you have not received a receipt from the department. There may be some observations regarding the documents you have submitted.

Regards,
Jagdeep K Vashishtha

It is as per the law that the basic salary for administration charges shall be Rs. 6500 per month. However, by mutual consent of the employer and employee, it can be increased. In your case, it may be your full basic salary.

Voluntary Contribution Option

The second option is that you can write an application to your employer to deduct a higher amount from your salary, whichever you can afford, known as Voluntary Contribution, exceeding 12%. In such a case, the employer is not obligated to deposit double the share that you are supposed to deduct. The employer will only deposit up to the ceiling of the basic salary.

Regards,
Jagdeep K Vashishtha