Unable To Understand Gross Salary, Professional Tax & Provident Fund

Hello, Sir. Good afternoon.

I have a problem; I am a new person in my office and I don't know about the provident fund. How do I calculate gross salary, net salary, and professional tax? In my office, there is a colleague who knows everything but hasn't shared it with me, so I am facing many problems. Please help me understand about PF.

Thank you, sir.

Hi,

Please go through this attachment if it can be of any help to you. Provident Fund (PF) deduction is usually 12% of the basic salary.

Thank you and regards.

Shall anybody help me prepare a payslip for a home-take salary of 18,000 rupees per month?

Hi,

For example: If your gross salary is $30,000 per month, then the basic salary will be 40% of the gross ($30,000) - $12,000. HRA (40% of basic in non-metro areas, 50% in metro cities) - $4,800. Conveyance - $800. Medical - $1,250. LTA - $1,000. Special Allowance - $10,150 (remaining amount). Total - $30,000.

Deductions: PTAX - $200. PF - 12% on basic ($12,000) - $1,440. Total deductions = Net salary. $30,000 - $1,640 = $28,360 (Gross).

Regards,
Kumar

Dear Sir,

Professional deduction is Rs. 200. Regarding P.F. deduction, if his Basic pay is more than Rs. 6500/- and he is not a member of PF, he is not eligible. If he is already a member and we have continued him in P.F., the deduction of P.F. should be restricted to Rs. 6500/- at a 12% rate.

D. Gurumurthy HR/IR Consultant

Hi friends,

Professional deduction is Rs. 200. Regarding P.F. deduction, if his Basic pay is more than Rs. 6500 and he is not a member of PF, he is not eligible. If he is already a member, then we will continue him in P.F., and the deduction of P.F. should be restricted to Rs. 6500 at a 12% rate on basic or even depends upon the company; some companies prefer to have a maximization of 780 per month. This is for your information & regards.

Please, can anyone let me know under which Act it states that the Basic should be 40% of the gross? It would be great if someone could share the notification.

Regards,
Rajesh N

I have one clarification. Suppose I leave the job within one year of joining to go for higher studies. Can I close my EPF account and receive the amount along with interest? What is the procedure for this?

Regards

Hi, Good morning. This is Anu. Please tell me what is the difference between Earned Leaves (ELs) and Casual Leaves (CLs), and what is the procedure to apply for ELs in my company. They provide only 2 CLs quarterly, totaling 8 CLs. Is there a specific procedure to apply for ELs, and how many ELs can we use in a month?

Dear Mr. Rajesh,
I have never heard of Basic salary 40% of Gross anywhere. So far as my knowledge goes, Basic Salary, forms the very basis of salary. This is the core of salary, and many other components may be calculated based on this amount. It usually depends on one’s grade within the company’s salary structure. It is a fixed part of one’s compensation structure. So you must know the Basic Salary in order to break the salary in to various components.
More over, as salary structure varies from one organisation to another, I suggest you to create an arbitrary salary break up for your company by following Salary forum posts available in internet.
Thanks and regards.

Hello Francis,

I hope you have already cleared your query about the gross salary from the discussions among the members above. I would like to provide you with additional information regarding P.F:

There are two (2) cases to be considered for PF formulation:

(1) LIMITED P.F: In this case, the Provident Fund's limit is fixed by the government at Rs. 6,500 (mandatory). Further considerations include the following two (2) scenarios:
(A) If the basic salary exceeds Rs. 6,500, then the PF contribution is calculated as 6,500 * 12%.
(B) If the basic salary is less than Rs. 6,500, the PF contribution amount is calculated as the basic salary * 12%.

(2) UNLIMITED P.F: In this scenario, the company sets the statutory limit for the PF, which is calculated as the total basic salary * 12%.

I hope the above explanation helps clear your query regarding the Provident Fund.

Regards,
SATYAJEET.

The basic need does not always have to be 40%; it depends upon the company policy. It can range between 30% to 60%. Therefore, it can be 30% of the basic pay or 40%, as decided by the company. However, the minimum is set at 30%.

PF can be claimed if you have drawn a complete one month's salary (at least 30 days' pay). Yes, you can claim your PF amount with interest, and it will accrue interest for up to 3 years. After 3 years, you will no longer receive any interest on the amount, but you can withdraw your PF amount from your PF account.

Mr. Sunil Sir,

For your kind information, I just want to inform you that according to PF law, every employee must contribute to their PF when their basic salary is more than Rs-1 Crore.

Thanks & Regards,

Lokesh Yadav
9560920941

Hi Lachiya,

The state government of each state is empowered with the responsibility of structuring and formulating the professional tax criteria and is also required to collect funds through professional tax. It is charged under the Seventh Schedule, State List of the Indian Constitution, and professional tax is levied for government infrastructural development purposes.

The professional tax structure followed in Tamil Nadu is on a half-yearly basis. Refer to the TN Govt. website [Professional-Tax](http://www.tn.gov.in/dtp/professional-tax.htm) (you may click on the link) where both old and new slab rates are available.

Hope the info is sufficient for you.

My friend Lokesh,

I did not get your question; please be clear so that I can understand you. This is for information; I need clarity about what you are trying to tell me. I never spoke in terms of salary like "His Basic Salary Is More Than Rs-1 Crore," so he does not have PF. Try to speak the reality of what you are trying to tell me or convince me. Be clear before telling something to others.

Hi,

Gross Salary = (Basic + HRA + T.A + M.A + LTA + S.A)

Some Rules:

Basic Salary (50% in Metro OR 40% in Non-Metro)

HRA (50% in Metro OR 40% in Non-Metro)

T.A Fixed 800 per month

M.A 1250 per month

The Calculation:

If, for example, the Gross Salary per month is 50,000

Basic 20,000 (40% of Gross Salary) (e.g., Hyderabad)

HRA 8000 (40% of Basic) (e.g., Hyderabad)

T.A 800

M.A 1250

Special Allowance 19950 (Gross Salary - (Basic + HRA + TA + MA)

Deductions:

Profession tax

In Hyderabad, the PT is 200 if Gross Salary is above 20,000

P.F by ee

Provident Fund has many conditions.

As his basic salary is more than 6500, he is not eligible for P.F. But if he continues to deduct PF since his salary was 6500, he can deduct the P.F. either on the shrink basic, meaning 6500, or on 20,000.

Here, we take P.F as 12% on 6500 = 780

780 + 200 = 980 (deductions)

Gross Salary - Deductions = Net Salary

50,000 - 980 = 49020

Here, it's important to note that PF is a concept that depends on company norms. Sometimes it is calculated on the shrink basic (12% of 6500 if basic < 6500) or sometimes on the original basic, meaning 12% on 12000 if the basic is 1200, no need to shrink it.

Regards,

Aditi Shrivastav

Hi Rock Francis,

Gross salary is the one with your total earnings. Net salary is something which you get after all the deductions (PF, PT, EMI, etc.). Whereas PT is concerned, it stands for Professional Tax and is deducted on a monthly basis depending on your gross earnings. It varies state-wise too.

PF stands for Provident Fund. PF is deducted from your gross salary depending on some set rules as well as company policy; you need to read about the same to understand it well.

Regards, Prachi Shinde

Dear Rajesh,

Based on my experience, there is no specific rule stating that you must calculate at 40% of the basic of gross pay. This calculation typically depends on the company's policy. In metropolitan areas, it is usually set at 40%, while elsewhere it might be at 50%. Setting the basic pay at either 40% or 50% of the gross pay can help reduce the employer's liabilities concerning PF, bonus, gratuity, leave encashment, etc.

Thank you,
Dilip
9374533460

I will help you understand Professional Tax.

If the employee's gross salary falls within the following ranges, the Professional Tax deduction will be as follows:

- Gross Salary: Rs. 5,000-10,000
PT Amount: Rs. 175/-

- Gross Salary: Rs. 10,000-Above
PT Amount: Rs. 200/-

In the month of February, the Professional Tax amount will be Rs. 300/-.

Dear Sir,

I just wanted to inform you that the base slab in PF is Rs. 6500. For example, if my basic salary is Rs. 50000, then I contribute 12% of that amount towards PF (i.e., Rs. 50000). The employer's contribution is based on Rs. 6500. However, if the employer does not want to deduct your PF, then you should fill out Form-11.

Regards,

Lokesh Yadav
9560920941

Dear All,

Thank you for the information regarding professional tax. Another thing I need to know is how to make online payments through EPF.

Thanks and Regards,
Lachiya

Mr. Lokesh,

What you said is correct; everyone knows that, right? The base slab is 6500/-. If an employee does not have PF in earlier companies and is not interested in having PF in the above company, he can give a Form-11 declaration stating that he has savings and is not interested in the deduction of PF. This is general information known to all. Exemptions are given for consultants. If he has a high salary, then he is eligible for PF.

Dear Lokesh,

If your basic salary exceeds Rs. 6500/- and you are not a member of PF before joining the organization, the employer is not bound to deduct PF. You are an exempted employee from PF liability.

Regards, Dilip