Is the EPF Ceiling Limit Really Fixed at ₹6,500? Seeking Clarity on Employer Contributions

EPF Ceiling Limit and Contribution Clarification

Some consultants are suggesting that the EPF ceiling limit is fixed at ₹6,500. The employer is liable to pay contributions only on ₹6,500, regardless of the basic salary. Is this correct? If an employee's basic salary is over and above the ceiling limit of ₹6,500, what should we do in such cases?

Please let me know the breakdown and kindly explain the changes in EPF rules as of 2012.

Thanks in advance.

Regards,
Brinda

If an employee's basic salary is ₹6500/- per month or above ₹6500/-, they still have to contribute to PF on ₹6500/- only. The contributions are as follows:
- ₹6500/- at 3.67% (PF)
- ₹6500/- at 8.33% (Pension Fund)

Regards,
Vikram

As you said, that is correct. For EPF contribution, there are various options:

a) Both EE & ER shall restrict to Basic till 6500/-.

b) Both EE & ER shall contribute on full Basic.

c) Employee shall contribute on full Basic & ER shall restrict to 6500/-.

:)

EPF Ceiling and Contribution Clarification

As per the EPF Act, the ceiling is fixed up to Rs. 6500 (basic & DA) per month. There is no doubt about it. We have to deduct the PF amount from both the employer and employee. It is mandatory to deduct the PF amount from the wages. If the employee is receiving wages above Rs. 6501 (basic & DA), we can obtain an exemption from PF through Form 11.

Thanks & Regards,

Muthukumar
Senior HR Executive
Devi Exports Corporation

Clarification on EPF Contribution Limits

As per the EPF Act, if the starting salary (Basic + DA) is fixed over and above Rs. 6,500/- (Rs. 6,501), it is entirely exempted from PF. If the starting salary (Basic + DA) is fixed below Rs. 6,500/-, then the employee is eligible for PF even after it increases above Rs. 6,500/-. Moreover, Rs. 6,500 is the limit. If it is more than that, it is at the employer's option.

With regards,
V. SUBBARAO
[Phone Number Removed For Privacy Reasons]

Can you tell me if the employee has a gross salary of Rs. 40,000 and the basic salary is Rs. 16,000, what would be the amount of PF deduction for both the employee and the employer? Is it based on the maximum ceiling limit of Rs. 6,500 or on Rs. 16,000?

Thanks and regards,
Rahal Rana
[Phone Number Removed For Privacy Reasons]

I have a question. If Mr. A, who is working at XYZ Co. and contributing to PF, resigns from XYZ Co. and joins ABC & Co. with a basic salary exceeding Rs. 6500/-, is it mandatory for him to contribute to PF at ABC & Co.? Or will he be exempted as the basic salary is higher than Rs. 6500/-?

Thanks & Regards

There are various calculations to be adopted as per your company policies:

1. In the case of the first employment and if the salary is Rs. 6501 and above, the employee may be covered or can make a contribution to EPF. In the case of an excluded employee, obtain Form 11.

2. In the case of a salary exceeding Rs. 6501:
- The employee may contribute for the full basic (both EYER & EYEE), or
- The employee may restrict to Rs. 6500 as E.YEE & E.YER, or
- The employee may contribute to the full basic and restrict the E.YER to Rs. 6500.

In any case, the contribution to the Pension (EPS) cannot exceed Rs. 541 or 8.33%. If you have any doubts, please call [Phone Number Removed For Privacy Reasons].

PF Contribution Requirement for High Basic Salary

If Mr. A, who is working at XYZ Co. and contributing to PF, resigns from XYZ Co. and joins ABC & Co. with a basic salary exceeding Rs. 6500, is it mandatory to contribute to PF at ABC & Co? Or will he be exempted since the basic salary is higher than Rs. 6500?

Is it possible not to contribute to PF when the basic salary is Rs. 7,000? (in relation to the above case)

If an employee is receiving a starting salary of more than Rs. 6500, can the employer deny them the EPF facility? Please clarify.

Do you mean that the gross salary is more than 6500/- or the basic salary? If the basic salary is above 6500/-, and if he doesn't have PF in the previous organization, there is a possibility for non-contribution.

Is the deduction of EPF compelled for trainees as well? Please guide us. If there is any notification or judgment, kindly forward it.

Regards,
Jayasheel

It is up to company policy for deducting PF on a basic fixed above 6500 for any employee. In this case, the following are outcomes:

1. Employer and Employee both pay contributions on a 16000 basic, i.e., 1920 * 2 (both sides) + admin charges 1.61% by the employer.

2. Employer restricts himself by paying contributions up to 6500 only, i.e., 780 + admin charge, and the Employee pays/deducts contributions from the full basic, i.e., on 16000 * 12% = 1944.

3. Both the employee and employer contribute on a 6500 basic, not more than that.

4. Employee and employer both do not want to contribute PF as the basic limit of basic + DA - 6500 exceeds in this case, and the legal liability of the employer to pay and deduct contributions, conditional to that the Employee should not be a member of PF at the time of joining the company. Otherwise, once a member of PF, he/she will be a lifelong member irrespective of the rise in basic.

If this is the case, then fill out the PF Exemption form and file it for PF officer visit purposes.

These all 4 options are legal and practiced in the industry.

I hope I made the point clear and helped you.

Thanks,

Dilip

HR Manager

Dear Dilip Sir,

That was a nice explanation by you. Could you please elaborate on the 4th point that you stated?

Employee and Employer PF Contribution

"4. Employee and employer both do not want to contribute to PF as the basic limit of basic + DA - 6500 is exceeded in this case. The legal liability of the employer to pay and deduct contributions applies, with the condition that the employee should not be a member of PF at the time of joining the company. Otherwise, once a member of PF, they will be a lifelong member regardless of any rise in basic.

If this is the case, then fill out the PF Exemption form and file it for the PF officer's visit."

Looking forward to your reply soon.

Regards

Yes, it is correct. The PF ceiling limit is Rs. 6500 per month. However, if the employer wants to pay contributions without any ceiling, there is no restriction. It can be done.

Regards,
D. Gurumurthy LL. HR. IR. Consultant, Hyderabad.

Can anybody tell me which amount will be considered for the administrative charge (1.10%) in case the basic + DA is greater than ₹6500?

Thank you.