Understanding PF Deductions: Is It Based on Rs. 6,500 or the Full Basic Salary?

Could you please 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]

Rs. 6500/- by the employer and the employee. If the employee wants to contribute more, he has to apply for permission from the Provident Fund Office. However, the employer can restrict his contribution to the threshold limit of Rs. 6500/-.

Regards,
S. Krishnamoorthy

Thank you, Mr. Krishnamoorthy, for your reply. Does this mean that if my colleague's basic salary is Rs. 16,000/-, he would need to obtain permission from the P.F. office to deduct the employee's share from the basic salary?

Yes, the maximum ceiling amount is Rs. 6,500/- per month to be considered for deduction. However, if the employee's emoluments exceed Rs. 6,500/- per month, he has the option to join the Scheme(s) with the consent of the employer.

I think that you have not understood the point.

1. All employees having a basic pay + DA of Rs. 6,500/- are covered by the EPF Act.

2. If an old employee crosses the threshold level of Rs. 6,500/-, his and his employer's contribution will be restricted to the threshold level of Rs. 6,500/-.

3. If a new employee with a basic + DA of more than Rs. 6,500/-, it is not mandatory for him or the employer to subscribe to EPF. However, with the approval of the PF Commissioner, he can be enrolled. In this case, the employer's contribution is nil.

4. If an existing EPF subscriber employee crosses the threshold level of Rs. 6,500/-, he and the employer should continue to pay the contribution restricted to Rs. 6,500/-, the maximum threshold level.

I trust that this clears your doubts.

Regards,
S. Krishnamoorthy

As you mentioned in the third point, the new employee's contribution is not mandatory if their basic salary plus D.A. crosses the Rs. 6,500 ceiling limit. According to the PF Act of 1957, any organization employing 20 or more employees must compulsorily provide PF coverage, regardless of their Basic + DA pay. In the scenario where an employee earns more than Rs. 6,500 per month as their basic salary + DA, they can choose to contribute more, while the employer can cap their contribution at the maximum ceiling limit.

Regards,
Krishna Sir