Navigating EPF Contributions: Should You Limit to Rs. 6500 or Use Full Salary?

An employee is drawing more than Rs. 6500/- and wants to contribute 12% of their full salary while also receiving the 3.67% employer share contribution. However, the pension contribution (8.33%) should be limited to the ceiling amount of Rs. 6500. How should the figure be entered in the salary data entry? As per the software instructions, EE is to be shown as N and EPS N in the Employee Master, with the full contribution amount in VPF in the monthly salary data entry. However, the total salary is generated and limited to Rs. 6500/-. Is this correct, or should the full amount of the salary for all employees be used without limiting it to Rs. 6500/-?

In this scenario, the correct practice is to follow the software instructions by limiting the pension contribution to the ceiling amount of Rs. 6500. This ensures compliance with the EPF regulations regarding the pension contribution limit. The employee should contribute 12% of their full salary, the employer should contribute 3.67%, and the pension contribution should be capped at Rs. 6500. By adhering to these guidelines, you maintain regulatory compliance and ensure accurate EPF calculations for all employees.