Understanding Basic Salary and DA: Why Is My Company Not Offering PF?

Hi Friends, My company offered me an 8000 Rs salary, with 6600 as Basic + DA. They mentioned that I am exceeding the PF ceiling amount, so they are not offering me PF. Can you please tell me on what basis the Basic + DA will be fixed?

You can be exempted under the Provident Fund Act when your basic salary is more than Rs. 6500, but only under one condition: if there is a consent form 11 filled out between both the employer and employee, stating that the employee does not want PF and the employer also agrees to this. If you want your PF to be deducted, the limit of the basic salary will be Rs. 6500.

Thank you.

Regards,
Prakash

There is no law that specifies how to bifurcate salaries, but generally, it is to be bifurcated on a friendly basis by considering the Income Tax Act.

Employee Pension Fund Deduction Clarification

I have 3 employees whose basic salaries are more than 6,500/- Rs, which are 16,000, 14,000, and 8,000 respectively. I deduct the employer's share from their basic salary. Now, my question is, on what amount should I deduct the employee pension fund, which has a maximum limit of 541/- Rs?

Assuming that employee A has a basic salary of 16,000/- Rs and has attendance of 28 days in April, the employer's share deducted would be 14,933/- Rs (16,000/30*28). But for the employee pension fund, on what amount should I deduct 8.33%? On the maximum limit of 6,500/- Rs or on 6,500/30*28 = 6,067?

Also, please help me with how to allocate the employee's wages for the month of April 2012 and how to provide a new PF number.

Respected seniors, please reply to me soon with clarification.

Thank you & Regards,
Rahul Rana
[Phone Number Removed For Privacy Reasons]

As per your post, it seems that you are contributing on the actual basic salary and not the ceiling limit, which is ₹6500/-. Well, congratulations to you as your company is paying on the actual basic salary.

Pension Deduction Explanation

When the PF is deducted on an actual basis, you have to deduct 12% of the actual earned basic from the employee's side, and it goes 100% to PF Account No. 1. For the pension fund, the employer's 12% payment is bifurcated as follows: you have to pay ₹541/-, which is the maximum contribution for Pension Fund Account No. 10 (considering a basic salary of ₹6500/-), and the remaining amount of that 12% goes into PF Account Number 1.

Handling PF Number for Rejoining Employees

Now, the second question - why are you showing that old employee as new and seeking a new PF number? There is no need to do this, and you cannot do this because you cannot reduce the salary of any individual.

You can only do this when an employee leaves the organization and rejoins again after 2 to 3 months; then only you can issue them a new PF number with the new salary.

Regards,
Sanjay

Your company has offered you a salary of 8000 Rs, with 6600 designated as Basic + DA. They have mentioned that you are exceeding the PF ceiling amount; hence, they are not providing PF contributions for you.

Clarification on PF Contributions

To clarify:
1) You are not exempt from the PF Scheme; 6500 is only the ceiling amount for employer contribution.
2) Your company is responsible for contributing 12% of the basic ceiling amount of Rs. 6500 to your PF account.
3) The determination of Basic + DA should adhere to company policy and comply with the Minimum Wages Act.

If you have additional questions, please feel free to ask.

Regards,
Hrishikesh

Dear Seniors,

In the above-given post, many seniors have mentioned that the ceiling of the PF deposit is Rs. 541 max, which is 8.33% of Rs. 6,500/-. However, in many other related topics, it has been stated that 12% of the Basic, i.e., Rs. 6,500/-, is constant, amounting to Rs. 780/-.

Hence, my confusion lies in determining which amount is actually fixed - is it Rs. 541/- or Rs. 780/-?

I would greatly appreciate your valuable guidance on this matter as soon as possible.

Regards,
Piyush Pandia

Dear Seniors,

In the above post, many seniors mentioned that the ceiling for PF deposit is Rs. 541, which is 8.33% of Rs. 6,500. However, in other related topics, it is stated that 12% of the basic salary, i.e., Rs. 6,500, is constant, amounting to Rs. 780. I am confused about which amount is actually fixed, whether it is Rs. 541 or Rs. 780. Your prompt guidance on this matter would be highly appreciated.

Regards,
Piyush Pandia

Dear Piyush,

Greetings for the day. Rs. 541 is the EPS (Employee Pension Scheme) contribution, and the ceiling for EPS & EDLI is fixed at Rs. 6,500. This means that regardless of the higher limit of 12% (EPF), the EPS (8.33%) should not exceed Rs. 541.

Thanks & Regards,
Sumit Kumar Saxena
[Phone Number Removed For Privacy Reasons]

Whatever your management told you is correct. If your basic salary exceeds Rs. 6500/-, at that time, management cannot be compelled for EPF. If the management is willing to contribute, then that is okay.

Safeguarding Management

For the safeguard of the management, they can fill up Form 11.

Regards,
V. Subbarao
[Email Removed For Privacy Reasons]

One thing you must understand. In A/c No.1, 12% is directly calculated, whereas in A/c No.10 (FPF), it is restricted to ₹6,500. For example, if your basic is ₹7,000, 12% is directly calculated, i.e., ₹840. For PENSION A/C, it is ₹541 only. For PF A/C, it is ₹840 - ₹541 (₹299 in A/c No.1).

Regards,
V. Subbarao

Understanding PF Exclusion and Deductions

1. If your basic salary exceeds ₹6,500 and you are not a member of the Provident Fund (PF), your current employer will require you to complete an undertaking in Form 11. This form states that you are not a member of the PF or that you have withdrawn your amount. In this case, you can be excluded from the PF. However, if you were a member of the PF in your previous organization and have not withdrawn your PF, then your PF will be deducted.

2. If the basic salary exceeds ₹6,500, pension fund deductions will be made on ₹6,500 only, which means a maximum deduction of ₹541.

For example, if your basic salary is ₹12,000 and you are present for 28 days, the calculation would be ₹12,000/30*28 = ₹11,200. Your basic salary already exceeds the requisite limit of ₹6,500. In that case, the pension fund will attract ₹541.

Thank you.