Understanding PF Deductions on Salary Arrears: Am I Calculating This Right?

Dear sir,

Kindly clarify this. One person is drawing 5500 in July. As he is eligible for an increment of 2000 from July, when calculating his pay with arrears for July, the deduction of PF will be 780 - as the maximum. Am I right?

Hi,

The maximum ceiling of Basic for the calculation of PF is Rs. 6500. If you are talking about Basic only, you are right; it should be Rs. 780.

Amit Goyal

Dear Amit and other friends,

Thank you for your reply. Could you please clarify if the following is correct?

Mr. X's basic salary in July was $5500, with a PF deduction of $660. In August, his basic salary was increased to $7500, and he received an arrears payment of $2000, where his PF contribution is to be $780 only and not 12% on the entire $9500. Am I correct?

Thank you.

Dear all,

Even I have a similar doubt. My sales manager was receiving 13000/- as basic until May '07, and we were deducting 12% for PF. In August, we increased his basic to 15000/- and paid arrears of basic from May to July (2000*3). Now, do we need to calculate PF for this arrear amount, i.e., 6000/- also?

Please clarify my doubt.

Regards,
Sowjanya

Dear Sowjanya and Rama,

First, please clarify whether you were deducting PF on the actual basic of Rs 13,000 or on the ceiling of Rs 6,500. If you were deducting PF on the actual Basic of Rs 13,000, you will need to pay PF on the arrears, i.e., on Rs 6,000. However, if you were deducting PF only on the ceiling of Rs 6,500, you do not need to pay PF on the arrears.

Amit Goyal

Hi,

It is left to the decision of the company in case they want to give more contribution, i.e., for more than Rs. 780/-. PF contribution can be increased once a year during the appraisal time. We do follow the same in our company.

Regards,
Joylyn

Dear All,

I agree with all of you that the maximum ceiling for PF (Pension Fund) is Rs. 6500/-. For example, if a person's PF wage is Rs. 7500/-, then PF contribution is as follows:
- PF Employee: 900 (Account No. 1) + 359 (Employer Part)
- PF Employer: (900) Rs 541/- Maximum goes to the pension fund (Account no. 10)

I request all of you to please correct me if I am wrong.

Regards,
Vikas Sharma

Dear All,

I would like to draw your attention to the rules for deducting the maximum ceiling of Rs. 780/=. As far as I know, companies that are running under a loss or under BIFR can only impose such a ceiling. Otherwise, we have to apply to the PF Commissioner to implement this type of ceiling. Even the PF Commissioner, before granting any permission, must obtain the consent of all the employees of the company.

Please share any additional rules that anyone may be aware of.

Hemant

Hi all,

I'm new to this site; can anyone please forward me all the information about the ESI and PF contributions and their calculations in Excel format to my email address below: loboelias2006@gmail.com

I would be very grateful for all your help as I want to deepen my knowledge of ESI and PF contributions.

Thanks,
Elias Lobo

It is the company policy to pay the statutory minimum, then PF would be 780. In case your company follows to pay 12% of Basic, it should be calculated on the basic.

If your company follows statutory minimum and the basic of the employee is less than 6500, then PF would be 12% of the basic. If it is more than 6500, then 780 is nothing but 12% of 6500 (Statutory minimum for calculating PF).

Dear Vikas,

The contribution you have deducted by giving an example is an absolutely perfect calculation from both the employee's and employer's sides.