Confused About PF Administration Charges? Seeking Clarity on Wage Basis and Rules

Dear all,

There is confusion regarding the payment of PF administration charges. I am aware that it is to be paid at 1.1%. However, the question arises on what wages this charge applies. In our organization, we deduct PF at 12% on Basic and DA (assuming it is more than Rs. 6500/-), but the management's contribution is calculated based on Rs. 6500/- only.

Our argument is that we are obligated to pay administration charges based on Rs. 6500/- only, as specified in the PF Act rules. The PF officials have denied this and are insisting on administrative charges based on the full wages on which PF is deducted. We have requested the specific rule that justifies their stance, but they have not provided any; instead, they persist that it must be paid on the full wages.

Could someone clarify whether our stance is correct or if the PF authorities' position is valid? I would greatly appreciate it if you could reference the rule in the PF Act if the PF authorities are correct, and also provide any relevant court decisions for further guidance.

Please assist me with this urgent matter as it has become a significant issue, and my client is facing difficulties.

Looking forward to your prompt response.

Regards,
Auditor Raman

I am in the same confusion. I am also looking for the document evidence, but I didn't find anything on that. I enquired with some PF officers, but a few are stating it's ₹6500/- and others are saying it's 12% of the entire Basic amount.

Thanks,
Jeevarathnam

Dear Jeevarathnam, there should not be any difference in the contribution amount. The employer has to match the employee's contribution unless the employee has opted for voluntary PF deduction. If the employer wants to contribute only Rs 780 against PF, then it should deduct the same amount from the employee. The calculation of PF admin charges will remain the same as I mentioned in the Excel sheet.

Regards,

In employee contribution, for 10,000 * 12% (1200), it means you have to pay the administrative charge of 1.1% for 10,000. For your employee contribution of 6500 * 12% (780), it means you have to pay 1.1% for 6500.

Regards,
Muthu

The deduction of PF above ₹6,500 for an employee is optional, whereas the employer is bound to pay and calculate to the extent of ₹6,500 only. All calculations are limited to a maximum of ₹6,500 only.

Understanding Administration Charges on PF Qualifying Salary

Administration charges are payable on the PF qualifying salary. Therefore, if employees are contributing based on their actual salary (for example, Rs 10,000), you have to contribute based on Rs 10,000. In the return of contribution, you have to show the PF qualifying salary on which the 12% is calculated. If employees contribute amounts higher than Rs 6,500, that should be reflected in the corresponding column. In such scenarios, some employees may choose to limit their contributions to Rs 6,500. Therefore, salary/wages refer to the total PF qualifying salary (the salary from which employees' share of contribution is deducted).

At the same time, the Employee's Deposit Linked Insurance (EDLI) and its administration charges are to be calculated based on Rs 6,500.

Regards,
Madhu.T.K

As I mentioned earlier, in our case, the employee is contributing 12% on Rs. 10,000/- whereas management's contribution is 12% on Rs. 6,500/- only. Consequently, we have paid administration charges at 1.1% on 6,500/-. The PF authorities are not accepting this calculation and are insisting on 1.1% on 10,000/-. We are seeking clarification on the specific rule that necessitates this, but we have not received a response yet.

If anyone is familiar with the rule or if this matter has been addressed in case law, kindly share the relevant information as it has become a pressing issue.

Regards,
Auditor Raman