Understanding PF Contributions and Tax Exemptions: Can I Opt Out and What Are the Implications?

Hi All, This is my first post. I have two queries:

Query 1: PF Contribution

1. My basic salary is around 27,000 per month. Can I choose not to contribute to the PF? If I contribute nothing, what happens to the employer's contribution? Is it sent to PF, or is it paid out as part of monthly compensation? Also, is this under the company's discretion regarding the PF contribution I will make?

Query 2: Tax Exemption on PF and Gratuity Deductions

2. The PF and gratuity deductions... Are they tax-exempt at the time of deduction or at the point of investing? i.e., while calculating tax, is it calculated after all deductions have been made?

Regards,
Abhishek

Please find the answers to your queries.

Provident Fund Contribution

1. 12% of the basic salary is deducted as PF contribution, and the same amount is contributed by the company as well. You cannot choose not to contribute as it is mandated by labor law. Voluntary Provident Fund (VPF) allows you to decide to contribute more for your savings. The PF amount accumulates in your PF account.

Tax Exemption and Gratuity

2. PF deductions will be used for tax exemption. Gratuity deductions will not occur from the employee's end; it is only the employer's contribution.

I hope that clarifies things. Feel free to reach out for any other queries.

First, PF is calculated on the basic salary. If your basic salary is more than Rs. 6500, you can choose not to pay for PF. However, if you have already opted to contribute, you must continue.

For any further clarification, feel free to write or discuss.

Hello everyone, with relevance to the discussions above, I want to learn about the clauses of PF applicable when a person is appointed on an apprenticeship.

If your basic salary is above 6,500, you can choose not to pay PF. Fill out Form 11 and hand it over to your employer. However, if 27,000 is your gross salary or basic salary, then verify the amount of your basic salary on the payslip for a breakdown. If it exceeds 6,500, you can opt to exempt yourself.

Regards,
Jaya

Dear Abhishek,

Understanding CTC and PF Contributions

Nowadays, all private companies will provide you with a CTC figure. The employee's and employer's contributions are deducted from the CTC figure. I have heard that from the very first job, an employee can say no to PF contribution. There is a form available with the PF department for your unwillingness to go with the PF deduction. However, you will lose this option once you have opted for PF contribution.

Tax Exemption on PF and Gratuity

PF deduction is eligible for tax exemption. Gratuity will be paid to the employee after continuous employment for a period of 5 years and 10 days. This amount is not taxable.

Regards