Is PF Deducted from Special Allowance in Gurgaon? Seeking Clarity on Salary Breakup

Special Allowance and PF Applicability

In my company's salary sheet, I mention a special allowance (salary breakup). I want to know if PF is applicable to the special allowance or not. My company is established in Gurgaon.

Regards,
Ramniwas

The definition of pay under the Employees Provident Fund Scheme, 1952 means basic wages with dearness allowance, retaining allowance if any, and cash value of food concession. In my view, if we refer to this definition, the special allowance should not be treated as part of pay for the applicability of PF. However, if it is established later on, at the time of inspection, that the employer had diverted a lion's share of pay into a special allowance with malafide intention to curtail or escape the PF liability, you will be in trouble.

I am also of the opinion that in case the basic, DA, and retaining allowance of the employees is more than Rs. 6500/- and even then you are paying a special allowance, then no liability of PF on the special allowance will be fastened on you as the employer can restrict the compliance up to the pay of Rs. 6500/- per month.

Regards,
VP Jain

Special Allowance is considered as salary under the PF Act and relevant notification. Please research on Google. However, there should be logic in defining the special allowance as long as you comply with the PF salary limit (at Rs. 6500/- PM).

Regards,
Vinod Bidwaik