Is PF Now Calculated on Gross Salary? Seeking Confirmation and Circular Details

Dear Seniors, it was disheartening to hear the news that the calculation of PF will now be based on the gross salary. Could anyone confirm this news for me? Additionally, I would appreciate it if someone could provide me with the circular and explain the implications of the E-Return Tool for this amendment.

Thanks & Regards,

Alin Ganguly

Please refer to the discussions we had earlier in this forum. You may not have to worry as the ceiling limit has not yet changed, and there have been no alterations made from the circular. We need to wait until we receive any information on this issue. Until then, PF would remain with the same ₹6500/- limit.

CiteHR Links:
https://www.citehr.com/442878-pf-con...llowances.html
https://www.citehr.com/442860-pay-mo...er-2012-a.html

PF Deduction on Allowances and Employer Obligations

There is nothing new as it has already been held by the Hon'ble S.C. that any allowance paid uniformly is subject to PF deduction. Various High Courts have given different judgments on such issues, and the latest matter is still pending before the Hon'ble Supreme Court. The situation will take its final shape after the outcome of this case.

On the other hand, the employer is bound to deduct and deposit PF due as per statutory provisions only. The ceiling is still at Rs. 6500. If an employee wants to contribute on a higher salary, he can do so only with the consent of his employer, but the employer is not bound to deposit his share on such an increased amount.

Again, if the employer wants to restrict the ceiling up to Rs. 6500, he can do so. If he is contributing on a higher salary, he can reduce it but only with the permission of RPFC.

However, CPFC has given significant relief to employers by streamlining the working of officers concerned. Inquiries will be held only when found from documents on record, for a period of 7 years in normal cases, only after serving a notice, supplying a basis for an inquiry, and only in respect of identifiable employees, etc.

Regards,
A.K. Chandok
RPFC (Retd.)

Hi Members, I have a question regarding the ceiling of Rs. 6500 for PF. Does this mean that anybody with a basic salary of Rs. 6500 does not have to contribute towards PF?

Thanks.

Please clarify whether an employee whose gross salary is above Rs. 20,000/- is required to have a deduction of PF, or if it is the employee's choice.

"Provident Fund Circular Kept in Abeyance: Labour Minister

Union Labour and Employment Minister Mallikarjun Kharge on December 13, 2012, stated that the Circular dated November 30, 2012, regarding Guidelines for Quasi-judicial proceedings under section 7A of the EPF & MP Act, 1952, issued by the EPFO on the inclusion of certain allowances, etc., for calculating Provident Fund contributions, is to be kept in abeyance. Therefore, the status quo will continue.

I have received the above extracts from Labour Law Reporter, Delhi."

Yes, sir, it is correct that this has been reported in the recently received mail by me from LLR.

Regards, Chandok AK

Guideline on PF Contribution Under Section 7A

A guideline was published in newspapers on 30th Nov '12 by CPFC regarding quasi-judicial matters under Section 7A to all his REFC. In the above-mentioned guideline, CPFC advises all REFC offices that if any allowance is paid uniformly, it will be covered under PF contribution. Based on that allowance, PF contribution will be calculated. However, this order has been put on hold by the Union Labour and Employment Minister.

Regards

PF Circular Kept in Abeyance, Says Kharge

Union Labour and Employment Minister Mallikarjun Kharge on Thursday said the November 30 circular issued by the Employees Provident Fund Organisation (EPFO) on the inclusion of certain allowances for calculating Provident Fund contribution has been kept in abeyance. Talking to The Hindu here, he said since there were a lot of queries and confusion on the circular issued by the Chief Commissioner of Provident Fund, the government had decided to keep it in abeyance until further order. “So the status quo will continue.”

Informed sources said though the circular — on fixing the PF contribution while calculating employees' basic wages — contained nothing new and only highlighted what was there in Section 2 of the EPF Act, there was a lot of confusion among employers. The circular stated that all allowances, except a few, should be taken into account for calculating wages, and from that, the PF contribution of employers had to be arrived at. This meant an employer had to contribute more towards PF for the employees. However, it did not clarify which of the allowances were to be taken into account for calculating basic wage.

Originally, the circular was issued to arrest the growing trend among some employers to lessen their burden on PF contribution by splitting the basic salary into various allowances and thus bringing down their contribution. This results in a loss to employees. There are over 5 crore subscribers in the EPFO, and employees have to contribute a statutory minimum of 12 percent of their basic salary towards PF, and an equal amount is contributed by employers.

The circular said basic wages “encompasses all payments except the specified exclusions. All such allowances which are ordinarily, necessarily, and uniformly paid to the employees are to be treated as part of the basic wages.” PF does not cover certain “specified exclusions” like “cash value of any food concession; any dearness allowance ... all cash payments by whatever name called paid to an employee on account of a rise in the cost of living, house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment…”

Regards, Jana Venkata Ramakrishna

[Phone Number Removed For Privacy Reasons]

Update on PF Calculation Circular

On 14-12-2012, a news report in The Hindu states that the Honorable Minister for Labour has assured that the circular is being kept in abeyance. This is good news for employers.

Regards,
rajanassociates