Is the New PF Rule Now 12.5% of Gross Salary? Plus, Employee Limit for PF Accounts?

Hi Friends, I would like to know whether the new rule for PF is applied, i.e., 12.5% of the gross monthly salary. Earlier, it used to be 12.5% of the basic. Also, is there any minimum limit of employees required to start a PF account for the employees in the company?

PF is 12% on the Basic, not 12.5%. As of now, there is no amendment for 12% on the gross pay. However, PF is calculated on Basic, DA, and other allowances too, except HRA.

Regards

Thank you for the information. It was a bit confusing as there was an update in December 2012 regarding new PF rules, stating that 12% of the gross. Anyway, thank you for the clarification. Also, could anybody help me to know what is the minimum number of employees required to start a PF account for the employees in the company?

Please go through the thread at https://www.citehr.com/443481-pf-cir...-abeyance.html, which will be useful for you. Furthermore, the discussions in the thread at https://www.citehr.com/442860-pay-mo...-salary-3.html will give you a clear picture.

Thank you.

PF Contribution Rate Clarification

The PF contribution rate for employees and employers is 12% only. Except for HRA, basic/DA/other allowances should be considered for 12%.

If the aforementioned elements exceed Rs. 6500, meaning if someone is receiving basic/DA/other allowances more than Rs. 6500, we can cap the PF wage at Rs. 6500 - (6500 * 12% = Rs. 780), resulting in a Rs. 780 PF deduction. Once the basic, DA, and other allowances are less than Rs. 6500, we should not cap the amount, and the contribution rate should remain at 12%.

There is no limit to start PF. From the first day of joining, PF contributions should be taken into account.

Regards,
Jerold

Hi Jerold, I need a small clarification. Can an employee opt out of PF by giving a written request to HR once the Basic + HRA + Other Allowances combined exceed 6500/-?

Regards, SP

Once the employee is covered under EPF, even if there is any hike in wages that exceeds ₹6,500, contributions are mandatory. In this case, if both parties are willing, contributions shall be 12% on basic, HRA, and other allowances; otherwise, it shall be restricted to ₹6,500.

EPF Guidelines Update

Union Labour and Employment Minister Mallikarjun Kharge announced on December 13, 2012, 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 for calculating Provident Fund contributions, is to be kept in abeyance. Therefore, the status quo will continue.

For SSHRIEE CONSULTANCY

An employer can restrict the basic salary ceiling to Rs. 6500 for PF contributions. There is no other way to go about it. If the employee is willing to deduct the entire amount, they can do so, but the organization is not obligated to facilitate this.

Thank you.