Understanding EPF Deductions: Can I Adjust for More Cash-in-Hand for Employees?

I am deducting EPF from my employees as per the following example: Basic = 11,000, Employee Share @12% = 1,320, Employer's @13.6% = 1,496. Gross Salary = 12,496. Is this correct? If not:

Questions Regarding EPF Deductions

1. Can I now fall back on the wage ceiling of Rs. 6,500 and deduct accordingly so that my employees get more cash-in-hand, and how can I do so?
2. What will happen to the excess amount that has been deposited so far into the EPFO A/c?

Thank you.

As per your mail, we are liable to pay only on ₹6,500 at 12% (basic) on either side. If an employee wishes to have PF deducted, we can cut 12% when the basic is more than ₹6,500. However, as an employer, we will be liable to contribute 12% on ₹6,500 and 1.61% as administrative expenses.

Note: When an employee's basic is more than ₹6,500, they can opt for no PF deduction by providing written consent to the employer.

The Provident Fund (PF) contribution is 12% of PF wages from both the employee and employer. For calculation purposes, the maximum limit of the basic is ₹6,500. This means even if the employee's PF wages are above ₹6,500, the employer is liable to contribute only on ₹6,500, which is ₹780.

However, if an employee desires, they may voluntarily contribute more than 12%. Apart from this, an employer also has to pay some administration charges. The various accounts of the PF Challan are as mentioned below:

- Employee
- Employer

A/c No 1: PF Contribution Account
A/c No 2: PF Admin Account
A/c No 10: EPS Account
A/c No 21: EDLIS Account
A/c No 22: EDLIS Admin Account

- 12%
- 3.67%
- 1.10%
- 8.33%
- 0.50%
- 0.01%

Total: 12% (Employee) 13.61% (Employer)

PF admin charge: The employer has to pay 1.1% of PF wages.
EDLIS: The employer has to pay 0.5% of PF wages.
EDLIS admin charge: The employer has to pay 0.01% of PF wages.

Hence, the total additional percentage the employer has to pay is 1.61% of the basic, so the employer actually pays 13.61% of the basic, while the employee pays only 12% of PF wages.

The employee's complete 12% goes to the PF account, while the employer's contribution of 8.33% goes to the Pension Fund and 3.67% goes to the PF Fund.

Regards,
RAGHU
HR-RAMKY

Thank you for your response. I have been making all the payments as per the details you have mentioned. However, I was calculating based on a basic wage of more than 6,500, as shown in my post, which means I was depositing more than the stipulated amount. Therefore, what I need to know now is if I can start deducting the salary from a basic of only 6,500 for the same members. Also, what will happen to the extra amount that has already been paid?

Hope to hear from you soon.

Thank you.

Correct answers to you are as follows:

You can effect PF deduction of 12% on the entire Basic + DA. To contribute on more than 6,500, a joint request in writing to an officer not below the rank of APFC is necessary. It is a procedural part. The employer's share, including administrative charges, is @ 13.61% and not @ 13.6%. It is not a Gross Salary of Rs. 12,496. It is a Gross CTC.

Yes, you can do it. You are requested to view my posts in the link below:
https://www.citehr.com/443348-pf-con...court-pg2.html

The amount deposited so far is not an excess amount. The amount deposited so far is accumulated in the respective PF A/Cs of all the employees correctly. Hope you have no query unanswered by me.

Thank you for your relevant response. I would like to inquire further:

1. Is there a procedure for deducting the PF from Rs. 6500? Are there any applications required for this?
2. Is there a minimum base salary for PF deduction as of today?
3. Can EPF payments be remitted into a Post Office Savings Account?

Thank you.

Kindly read my response to Mr. Arthy dated 14.12.2012 in the link given earlier to you.

Procedure for PF Deduction from Rs. 6500

There is no specific procedure or application required for not deducting the PF from Rs. 6500. Please refer to my previous response for more details.

Minimum Base Salary for PF Deduction

There is no minimum salary limit for PF deduction under the EPF & MP Act. However, you need to ensure that wages/salary are paid as per the Minimum Wage Act.

EPF Payments Remittance

EPF payments cannot be remitted into a Post Office Savings Account. You need to make the remittance in SBI only in EPF A/c.

Regards,

Thank you again for your timely response. I'd like to rephrase my question no. 3: Can an employee who does not have a savings account with a bank get the EPF payments after cessation into a post office savings account?

Further, one of my employees has crossed 58 years and is still in service. I have been making all the deductions and EPF payments as before the attainment of 58 years. Now, should I discontinue the EPS payment/deduction, and what about the payments that have been done so far into EPS?

Thank you.