Is P.F. Deduction Mandatory for Salaries Over 3.5 Lacs? Let's Discuss

Is P.F. Deduction Compulsory?

Hi, thank you for reaching out to us. In response to your query, I would like to confirm that P.F. deduction is indeed mandatory if your total annual salary exceeds 3.5 lacs. If you have any further questions or require additional information, please feel free to ask.

Regards

PF deduction is compulsory. The amount and the PF are calculated on the Basic instead of the annual salary.

Regards,
B. Anand Kumar

Dear Sudhakarneelu20000, In this forum, there have been several discussions on this subject up to now. Different views have been expressed by many members, but very few views are correct.

Even the above view is not entirely correct and complete. You can research and find my views on exempted employees within the meaning under para 2(f) of the EPF Scheme. I do not wish to repeat it again.

When an employee's salary (Basic + DA) is more than Rs. 6500/- per month and he is not already a member (in his previous assignments, if any) of the EPF, deduction of PF from the employee and equal contribution from the company is not mandatory. In such cases, it purely depends on management policy.

Can I request you to kindly provide the relevant provision, notification, circular, or any other document to support your previous response?

Thank you.

You can refer to the Employee's Provident Fund Scheme, 1952, Sub-section (f) of Section 2, which defines "Excluded Employee" as:

i) An employee who, having been a member of the fund, withdrew the full amount of his accumulations in the fund.
ii) An employee whose pay at the time he is becoming a member of the fund exceeds 6,500 per month.
iii) An apprentice.

In case an employer wants to keep an employee out of PF, he needs to ensure that the employee is not an existing member in PF and is drawing more than 6,500 (Basic+DA) at the time of joining. Hence, the employer needs to collect Form-11 from the employee if they want to exclude them on the above grounds to ensure non-membership in PF.

It is important to remind you that once a member joins PF, they will continue to be a member regardless of the quantum of salary.

Regards,
Pratap

I would like to add to your last sentence that "where the monthly pay of such member exceeds Rs 6500/-, the contribution payable by him and that of his employer shall be limited to amounts payable on monthly pay of Rs 6500/- including DA, retaining allowance (if any), and cash value of food concession".

Regards,
BS Kalsi
Member since Aug 2011

Thank you very much for responding to me. I have re-read all the posts in this thread, including both of your posts, very carefully. I would like to request you to kindly reconsider the following quote:

Thank you for your attention to this matter.

Best regards,

I have quoted this keeping in view the options available to an employer in case of an employee (not an existing member in PF in his past assignments) drawing a salary (Basic+DA) exceeding Rs. 6,500. The options available to the employer are:

a) Straight away can exclude the employee from PF, or

b) Can contribute (limit) only Rs. 6,500 irrespective of the higher salary (Basic+DA), or

c) Also can contribute on the total Basic+DA (which may be any amount more than Rs. 6,500).

Hence, I said it depends on management policy.

Regards,
PRATAP

Dear Pratap ji, Thank you very much for your response. With due respect to you, Sir, your seniority, and knowledge, I beg to differ with you.

According to my knowledge, it is the option of an employee drawing a salary of more than Rs. 6500/- whether to join PF or not. This option is not with management. If management has such a policy, it is not legal, in my view.

Regards

Sorry to differ with you. I agree with you as far as employees' choice is concerned. I am sure that management also has the option to contribute or not contribute to PF for an employee drawing more than 6500 PM on the day of his joining, in case he is not already a member of PF (in his previous assignments). To ensure that he is not an existing member in PF, the employer needs to collect a declaration in Form-11 before excluding him from PF.

I agree with you on one aspect - an employee contributing to PF cannot be excluded from PF on the pretext that his salary exceeds 6500. Once a member of PF, they can continue to be a member even if their salary exceeds 6500, and the employer will not have a choice. We are following the above in many organizations and have never had a problem during periodical inspections.

Hope you may be convinced.

Regards,
PRATAP

Dear Pratap ji, Thanks again for your response. We differ from each other on one point, i.e., management choice when the salary of an employee is above Rs. 6500/- and he is not a member of PF previously. May I request intervention/opinion by experts in this regard? We have Shri. AK Chandok ji, RPFC (Retired), as our member. I request our Moderators to draw the kind attention of him to this thread and enlighten us in this regard.

First of all, I would like to appreciate the individuals above who referred to the law, as clearly written in the EPF Act about excluded employees. However, if somebody once becomes a member of EPF and has not withdrawn the EPF from a previous employer, they cannot be exempted from EPF in that case. The employer's liability is fixed up to 6500.

For example, if a new employee joins the organization and their basic salary plus dearness allowance is 20000 per month, but they were a member of EPF in their previous company, in that case, they are entitled to EPF in our company as well. However, the employer's liability will be fixed up to 13.61% of 6500. If the company wishes to deposit more than that, it is all about mutual understanding in that case.

Regards

How to calculate PF when there is some deduction, say leave of 10 days is deducted from the salary in a particular month? Will PF remain the same as in the previous month, or do we have to recalculate according to this leave deduction?

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To calculate Provident Fund (PF) when there is a deduction such as 10 days of leave being deducted from the salary in a particular month, you generally need to recalculate based on the reduced salary amount after the deduction. The PF contribution is typically a percentage of the basic salary and any other applicable components of the salary. Therefore, if the salary is reduced due to leave deduction, the PF amount would also be adjusted accordingly. It's important to ensure that the PF calculation accurately reflects the actual salary for the month, taking into account any deductions that impact the salary amount used for PF calculation purposes.