Can Employees Opt Out of PF Deductions if They Save in PPF? Seeking Clarity on Rules

I have come across a query regarding PF and seek your assistance.

Exemption from PF Deductions

1) An employee in my organization draws a basic salary of ₹50,000 per month. He is now requesting an exemption from PF deductions. Is this possible? Are there any special rules for exemption?

Exemption from EPF Due to PPF Savings

2) He is saving an amount in PPF and is therefore seeking an exemption from EPF. Are there any special provisions for this?

Thank you.

Understanding EPF Act Applicability

The EPF Act applies to an organization where the employee strength, including contract employees, is 20 or above.

As others have mentioned, the PF is deducted on the basic + DA (hereinafter referred to as PF Wages). The contribution is 12% by the employee (deducted from his/her salary) and 12% by the employer.

Out of the employer contribution, 8.33% or Rs. 541/- per month, whichever is less, goes to the pension fund, and the rest (3.67%) goes to the employee's provident fund.

Apart from this, there are charges and contributions to the employee's Deposit Linked Insurance (EDLI) scheme. The total of charges and contributions amounts to 1.61% and is paid by the employer.

The stated limit as per the latest amendment is Rs. 6500/- per month (PF Wages). I would like to clarify one thing: even if the PF Wages increase beyond this limit, no employee ceases to be a member of PF. In fact, one cannot even withdraw the PF if he/she is moving to a company to which the PF Act applies.

An employee is exempt from PF only if the organization is not covered under the PF Act or the first PF Wage of the employee is more than Rs. 6500/-.

If once an employee is covered under the Act, he/she cannot be pushed out of the PF just because his/her PF Wages have gone beyond the limit as stated by the Act.

However, the Act does not force the employee and employer to contribute PF over the PF Wages. For example, if an employee was drawing 6500/- as PF Wages, the total contribution would be Rs. 1665/- (25.61% of the PF Wages, i.e., 12% employee contribution, 12% employer contribution, and 1.61% towards EDLI and charges).

Now suppose the PF Wages exceed 6500/- and are 7500/-. The organization may limit the contribution to 1665/- (25.61% of 6500/-) and not 1921/- (25.61% of 7500/-).

Even if the employer wants to contribute to the increased PF Wages, which is 7500/- in this case, the contribution to the pension fund will be limited to 541/-.

I hope the underlying cases shall clarify this to you.

(A) Basic 6000/- 6500/- 7500/-

(B) PF Cont (24% of basic 940/- 1019/- 1259/-

Less pension cont)

(C) Pension Cont (8.33% or 541/- 500/- 541/- 541/-

Whichever is less)

(D) Charges 97/- 105/- 121/-

Total PF Cont (A x 25.61%) 1537/- 1665/- 1921/-

or B+C+D

Please feel free to have any further questions on this.

attribution https://www.citehr.com/21732-ceiling...#ixzz2jwAFg7RY

EPF vs. PPF: Understanding the Differences

EPF is mandatory, and PPF is voluntary. Therefore, a PPF contribution cannot be a reason for exemption from EPF. If the organization is under EPF, every employee necessarily has to be a member of EPF.