PF Deduction Dilemma: Should Contractors Deduct PF for Skilled Professionals Earning Rs. 12,000?

If the contractor engages a "Skilled Professional" with a salary of Rs. 12,000 per month, is the contractor required to deduct PF based on a ceiling of Rs. 6,500, or can he be exempted from PF deduction?

Regards,
Ankur

In this situation, the employee will choose regarding PF deduction on ₹12,500 or ₹6,500 or be exempt from it. But first, we have to determine whether the amount above ₹12,500 is gross wages or Basic + DA.

Thank you, Kishorji, for your assistance. Rs. 12,000/- is Basic + DA. However, in such a case, if the enforcing authority pressurizes for PF compliance, is it legally tenable?

Regards,
Ankur

Yes, it is right and perfectly compliant under the PF Act.

As per the provisions of the Act, an employee drawing a salary (Basic + DA) over the basic exemption limit of Rs. 6,500 is excluded from the coverage of the Act, provided he is not a member of the fund. In other words, if he was not a PF account holder in any of his previous employments, then he need not comply with PF formalities in your establishment. However, for administrative compliance, you can take a declaration from the employee stating that he was not a member and that he is not willing to pay PF contribution.

Hope that helps!

Referring to my previous comment above, you are not liable to pay PF if you were not a member in your previous employment. However, you may opt for PF compliance on a basic amount of Rs. 6,500.

Under ESI, you are an exempted employee as your gross salary exceeds the maximum limit of Rs. 15,000. Hence, you are not liable to pay any ESI contribution.

Hope that helps!