How Should I Handle PF Deductions for an Employee with a Basic Salary of Rs. 16,000?

Hello all, I have an employee who has a basic component in the salary of Rs. 16,000. He wants to continue deducting PF since he was deducting it in his previous company. Can you tell me how much PF we should deduct - 12% on the basic, i.e., on 16,000, or can we deduct PF on the maximum applicable limit of 6,500 also?

Thank you.

This depends on your policy. However, you should apply a uniform policy to every case where the basic salary is above Rs 6,500/- per month.

Varghese Mathew

PF Deduction for Employees with Higher Starting Salary

Where the employee has a starting salary of more than Rs. 6500 (Basic + DA) and he wants to continue to have a PF account, he is entitled to do so under the law. Under the law, you are required to deduct and pay PF at 12% on the actual salary or Rs. 6500, whichever is lower. Therefore, in this case, you are required to deduct 12% of Rs. 6500 and contribute the same amount from your side. However, the employee can opt for a higher deduction. You are not required to match the same amount as the employer's contribution.

Hope this clarifies your doubt.

I have a query. Is it mandatory to deduct the PF at 12% on the actual salary or on Rs 6,500, whichever is less? Because my actual basic pay is more than 6,500, and a 12% deduction is happening on the actual basic pay itself. Please update.

Thanks,
Naveen.

No, it is not mandatory to deduct PF beyond 12% of ₹6500. The excess will be voluntary. However, many companies have a policy of deducting more (and give a matching contribution from the employer side). This is beneficial to you, so you should let it continue.