Understanding Provident Fund Deductions: Can Employee Contributions Be Adjusted?

I want to know if we deduct the Provident Fund of an employee above the range of 6500/-. For example, on 6500, the employee's contribution is 12%, which amounts to 780/-. If we are deducting 810/- for the employee PF, can I decrease his contribution, or will it increase every year from 810/- PM? Please guide me.

Thanks & Regards,
Jagdish

PF contribution can't be reduced at any point in time. Secondly, if an employee wishes to increase their contribution by more than 12%, you may allow them to do so. However, in that case, the employer is not bound to deduct a higher percentage (more than 12%); they are allowed to contribute at least 12%.

Regards,
Tushar Swar

Mr. Tushar,

The option is open if we receive a declaration from the individual to do so.

R.K.S.INGH

Thank you for your kind reply. I would like to inquire about a matter regarding minimum wages in the hotel industry. Previously, when the minimum wages were increased, the Provident Fund (PF) contribution was 12%, amounting to 810/-. Now, the minimum wages are set at 6500/-. Initially, for a month or two, we continued to contribute 810/- per month for some of our employees. Recently, our consultant has advised us that regardless of any revisions in minimum wages, it is mandatory to increase the PF contribution for these employees from 810/- after a year. Could you please confirm if this is correct or incorrect? Your guidance on this matter would be greatly appreciated.

Thanks & Regards,
Jagdish

Your consultant is absolutely right. You may continue to deduct on ₹6500 until the new amendment is in effect, as the PF authority is increasing the PF ceiling from ₹6500 to ₹10,000.

Regards,
Tushar Swar

Please go through the following judgment to know more details about the PF contribution in the case of Minimum wages.

IN THE SUPREME COURT OF INDIA

MANU/SC/0446/1999
Equivalent Citation: AIR 1999 SC 2459, JT 1999 (5) SC 320, (1999) IILLJ 705 SC, 1999 (4) SCALE 451, (1999) 6 SCC 567, [1999] Supp 1 SCR 22, 2000 (1) SLJ 273 (SC)

C.A. No. 4259 of 1999
Decided On: 04.08.1999
Appellants: Airfreight Ltd.
Vs.
Respondent: State of Karnataka & Ors.

Regards,
Agdesai

The deduction or contribution to the Provident Fund is statutory. The existing salary limit, which is fixed at Rs. 6,500/-, requires a contribution of 12% from the employee's side and an equivalent amount from the employer. Additional contributions above 12% by employees are permitted, but the employer's contribution is limited. In any case, you cannot deduct a lesser amount. The deduction at the existing rate should continue until new amendments come into force.

Regards,
Adoni Suguresh
Sr. Executive (Pers, Admin & Ind. Rels) Rtd
Labour Law Consultant