Understanding EPFO Circular: Is PF Really Excluded from Your CTC?

Dear friends, please find attached the circular dated 18.3.2014 issued by EPFO on the subject.

Thanks

Thank you for sharing such a knowledgeable circular with all of us, especially as it was just issued yesterday, and you promptly shared it with all members. It is very much appreciated. However, please correct me if I am wrong, but it seems that this circular is intended for the internal department, instructing staff to avoid unnecessary litigation matters by misunderstanding that the employer is doing anything wrong by considering PF contribution in CTC. It is not stated that PF shall not be applicable on CTC; it is only specified how it is logically correct to consider it in CTC. Please correct me if I am mistaken.

Regards,
Tushar Swar.

Kindly explain, in the future, do we need to deduct EPF only for Basic + DA or Gross? If Basic + DA is below ₹6,500, what should we do?

Regards,
Suresh Kumar M

Thank you for sharing the circular issued by the Ministry of Labour on the Provident Fund. I would like to inquire if some companies are conducting their business against the government and PF rules and are not following them properly as per government norms. Even though the PF contribution is only 3 to 5% of the basic salary and is deposited to the PF office, how is it possible that the PF Inspector is overlooking the contribution percentage from both employees and employers?

For example, if the basic salary is 23,295, HRA 11,648, Conveyance 800, and PF 780, the PF contribution should be 12% of the basic salary. Therefore, could you confirm if the above example is correct? I am questioning not only the organization but also the inspection process and the commissioners of Delhi/NCR. How are they neglecting such organizations with over 1,200 employees?

These concerns arose after reviewing the circular. Could you please shed some light on this matter?

Regards,
Silva

As per my understanding, the EPF ceiling is Rs. 6,500 (6500*12% = Rs. 780). If the amount exceeds the ceiling, the employer is not required to cover the basic amount. Please correct me if I am wrong.

Regards,
Suresh Kumar M

Dear Senior, please clarify if an employer can include EPF in CTC (employer contribution).

Regards,
Dhananjay Patil

Dear Team,

I appreciate Agrawal for posting the information. Thanks a ton.

For PF:

PF is always calculated as 12% on Basic + DA + Retaining Allowances, if any. There are two ways:

1. 12% on the above irrespective of your Basic.
2. 12% on the above but a maximum up to Rs 6500/- on Basic or Actuals that are less than Rs 6500/-. Hence, we take it as Rs 780/-. However, there is VDF (Voluntary Deduction Provident Fund). Only the employee can contribute more than 12% on the above. Here, the employer pays only Rs 780/- or as per the 1st Clause if applicable. The employer does not pay VDF.

Employer and Employee PF contributions are added in CTC when the Appointment Letter/Offer Letter is issued, totaling 25.61%. In actuality, this includes 12% employee contribution, 12% employer contribution (8.33% - Employee Pension Fund and 3.67% again added with Employee contribution). On EPF (Employee Pension Fund), a maximum of Rs 541/- is deposited; more than that is deposited in Employee Contribution. Additionally, 1.1% of Basic as Admin Exp, 0.5% EDLI is calculated on Rs 6500/- only if the basic is more than Rs 6500/-; if less, then on Actuals. Also, 0.01% Inspection Charges are calculated on Rs 6500/- only if the basic is more than Rs 6500/-; if less, then on Actuals.

Please let me know if you need any further information in this regard.

Warm regards,

Pranab Chakraborty

[Phone Number Removed For Privacy Reasons]

Employer Contribution of PF in CTC

Employer contribution to PF is normally shown by the company in the CTC (Cost to the Company). It does not mean that they are deducting the PF contribution from the salary. The circular also stated that showing employer contribution in CTC is not wrong at all.

Some companies contribute to PF based on the total salary of basic + DA, even beyond the ceiling amount (Rs. 6500). However, some companies restrict PF contribution to the ceiling amount, depending on the company policy.

Regards,
D. Gurumurthy

Mr. Gurumurthy is absolutely right. Just try to understand the circular exactly. This circular is issued for internal communication to avoid any litigation matters due to misinterpretation of the company's contribution and liability towards social security benefits.

Regards,
Tushar Swar

I am sharing with you an update regarding PF A/c Nos. that will be treated as a UAN from October of this year.

EPFO to Provide Permanent A/C Number from October This Year

The retirement fund body EPFO will start providing permanent account numbers on the pattern of core banking services to its over five crore subscribers from October this year. The permanent or universal account number (UAN) will facilitate subscribers to avoid filing PF account transfer claims on changing jobs. After getting UAN, a subscriber would not be issued a new PF account number on joining a new employer. It is expected to provide great relief to those workers in the organized sector who frequently change jobs, particularly in the construction sector.

The UAN would be one account number allotted to a subscriber for various schemes run by the Employees' Provident Fund Organisation (EPFO) for his or her entire service period with different employers.

"We have engaged C-DAC for preparing a roadmap for implementing the UAN program for our subscribers. We will launch it on October 1 this year," EPFO's Central Provident Fund Commissioner K K Jalan told PTI.

The Centre for Development of Advanced Computing (C-DAC) is the premier research and development organization under the Ministry of Communications & Information Technology for carrying out R&D in IT, Electronics, and associated areas.

According to a senior EPFO official, the UAN will help reduce the workload of the EPFO to a great extent as it receives over 12 lakh claims for the transfer of PF account on changing jobs by its subscribers. EPFO has settled over 1.1 crore PF claims, including PF withdrawal and transfer till February end of this fiscal. It expects 1.2 crore such claims in 2013-14, including around 13 lakh PF transfer claims.

The official said that a large number of subscribers choose to close their PF and pension account with EPFO and seek withdrawal of their funds due to the time-consuming process of transferring PF accounts on changing jobs. However, the EPFO had started the facility of filing online transfer of PF account claims in October last year to make the transaction faster.

During 2012-13, the EPFO had settled 1.08 crore claims, 88 percent of which were processed within 30 days, as prescribed by the body's citizen charter.

Regards