Can Someone with a Basic Salary Over Rs. 6500 Be Exempt from EPF? When Did This Start?

I would like to inquire if any person can be exempt from EPF if their basic salary is above Rs. 6500/-. If so, when was this rule implemented?

Thanks & Regards,
GAUTAM KUMAR
MOB: [Phone Number Removed For Privacy Reasons]

Current Ceiling for PF Deduction

Currently, the ceiling of salary for PF deduction is Rs. 6,500. Those who are drawing more than Rs. 6,500 could be restricted to Rs. 6,500. However, if the company desires, they can deduct PF for amounts above Rs. 6,500, as it will be a benefit to employees.

Now, it is also likely that the ceiling for PF shall be increased to Rs. 15,000.

Thanks.

Regards,
R K Nair

If an employee drawing a salary above Rs 6500/- per month is already a PF member in their earlier company, they cannot be exempted.

If you appoint freshers whose salary is above Rs. 6500/- (and they have not been a member of PF previously), then only are they exempt from PF.

With regards,
V. Subbarao

You can exempt the employee whose salary is above Rs. 6500/- per month. Please go through the contents of exemptions under the EPF Act - 1952.

An employee joining with a basic salary above Rs. 6500/- and who was not a PF subscriber in their last organization can be exempted from PF. At the same time, the employer will have the employee sign Form 11 during the joining process.

Regards, Mohammad Akram.

Such an employee shall not be treated as exempt but shall be treated as an "Excluded Employee" under the PF Scheme. Please see the definition below.

Excluded Employee Definition

(f) “Excluded employee” means:

2[(i) An employee who, having been a member of the Fund, withdrew the full amount of his accumulations in the Fund under 3[clause (a) or (c) of] sub-paragraph (1) of paragraph (69);]

4[(ii) An employee whose pay, at the time he is otherwise entitled to become a member of the Fund, exceeds 5[six thousand and five hundred rupees] per month.

Explanation: ‘Pay’ includes basic wages with dearness allowance, 6[retaining allowance (if any)] and cash value of food concessions admissible thereon.]

So, it is clear that an employee can only be treated as excluded if either he is a fresher with more than Rs 6500/- monthly pay or he has withdrawn all the amount accumulated in his PF account earlier in accordance with para 69 of the scheme.

However, if any employee has been a member of the PF fund, then he shall always be a member until and unless he settles his dues/account in terms of para 69. The same is prescribed by para 26 of the scheme as retention of membership.

As per law, the employer's contribution will be 12% towards the Provident Fund (PF).

Bifurcation:

- 8.33% will go towards the Pension Fund (calculated on Rs 6,500, so the maximum will be Rs 541 per month).
- 3.67% will be allocated to the Provident Fund (calculated on the Basic + DA of the employee's salary).

If the employee's Basic + DA exceeds Rs 6,500, for example, Rs 10,000, the contribution to the Pension Fund will remain Rs 541, and the excess amount will be transferred to the Provident Fund, making the total contribution Rs 659.