Can Employees Choose a Lower PF Contribution Base After a Salary Hike? Seeking Advice on Options

I am working in an agriculture-based organization. I have a query regarding the provident fund. My query is, is it possible for an employee to make his PF contribution on a lesser Basic+DA than his actual Basic+DA? As he was already contributing on his actual Basic+DA.

For example, his Basic+D.A = Rs 12,500/- per month. He was contributing on the above Basic+DA @ 12%. His contribution was Rs 1,500/- per month. Now after a salary revision, his Basic+DA is Rs 15,500, and the contribution to PF will be Rs 1,860/-.

Hence, his contribution to PF increased as his salary increased, but he doesn't want to contribute at a higher salary. Now he wants to contribute to his PF account based on Rs 6,500/- (as per PF law regarding the maximum (bounded) salary for the calculation of employer contribution). Can he do so? If yes, then what procedure does he have to follow?

Is there any other option to switch from EPF to PPF or any other PF scheme? Please help.

Thanks & regards

If you are paying over the ceiling and suddenly you cannot reduce the contribution as per the latest amendment, read Section 12. If you need to contribute to VPF, then it's possible you can contribute up to 100% of your Basic in VPF.

Provident Fund Contribution Options

As we know, Rs 6500 is the maximum limit for both employer and employee contributions. If a new employee receives a salary higher than Rs 6500, they have the option to choose a deduction based on either the actual basic + DA or Rs 6500.

My questions are:

1) Is it possible for an employee to contribute based on Rs 6500 when they have already contributed at a higher basic than Rs 6500 in past months? Can an employee (who earns more than Rs 6500) revise their option for the deduction of PF?

2) Can they transfer or switch their EPF to any other PF scheme like PPF? You mentioned the Voluntary Provident Fund (VPF). Please provide some details about this.

Please help me resolve this situation.

Thanks & regards,
Dinesh Kumar

Clarification on EPF Contribution Limits

After 1976, there have been no amendments to Section 12 of the EPF Act. I think the employee can limit the contribution to Rs 6,500/- now. The Supreme Court has allowed this for employers. So why can't it be extended to employees as well?

Regards,
Varghese Mathew
[Phone Number Removed For Privacy Reasons]

Section 12 in The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

1. [12. Employer not to reduce wages, etc.] No employer in relation to [an establishment] to which any [Scheme or the Insurance Scheme] applies shall, by reason only of his liability for the payment of any contribution to [the Fund or the Insurance Fund] or any charges under this Act or the [Scheme or the Insurance Scheme], reduce, whether directly or indirectly, the wages of any employee to whom the [Scheme or the Insurance Scheme] applies or the total quantum of benefits in the nature of old age pension, gratuity, [provident fund or life insurance] to which the employee is entitled under the terms of his employment, express or implied.

Regards

Dear all,

First of all, I would like to say thanks for your quotes. However, I still have some doubts.

Employee Contribution on Lesser Basic+DA

Can an employee approach the employer for a contribution on a lesser Basic+DA? Should the employer accept the proposal of an employee who wants to restrict their Basic+DA for PF contribution up to Rs 6500/-? The employer has restricted his contribution up to a Basic+DA of Rs 6500/-.

Please suggest, is it possible for the employer to accept it?

Thanks & regards

Employer can't restrict employees' contributions, but he can restrict his own contribution to ₹6,500/-. For employees, reducing their contribution is a better concern for the office. I hope this clears things up.

EPF vs. PPF: Understanding the Differences

I would like to comment on the second part of your query. PPF is not a substitute for EPF. EPF can be maintained either by the EPFO or by a Trust created with the sanction of EPFO. One can opt out of EPF provided one's wages are above Rs. 6,500 per month. He can then save in PPF. However, he will not be able to avail of the pension and deposit-linked insurance scheme if he prefers PPF to EPF. EPF gives more interest than PPF. The employee also loses the employer's 12% contribution, which is a major loss of opting out of EPF. EPF is a social welfare scheme, so it is in the interest of employees to become a member of EPF. Voluntary EPF is contributing over and above the 12% statutory subscription. An employee can contribute more than 12% of his wages and avail of benefits of tax rebate under 80C.

Questions on PF Contribution and Switching Schemes

As we know, Rs. 6500 is the maximum limit for the employer and employee. If a new employee gets a higher salary than Rs. 6500, he has the option to opt for deduction on actual basic+DA or Rs. 6500/-. My question was:

1. Is it possible for an employee to contribute on the basis of Rs. 6500/- when he already contributed at a higher basic than Rs. 6500.00 in past months? Can an employee (who gets a salary more than 6500) revise his option for the deduction of PF?

2. Can he transfer/switch over his EPF to any other PF Scheme like PPF? You wrote about Voluntary Provident Fund (VPF). Please give some details about this. Please help me to come out of this situation.

Thanks & regards,
Dinesh Kumar