How Will the New PF Ceiling Limit Affect Employers and Employees Earning Under Rs. 15,000?

Dear Seniors, Kindly furnish me with the appropriate answer to my query as mentioned below:

PF Ceiling Limit Enhancement

As we know, the PF ceiling limit is going to be enhanced from September 2014 onwards to Rs. 15,000; previously, it was Rs. 6,500.

Previously, if any employee had a basic salary of more than Rs. 6,500 per month, it was optional for them to choose PF deduction or not (let's assume that in this case, the employee's monthly drawn salary is Rs. 12,000).

Gross = Rs. 12,000
Basic (60%) = Rs. 7,200

So, he can be exempted from PF deduction if the company wishes; it can provide the PF facility over Rs. 6,500 (Rs. 780 per month).

New Rule from September 2014

My query is, from September 2014 onwards, according to the new rule, all employees who are drawing less than Rs. 15,000 per month will be liable to have PF deduction on a monthly basis on the overall basic salary amount.

Thus, all employees will require new registration for EPF from September 2014 who were not enrolled in EPF in the past due to the old ceiling limit of Rs. 6,500.

Will it create any problems for the employer?

Kindly provide your valuable suggestions at the earliest. I am looking for an appropriate reply.

Thanks,

Neetu Bisht

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Yes, employees and employers need to contribute the amount up to ₹15,000. Above ₹15,000, employees have the option to join. In this case, the employer can limit their contribution to ₹15,000. The employer will not face any problems; just identify the employees over ₹6,500 and enroll them starting from the 1st of September. The ECR generation process remains the same as before.

Regards

In addition to the discussion, I have attached my understanding with three scenarios for the period before the ceiling increase and after the increase. Please confirm whether I am correct in my understanding.

Regards,
Arul Prakash D.

Hi Arul,

For those employees who are new to PF and have a basic salary exceeding Rs. 15,000, the EPS (8.33%) should not be given but should be added to EPF. However, for existing employees, EPS can be given even if the basic salary is more than Rs. 15,000, but 1.16% of the amount is to be given to the Central Govt. The best approach would be to restrict EPS to Rs. 15,000 and calculate Rs. 1250.

This is my understanding.

Thanks,

Mahesh.H.M.M

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Hi Neetu, I have understood as follows:

1. Those employees whose basic salary is less than Rs. 15,000 should get enrolled in PF if they had not enrolled before since their basic was more than Rs. 6,500.

2. Employees new to PF (meaning not new to the company) and whose basic salary is more than Rs. 15,000 should not contribute to EPS but should be added to EPF. In other words, they will not be eligible to receive a pension. They have to find different options like NPS, etc.

Thanks,
Mahesh.H.M.M

EPS Limit and EPF Account Practice

The EPS limit in Account-10 is restricted to ₹1,000 only, with the remaining amount being credited to the EPF Account, as per the previous practice.

Regards

I think your perception of Rs. 1000/- (minimum amount) is incorrect. In that case, employees whose basic salary is Rs. 8000/- or less would see the EPF amount become negative. I checked with the PF department. They said the minimum pension payable by them to the dependents is Rs. 1000/-. If EPS is more, the pension amount will also be higher.

Thanks,
Mahesh. H. M. M.

EPS Contribution Update

Before, we were limiting EPS to Rs. 541/- (not paying more than that). Now, it will be Rs. 1250/-. If you pay more than Rs. 1250/- towards EPS, then 1.16% of salaries is to be paid to the Central Govt (the procedure of payment is not clear to me yet).

Thanks,

Mahesh.H.M.M

As I understand it, the PF ceiling limit is set to be increased from September 2014 onwards to ₹15,000, compared to the previous limit of ₹6,500. Will this change have any impact on the percentage (%) of the PF account?

The admin charges percentage rate remains the same as before, but the value has increased due to a change in the slab. The increase will occur if you had restricted PF to Rs. 6500/- only, even if your basic would have been more than Rs. 6500/-. If you were to be paying PF on the full basic, then admin charges would not differ.

Example of Admin Charges Calculation

For example, if your basic were Rs. 20000/-, but you were paying PF on Rs. 6500/-, then admin charges were Rs. 6500 * 1.61%. Now it will be Rs. 15000 * 1.61%. If you were paying PF on the full Rs. 20000/-, then your admin charges would have been Rs. 20000 * 1.61%. Now it will also be Rs. 20000 * 1.61%. Only EPS will change from Rs. 541/- to Rs. 1250/-.

Thanks,

Mahesh.H.M.M