Understanding PF Contributions: Will Your Salary Change with a 15,000 Rupee Base?

Hi all, if a person's basic salary is 15,000 rupees per month, what is his PF contribution as per the revised structure? For instance, if the PF contribution is calculated based on 15,000 (15,000 * 12%), will the employee's salary increase or remain the same? Please advise regarding this.

Employee salary will remain the same. If the basic salary is 15,000, then there will be more deductions. His PF deduction will be 15,000 * 12% = 1,800/-. The only thing is the net salary will reduce compared to the earlier net take-home, and even the company contribution to PF will increase.

Regards,
Jeevarathnam P

Hi, another query arises. If a person's gross salary is ₹15,000/-, is their basic pay ₹6,000/-? Is the PF calculated from ₹6,000/- or ₹15,000/-? Please clarify.

It simply means that the employee whose basic salary is above $6,500 and $15,000 or less shall be included in the PF scheme. It does not mean that you have to increase the salary. Earlier, it was optional for the employer to deduct the PF of those employees whose basic salary is above $6,500. However, most companies do deduct PF regardless of the basic salary. Now it is mandatory to deduct the PF for employees whose basic salary is between $6,500 and $15,000.

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Hi, PF will be calculated on $6000. It is always based on the basic salary and not the gross salary.

I agree with your views. I am asking if a person's gross income is ₹15,000/-, will the basic salary come under ₹6,000/-? PF will be deducted from the ₹6,000/-. Above ₹15,000/-, they can be exempted from it.

Yes, if the basic salary is above 15,000, they can be exempted for the difference in the amount. However, most organizations do deduct PF even if the basic is above 15,000. May I have your email id?

Thanks & regards.

Hi Amirtha Varshini, if the gross is $15,000 and Basic+DA is $6,000, then PF shall be calculated on $6,000 only.

Updates! Updates! On the above PF revision. Employees whose basic salary is above 15,000 now have the option to allocate all PF contributions into the PF account instead of placing 3.67% in the pension account. The same option is available for employer contributions towards this category of employees. If I am mistaken, please correct me.

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Eligibility for Provident Fund (PF)

The eligibility for PF is for those who are receiving total emoluments of Rs. 15,000 or less. Is that right?

The next question is, under the current circumstances, suppose an employee is receiving Rs. 13,000 as their total emoluments. For how much do we have to deduct? Should we deduct only for Rs. 6,500 (the previous limit) or Rs. 13,000?

Understanding PF Calculation on Basic Salary

PF is not calculated on Total Emoluments (Gross Salary). It is calculated on (BASIC+DA) or BASIC only. If the employee's total emoluments are 13,000/-, there is no clarity. Please refer to his Basic Salary, on which the deduction is 12%.

For better understanding, consider the following example:

Suppose his Basic Salary is 15,000/- (not Total emoluments or Gross salary).
- Employee Contribution: 12% on 15,000 = 1,800
- Employer Contribution:
- EPS: 8.33% on 15,000 = 1,249.5
- EPF: 3.67% on 15,000 = 550.5
- EDLI charges: 0.5% on 15,000 = 75
- EPF Admin charges: 1.1% on 15,000 = 165
- EDLI Admin charges: 0.01% on 15,000 = 1.5 (round off to 2).

I hope I have clarified your doubt. Please let me know if you have any queries.

Regards,
T. Prathap

https://www.citehr.com/504737-employ...#ixzz3D4cfRdD1

Your query is not clear. To be eligible to contribute to the Provident Fund, only his/her Basic Salary and Dearness Allowance should be taken into consideration for PF contribution, not the gross salary. The gross salary, whatever it may be, does not matter.

Provident Fund Contribution Ceiling

Previously, the ceiling was Rs. 6,500 (Basic + DA). Now, this has been increased to Rs. 15,000 per month. If the Basic and DA are less than Rs. 15,000, the contribution should be based on the actual Basic and DA earned by the employee. If the salary is above Rs. 15,000 per month (Basic and DA), then the ceiling will apply, either restricting to the ceiling or contributing based on actual earnings, depending on the employer's policy.

Importance of Provident Fund Contribution

As an employee, one should not skip contributing to the scheme as it serves as a form of savings for the employee. Whether there is a ceiling or not, contributions should be made. This is a long-term saving and is referred to as Bhavishya Nidhi. Believe it or not, our contributions when we joined the scheme used to be only Rs. 12 per month back in the sixties. Now, you can compare the past, present, and future yourself.

Regards,
Adoni Suguresh
Sr. Executive (Personnel, Administration & Industrial Relations) - Retired
Labour Laws Consultant

Clarification on PF Contribution Rates

The above discussion was very useful for me, and I would like to clarify a few doubts I have. In earlier PF contributions, if the basic salary of the employee is Rs. 6,500/-, they could be exempted from PF. Otherwise, 12% would be deducted, i.e., 6,500 * 12% = Rs. 780 was the contribution to the PF account. Even if the basic salary was more than Rs. 6,500/-, a flat rate of Rs. 780/- was deducted. In our company, we deduct a flat rate of Rs. 780/- for employees who have salaries both above and below Rs. 6,500/-.

From the above conversation, I have learned that if the employee's basic salary is Rs. 15,000/- or more, he/she can be exempted from PF. If we calculate 12% of the basic salary of Rs. 15,000/-, it may come around Rs. 1,800/-. Is this Rs. 1,800/- the flat rate we have to deduct for all employees, or is there any other flat rate to be deducted?

Thanks in advance for your replies.

If the basic wages are ₹15,000 or above, you can restrict the contribution to ₹1,800. If the basic is less, then you may have to contribute 12% of the wages. For example, if the basic is ₹10,000, then the PF contribution will be ₹1,200.

There have not been any extra changes in the rules and regulations of PF. Only the limit of PF has been extended from Rs. 6500/- basic to Rs. 15000/- basic salary. The rest of the rules are the same for the PF fund and pension fund.

Furthermore, PF can be deducted from the actual basic salary of the employee even if it exceeds Rs. 15000/-. It is a contractual agreement between the employer and employee, which is mentioned in the Appointment Letter.

If the employee earns a basic salary of more than Rs. 15000 and does not wish to contribute to PF, the employer takes FORM 11 from them and submits it to the PF office along with a letter.

Regards, Rahul

Dear seniors, please clarify my question:

Administrative Charges Calculation

1.1% administrative charges will be calculated on the Basic amount without a ceiling of Rs. 15,000/- or will be calculated on Basic with a ceiling of Rs. 15,000/-?

(Our Principal Employer is calculating flatly at 13.61% on Rs. 15,000/- (previously Rs. 6,500/-) even if the Basic amount is more than Rs. 15,000/-.)

Kindly clarify the same.

Regards,
AHC Ansari/Admin
RailTel Bangalore

If an employee's basic salary is less than ₹15,000, suppose ₹12,000, the employer contribution would be 13.61% on ₹12,000, which equals ₹1,633.2 (rounded off to ₹1,633).

If an employee's basic salary is ₹15,000, suppose ₹12,000, the employer contribution would be 13.61% on ₹15,000, resulting in ₹2,041.5 (rounded off to ₹2,042).

If an employee's basic salary is more than ₹15,000, suppose ₹20,000, the employer contribution would still be 13.61% on ₹15,000. Even if the employee contribution is 12% on ₹20,000 = ₹2,400 or 12% on ₹15,000 = ₹1,800, the employer contribution remains the same if the Basic + DA is more than ₹15,000.

I hope I clarified your doubt. Please let me know if you have any queries.

Regards,
T. Prathap
HR Executive
Human Resource Department
Narayana Health Group of Hospitals
[Email Removed For Privacy Reasons]
[Phone Number Removed For Privacy Reasons]

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