Understanding New PF Contribution Rules: How to Calculate Based on Different Salary Structures?

Provident Fund Contribution Query

I am Abhilasha, working as an HR in an IT company. I have a query regarding the new PF contribution rules. The Provident Fund Pension Ceiling increased from Rs. 6,500.00 to Rs. 15,000.00, effective from 1st September 2014.

Generally, PF contribution is calculated on Basic + D.A., but in my company, we have a different CTC structure.

For example:

- Basic: 160,800
- House Rent Allowance (HRA): 64,320
- Conveyance Allowance: 9,600
- Medical Reimbursements: 15,000
- Other Allowances: 132,920
- PF: 9,360
- Total Annual CTC: 392,000

In the old salary structure, PF was considered with a fixed basic of 6,500/-. Now, we are planning to fix the basic at 15K for PF amount calculation.

Question on PF Calculation

My question is, as per this basic of 160,800/- PA and 13,400/- per month, which is less than 15K, can we calculate the PF amount as 12% of 13,400/-, or do we need to calculate the PF amount on Basic + Other allowances at 12%, or 12% on 15,000, whichever is the minimum?

Another CTC Structure Example

Sharing here one more CTC structure, which has a basic per month more than 15K.

For example:

- Basic: 270,000
- House Rent Allowance (HRA): 108,000
- Conveyance Allowance: 9,600
- Medical Reimbursements: 15,000
- Other Allowances: 253,040
- PF: 9,360
- Total Annual CTC: 665,000

In this case, we will calculate the PF amount as 12% on 15,000/-, i.e., 1,800/-.

Thanks,

Abhilasha

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 those employees whose basic salary is between 6,500 and 15,000.

Explanation for Your Case:

1st example: Calculate the PF contribution only on his basic salary and not on BASIC+allowances, i.e., on 13,400.

2nd Example:

My introduction: Your calculation is right. Just simply understand that all the employees whose basic salary is 15,000 or less will be applicable for the PF contribution on their respective salary.

My Introduction:

This is Alok. I am a Cite HR member and have completed my MBA-HR, DLL, and now working as an HR trainee at Cosmo Films Public Ltd. I will be glad to exchange ideas and share knowledge. As I have recently begun my career in this profession, I am also looking forward to professional networking. Please feel free to write to me at [Email Removed For Privacy Reasons]. I would like to know your email ID so that I can send it from my company mail ID. I would be willing to share HR knowledge and professional networking.

Regards.