New Employee with High Basic Salary: Should His Pension Be Deducted Under EPF?

Dear All,

I need your help. A company has a policy of deducting PF as well as contributing PF up to a Basic of ₹15,000 only, even for basics exceeding ₹15,000. Now, there is a new joiner (who was never previously covered in PF) in Mar'15 with a Basic of ₹40,000. His PF is deducted on ₹15,000. My question is whether his Pension will be deducted or not? Please reply.

Thank you.

There is no Pension deduction. As per new guidelines, for a new employee who has never been a PF member in the past and whose salary is above ₹15,000, both the employee’s and employer’s shares of contribution should be deposited into the Provident Fund without bifurcating it into PF and Pension Fund. But in your case, the PF qualifying salary itself is ₹15,000, which is within the limits. It is immaterial if his salary is ₹40,000. What is disclosed is the PF qualifying salary, and that is ₹15,000. Therefore, I believe that you have to bifurcate the employer’s share of contribution into the Pension Fund at the rate of 8.33% on ₹15,000 and the remaining into the Provident Fund.

Regards,
Madhu.T.K

Thank you, sir, for the reply. I would also like to request your guidance on a slightly different case as below:

PF Deduction Policy for New Joinee

If a company has a policy of deducting PF on the entire Basic component (even if it exceeds ₹15,000) of the employee, but the company is contributing only up to the present prescribed limit of ₹15,000.

Now, if there is a new joinee (who was never previously covered in PF) in Mar'15 with a Basic of ₹40,000, his PF will be deducted on ₹40,000. However, will his Pension be bifurcated in this case on ₹15,000?

In such a case, the employer's contribution need not be bifurcated but paid only to the PF account along with his share calculated on $40,000.

Madhu.T.K