Is It Optional to Deduct PF & ESI for Employees Earning Over $15,000? Seeking Clarity

Hi! We have some employees in our company whose salary is above $15,000, and their PF and ESI are not being deducted. Kindly provide me PF & ESI ruling (Government Copy) where it is mentioned that it's optional to deduct PF & ESI of those workers whose salary is above $15,000. Regards

Coverage Under the ESI Act, 1948

Applicability

Under Section 2(12), the Act is applicable to non-seasonal factories employing 10 or more persons.

Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatres, road-motor transport undertakings, and newspaper establishments employing 20 or more persons.

Further, under Section 1(5) of the Act, the Scheme has been extended to private medical and educational institutions employing 20 or more persons in certain States/UTs.

*Note: 14 State Governments/UTs have reduced the threshold limit for coverage of shops and other establishments from 20 to 10 or more persons. Remaining State Governments/UTs are in the process of reducing the same.

The existing wage limit for coverage under the Act is Rs. 15,000/- per month (w.e.f. 01/05/2010).

Regarding EPF, kindly see the attached file on wage ceiling.

Regards,
Abbas.P.S

Department is asking to show where it is written that we may or may not deduct PF if salary is more than 15000.

Wasim Ahsan
9470040025

Thank you, but please provide the ruling where it's written that it's optional to deduct or not to deduct PF for wages above Rs. 15,000/-. Actually, my client is saying it's mandatory to deduct PF even if the wage of the worker is above Rs. 15,000/-. Since I have not deducted PF of workers earning more than Rs. 15,000/-, the client has asked to produce the government ruling for the same. If I fail to produce it, I will be in great trouble for the time being.

Regards,
Wasim Ahsan
+91 9470040025

Dear Wasim, I hope the following details will suffice for you and provide you with an exhaustive idea about your concern.

1. Employees’ Provident Funds (Amendment) Scheme, 2014

- It is specifically written in the "Employees’ Provident Funds (Amendment) Scheme, 2014".
- The Amendment came into force with effect from 1st September 2014.

2. Changes in the Employees’ Provident Funds Scheme, 1952

- Paragraph 2, in clause (f), in sub-clause (ii), for the words “six thousand and five hundred rupees” the words “fifteen thousand rupees” shall be substituted.
- Paragraph 26, sub-paragraph (6), for the words “six thousand and five hundred rupees” the words “fifteen thousand rupees” shall be substituted.
- Paragraph 26A, sub-paragraph (2), for the words “six thousand and five hundred rupees” the words “fifteen thousand rupees” shall be substituted.

Excluded employee: An employee whose pay at the time he is otherwise entitled to become a member of the Fund exceeds [six thousand and five hundred rupees] per month.

Note: Gazette Notification was published on 22nd August 2014.

Regards,
J. Basak

You have the right to divide their salary as per the laws of PF. It is also for your consideration that the ESIC limit increased to ₹25,000/-. The Employees' State Insurance Corporation (ESIC) board has decided to increase the income ceiling limit for employees from the existing ₹15,000 a month for coverage under the ESIC scheme to ₹25,000 a month. This decision will help 32 lakh employees to become members of the ESIC scheme. At present, there are 3 crore employees covered under the ESIC scheme. To a question, he said the board of trustees of the Provident Fund has also decided to increase the interest rate of Provident Fund contributions from the existing 8.5 percent to 8.75 percent.

Has there been any official announcement for the limit to be increased to 25,000? We have not received any notification as yet.

Any circular regarding PF deduction - maximum ceiling salary to 15,000 (Rs. 1,800).

EPFO Contribution After Salary Increase

If an employee's basic salary is increased from $14,000 to $16,000, his EPFO contribution is being deducted from his previous basic salary. Now the question is, after the increase in his basic salary, will he still be a member of EPFO or not? If so, please share with me the EPFO notification or guidelines.

As per the Act, the employer will pay his contribution until the Basic + VDA reaches Rs 15,000.

It operates as per Clause 26A of the EPF Scheme 1952. Yes, a member, once covered, continues to be a member until he withdraws his PF. However, you can restrict the PF contribution in respect of such employees to INR 15,000/-, which is well allowed under the provisions.

Retention of membership

(1) A member of the Fund shall continue to be a member until he withdraws, under paragraph 69, the amount standing to his credit in the Fund or is covered by a notification of exemption under section 17 of the Act or an order of exemption under paragraph 27 or paragraph 27A.

- He will be a member of PF
- PF contribution can be restricted to INR 15,000/-