Understanding Provident Fund: Why Is It Split into 8.33% and 3.67%?

Hello all,

Please help me understand why the provident fund (PF), which is 12% of the basic salary, is divided into two forms - one being 8.33% and the other 3.67%. Where does each portion go? Could you please explain this?

Thank you.

Hi Rithika,

Employee contribution to PF is 12%.

Employer contribution to PF is 3.67%.

Employees' family pension fund contribution is 8.33%.

Regards,
M. Dhanasekar

Apart from the above admin charges, the deductions are as follows:
- 1.10% of basic
- 0.5% of basic
- 0.01% of basic

Altogether, the total provident fund contribution for employers is 13.61%.

Thank you, Mr. DHANA.M. Would you please elaborate on the second point you explained? I need more clarification.

Hi,

For employers, the total PF contribution with the family pension fund is 13.61%, inclusive of all the above charges.

Now, PF admin charges have been changed from 1.10% to 0.85%. So, altogether, PF is 13.36% for employers.

Understanding Provident Fund (PF) Contributions

When you deduct PF from an employee's salary, it is at a rate of 12%. However, when you deposit the PF, there are certain other fields mentioned in the challan. They are shown as A/c No. 01, 10, 2, 21 & 22.

1. Employee Contribution (A/c No. 1) is at 12% of Basic and DA.
2. Employer Contribution is at 12%, further divided into two parts: (a) Pension Fund (A/c No. 10) at 8.33% and (b) EPF (A/c No. 1) at 3.67%. The (b) is deposited under EPF similar to employee contribution.
3. Admin Charges (A/c No. 02) at 1.1% of Basic and DA or Rs. 500/-, whichever is higher.
4. EDLI Charges (A/c No. 21) at 0.50% (Employee Deposit-Linked Insurance).
5. Inspection Charges (A/c No. 22) at 0.01% or Rs. 200/-, whichever is higher.

Please note that if any employee draws a basic salary of more than Rs. 15,000, under A/c No. 10 (Pension Fund), a maximum of Rs. 1,250 can be deposited. The difference amount of the employer contribution will then be shifted to A/c No. 01 (EPF).

For instance, if the Basic is Rs. 20,000, the contributions would be Rs. 2,400 (Employer Contribution- No. 01), Rs. 1,250 (Employer Contribution, A/c-10, being the maximum limit), and Rs. 1,150 (Employer contribution-A/c 01).

However, the other heads will be deposited as per the percentage and minimum limit criteria.

I hope your basics for EPF are now clear.

Best regards

Thank you so much for making the concept clear. I have one more question that I posted yesterday but didn't receive any answer. Please answer. Is there a need to deduct PF and ESI for an employee who is on a contract basis and hired directly by the company, not by a contractor? Is it official or mandatory here?

Hi Ritika
Scheme Name Employee contribution Employer contribution
Employee provident fund 12% 3.67%
Employees’ Pension scheme 0 8.33%
Employees Deposit linked insurance 0 0.5%
EPF Administrative charges 0 1.1%
EDLIS Administrative charges 0 0.01%