Is an Employee Still Covered Under PF After a Salary Increase to 16000? Seeking Clarity on EPF Contributions

Dear Members,

I have a doubt regarding PF contribution. That is, in case an employee has a basic salary of 14000 in the month of January and is under PF coverage. But the next month, a salary increment is done, and the employee's salary increases to 16000. Is he still under the PF act or not? Do we need to contribute to EPF? If yes, on what basis should we calculate it? Please explain with the related section.

AKHIL S

An employee once covered under the PF will continue to be covered irrespective of any increase in salary. Therefore, if their salary exceeds Rs. 15,000, they should contribute at least Rs. 15,000. The employer, in turn, should also contribute at least Rs. 15,000.

Madhu.T.K

Yes, you need to contribute to EPF. If you do not want to contribute to PF, then you need to show that the employee has been unemployed for 2 months.

Consider an employee receiving a basic salary of 20,000. We can calculate it in different ways, but EPS is calculated only up to 15,000 (it was Rs 6,500 before September 1, 2014). This means the maximum amount is fixed at Rs 1,250 (before September 1, 2014, it was Rs 541.00).

Let me correct Karthikeyan that it is not necessary to calculate the contributions (employee and employer) on Rs 15,000. However, if you wish to contribute based on a higher salary, say, Rs 20,000, you can do so. Even if you contribute on a higher salary, the contribution to the Pension Fund shall be based on Rs 15,000. The remaining amount of the employer's contribution shall be deposited in the Provident Fund. In such cases, it will not be exactly 3.67% that goes to PF from the employer's side but more than that.

It is also possible for employees to contribute based on their actual salary, which may be above Rs 15,000, but the employer will restrict their contribution to 12% of Rs 15,000.

Regards,
Madhu.T.K

Please help me in resolving the below-mentioned query:

Suppose my salary is as follows:
Basic: 14122
CCA Allowance: 7250
Gross: 22784

My PF is deducted with a capping of 15000. Therefore, is it necessary to deduct PF on 21372 (including other allowances) or should it be only on 14122? Also, what is my PF contribution? Is it 1800 or 1695?