Is LTA in Salary Counted for PF Contributions? Seeking Clarification on Mixed Cases

Hi friends,

Please let me know whether any judgments have been made regarding including LTA in salary for PF contributions. I have encountered a situation where it is included in some cases and not in others. I would be grateful if anybody could clarify this.

Thank you.

The definition in the act is very clear - salary is basic and DA only. There is a case pending before the Supreme Court which is for reinterpretation of the definition. Till it happens, the LTA is not a part of PF contribution.

LTA and Its Impact on PF Contributions

LTA is an annual component of employee remuneration. There is no chance that it will form part of the salary, even if the definition of wages under the EPF & MP Act is amended and all emoluments received while in employment are brought under the definition of wages on which PF is to be contributed.

Normally, LTA will be equal to one month's basic salary, and by including it in any month, the PF qualifying salary would naturally increase and perhaps exceed Rs 15,000. Since the PF Organisation has no right to demand contributions on an amount above Rs 15,000, the significance of its inclusion is very limited.

Regards, Madhu.T.K

You have not mentioned what components under the 'salary' you noticed in these cited cases. There could hardly be any employer eager to pay PF contributions on allowances beyond Basic & DA. That's why I doubt whether you properly understood what was happening in these instances.

LTA (Leave Travel Allowance) Forms

LTA is enjoyed by employees in more than one form. The popular form is 'spend & get reimbursed subject to eligibility norms'; the second one is 'paid lump sum periodically'; and the third is 'paid through salary monthly', and so on. In none of these cases is PF contribution applicable. Frankly, I could not believe any such employer exists. If yes, please let me know.

CTC Pattern and PF Contribution

It's yet another case where the CTC pattern is followed. As you may know, LTA forms part of CTC but is unlikely to account for PF contribution. You may explore the cases you have come across further to ascertain the circumstances they are acting upon for knowledge's sake, though legally PF contribution on LTA is not applicable. There is no judgment to support PF contribution on LTA, to my knowledge so far.

Regards