Items Of Salary Package On Which PF To Be Deducted

Our manufacturing company with about 350 employees pays all employees a Basic Salary which is close to and always exceeds the Minimum Wages prescribed for our industry. We have no separate D.A. or H.R.A. In addition to basic, we pay an incentive which is governed by a published incentive scheme and where payment is based on the production of the individual worker.
We have been deducting and remitting P.F. only on the Basic Salary and not on the incentive earnings.
Now we have received a Notice from the P.F. inspector that we should have deducted and remitted P.F. on the entire salary paid including incentive amount.
I would appreciate comments and experience on this issue from our learned friends in this group. Are we right in what we are doing or is the inspector correct?
RAGHAV RAO Hyderabad, Telangana.

Dear Raghav Rao
Is incentive paid to all employees? Refer Section 6 and 6 A of PF Act. for further details you can call me on 9324539537
Thanks and regards
Vicky Pathak
(B.com, DHRM, L.L.B.)

Section 2B of PF Act states that PF is applicable on Production Incentive in the absence of any specific exclusion.

PF should be deducted only on the basic salary and not on the Incentive, HRA or DA as per the rules of PF department.

Dear Mr shivianjay. Kindly refer section 2 b of EPF act. Its applicable on production incentive. Hope the matter will be clear to you after reading it..
Thanks and regards
Vicky pathak

Dear Mr Pathak
My attention has been drawn to the Bridge & Roof, Calcutta, case (cited in 1963 AIR 1474 and 1963 SCR (3)978) where the Supreme Court held that production bonus is covered by the unqualified word "bonus" mentioned as an exclusion in Sec. 2 b ii of the Act and therefore PF is not deductible on production incentive and production bonus.
Do you disagree with this stand?
Raghav Rao

YA GOOD MY FRIEND.

.

THE SALARY U R PAYING IS SOLID AMOUNT

WHICH IS ABOVE MINIMUM WAGE..BUT IT SHOULD

NOT MERELY ABOVE M.W. MINIMUM WAGE

CONCEPT IS AT LEAST SALARY..I MEAN IT IS A

LIVING WAGE..SO TRY TO.PROVIDE UR EMPLOYEES

LIKE THIS...SALARY CONSISTING OF...BASIC

PAY+V.D.A...( VARIABLE DEARNESS ALLOWANCE

RAISED TIME TO TIME FOR EVERY SIX MONTHS ..

G.O.ISSUED BY CONCERNED STATE GOVTS .)

Ok.

NOW COME TO INCENTIVES ADDING TO SALARY IS NOT COMPULSORY.

NO WAY CONCERNED TO P.F.DEPT.OR ITS NOTICE. INCENTIVES ARE NOT REGULAR PAY...THAT TOO VARIES MONTH BY MONTH TO THE WORKER BASING ON THE PERFORMANCE OF THE WORKER.

SO NONE OF THE BUSINESS OF THE P.F.DEPT.

INCENTIVE AMOUNTS ARE NOT PERMANENT PAYMENTS OF EMPLOYEES..LIKE H.R.A.

SO THE ACT OF P.F.DEPT...IS OVERENTHUSIASTIC..

PROTEST IT VTH REPLY YOU WILL APPROACH HIGHER AUTHORITIES OF P.F.DEPT.SAYING THAT U R ..NEGATIVE TO ADD INCENTIVE TO THE SALARY AS PER THE DEMAND OF YOUR WORKERS. GO AHEAD.

USUALLY NOTICES ARE ISSUED BY CLERKS OF THE DEPT.EVEN WITHOUT KNOWELEDGE OF THE INSPECTING STAFF.

SO GO AHEAD..

NO.PROB.

Dear All,
The subject is not straight forward. There are several guideline through official circulars of EPFO how to deal with the subject. I am referring three circulars - (1) 7(1) 2012/RCs Review Meeting/345 dated 30.11.2012 point no(12) and the subsequent circular (2) ref. no 7(1) 2012/RCs Review Meeting/21224 dated 18.12.2012 instructing to keep abeyance of the 1st circular. Circular ref (3) C-III / 110001 / 4/ 3 (72) 14 / Circular / Hqrs./6693 dated 06.08.2014 - some indirect guideline to deal with the situation.
All above circulars are available at the archive of EPFO. I have no idea whether any further circular has been published or not. If we read all three above circulars of EPFO, it will at least guide us how to deal with the subject.
Thanks & regards,
S K Bandyopadhyay
USD HR Solutions

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