PF Deduction Confusion: Can We Exclude HRA from Gross Salary Calculations?

Hello All.

I am having a problem regarding PF deduction. Can we deduct PF from Gross Salary excluding HRA?

PF is deducted only on BASIC+DA. It will not be deducted from the gross salary; only ESIC is deducted from the gross salary.

Dear sir,

Deduction of effort basic + d.a. EPF deduct one time. After that, if the basic + d.a. is above the ceiling amount, we cannot stop the deduction of EPF.

Dear Aakash, with regard to PF on gross, the Madras High Court has given a judgment in one of the cases that excludes the HRA; all the allowances shall be a part of wages for the chargeability of PF. However, a review petition has been filed in the Supreme Court. Hence, this issue is awaiting a Supreme Court judgment on whether PF contributions shall be made inclusive of allowances excluding the HRA or not. Until then, follow the existing wages definition as per Section 2(b) of the said act. Should PF be charged on Basic plus DA?

Thanks & Regards,
V. SHAKYA
HR & Labour, Corporate Laws Advisor

Dear Sir,

The latest contribution of EPF sharing ratios is as follows:

- A/c No 1 = 12% EE
- A/c No 1 = 3.67% ER
- A/C No 10 = 8.33%
- A/c No 2 = 0.65% effective from 01.04.2017
- A/c No 21 = 0.5%
- A/c No 22 = 0.01%

Additional charges:
- Minimum Admin Charge = 500/- for A/c No 02
- Min. Inspection Charge = 200/- for A/c No 22
- Non-Contribution minimum admin & Inspection Charge = 75/- & 25/-

Thank you.

You can do so. However, what will happen is the gross salary will be considered as the basic salary for the calculation of gratuity. This is because you intend to deduct PF on the gross salary, whereas it should be deducted on basic & DA, if any.

Dear Mr. Suresh Kaushik,

You have mentioned that "A/c No 22=0.01%." Please note that effective from 01/04/2017, no sum is payable towards EDLI Admin Charges, i.e., A/C # 22.

Thank you.

Hello all,

Greetings of the day! I would like some help from you all. I am currently working in a company where approximately 100 employees work. The company has requested me to provide the best scheme for PF and ESI contributions. Could anyone assist me with this scheme? Specifically, how can I help the company reduce expenses on PF contributions? In other words, how can I have fewer employees included in PF contributions?

Thank you.

Put a lock or ceiling limit; do not deduct the PF of the employees having basic + DA more than 15k.

Also PF can be deducted from the gross salary if the salary has no breakup and is termed as a consolidated salary during probation. After confirmation with a proper breakup according to the pay grade, it could be deducted from Basic + DA.

Dear Mr. Aniket Pathak,

Your statement that "do not deduct the PF of the employees having basic + DA more than 15k" is not tenable legally. An employee who is covered under EPF will continue to be covered under EPF irrespective of his EPF wages going above the EPF wage ceiling of Rs. 15,000/- However, the employer can restrict EPF contribution to the ceiling limit i.e., Rs. 15,000/-. Please go through EPF Act and EPS, 1995 for the sake of understanding.

Even for new employees joining the establishment whose entry-level EPF wages are more than Rs 15,000, you cannot automatically exclude them from EPF coverage. Action should only be taken after obtaining EPF Form No. 11 (New) and based on the information furnished therein. Please note that EPF is a beneficial legislation, and to the extent possible, employers should encourage employees to become EPF members. The rate of interest is higher than the industry standard, and consistently, you receive interest.

You can deduct PF on Gross salary subject to a limit of Rs. 15K as per the EPF Act. If the Basic salary is greater than 15K, Gross salary cannot be considered for PF computation. If Basic+DA salary is greater than 15K, you can deduct PF on it.

Can we deduct PF from gross salary excluding HRA? If anyone has guidance in this regard, please share. Thank you.