Confused About My Salary Deductions: Where Is My PF Money Going?

I joined this company about a year ago with the help of a reference. They gave me an offer letter stating my salary would be 20k, out of which 17,500 would be in hand, and the rest would be for taxes and PF.

This was my first experience with PF deductions, and I had no prior knowledge about tax and PF deductions. I request you to review the reference screenshot of my offer letter for the details mentioned.

All this time, I assumed the company was deducting 2,500, with at least 2,000 being deposited into my PF account from my side and 2,000 from the employer's side. However, upon careful inspection of my salary bifurcation, it appears they are only depositing 960 into my PF account. Hence, my first question is, where is the remaining 1,000 being deducted?

Assuming the 960 is being deposited as a PF contribution, why am I receiving only approximately 300 from the employer's side?

My estimated annual savings were calculated as follows:
Employee contribution: 2,000
Employer contribution: 2,000 x 12 = 24,000

Total deduction: 2,500 x 12 = 30,000

What I am actually receiving is 15,500, which can be confirmed by reviewing my PF passbook attachment.

Thank you for your attention and response.

Salary Bifurcation and EPF Contribution

With reference to your salary bifurcation, your fixed gross salary is 18,655, which was set by your employer. Including your employer's EPF contribution (960) and gratuity (385), it amounts to 20,000. Deducting your EPF contribution of 960 (8,000 * 12%), you should receive 17,695.

EPF is a social security benefit that every employer must ensure they provide to their employees as per norms. No tax is deducted from your salary since your annual salary of 18,655 * 12 is below the income tax threshold.

Dear Sepreta,

First of all, welcome to the community, which is based on "Sharing and Learning."

This is your very first discussion, and I appreciate the way you have explained your query. You have not only provided detailed data but also attached relevant documents to clarify your points. Most newcomers post their queries in a very casual approach with a lot of short forms (like typing a social media message). Very few explain their queries in a proper way.

Understanding Salary Components

Now, coming to your points, you mentioned "salary will be 20k in which 17500 will be in hand." Let me explain: the "Salary" here means your total CTC, which will include your monthly salary and the employer’s other expenses towards your employment in the company. Employees always receive a monthly salary after necessary deductions. We never receive the CTC. As stated by a fellow member, your in-hand salary should be 17695 (Gross salary – EPF, 18655-960). There may be other deductions on account of Professional Tax, Labour Welfare Fund (which may be applicable in your state). You might be getting Rs. 17500/- after those deductions, or it could be that the 17500/- was told as a rounded-off figure.

Clarifying EPF Calculation

Your main concern is for EPF Calculation. Your assumption that the company is deducting Rs. 2500/- or depositing at least Rs. 2000/- is incorrect. When clearly Rs. 960 is mentioned in your offer letter, how can it be 2500/- or 2000/-? Please note once again, 20k is your CTC, not salary. Don't assume that your PF deduction should be Rs. 2500 (20000-17500). It is 960/pm as given in the offer letter and PF passbook as well. So, I think your first doubt of the other 1000/- is cleared now.

However, upon going through the attachment, I noticed your company initially deducted and deposited Rs. 960 (which is absolutely correct as per the offer letter). But later, the company has deducted and deposited a higher PF. Maybe later some salary corrections were done. In Maharashtra, DA is also a compulsory part of the Wages Structure (which is not shown in your letter). Maybe later, the DA component was included/adjusted in your pay structure, and PF is deducted and deposited on DA as well.

Employer PF Contribution Breakdown

The Employer PF is further divided into two parts (Pension Fund and Employer PF). For your knowledge, out of the employer's 12% contribution, 8.33% of Basic+DA (subject to a maximum of Rs. 1250) is deposited under "Pension Fund," and the rest is deposited into Employer PF Contribution. You can see the total of "Employer contribution" and "Pension Fund" equals the Employee Share (5402+2381=7783). So, don't think less Employer contribution is deposited.

So, as of now, your salary and PF (employer contribution) are all fine.

Hope I have clarified your points to your satisfaction.

Hi Sepreta, with reference to your salary bifurcation, your fixed CTC salary is 20,000, which was set by your employer.

- BASIC: 8,000
- HRA: 4,000
- CONV.: 1,600
- MEDICAL ALL.: 1,250
- SPEA. ALL.: 3,805
- GROSS: 18,655

Deductions:

- Employee's share in PF = 12% on basic = 960
- Employer's share in PF (before April 2017) = 13.36% on basic = 1,069 (deducted from your gross salary)
- Gratuity (4.81% on basic) = 385
- LWF (deducted from your gross salary) = 48 (36 Employer's share and 12 employee's share) in Mumbai

IN HAND: 17,538

Hope this helps you!