Understanding Provident Fund: How Is It Calculated and Who Qualifies on a Rs 10,000 Salary?

Hello, I\'m seeking clarification on the following:

1. The method for calculating Provident Fund (PF).
2. The criteria for individuals eligible for PF deduction.
3. A detailed salary breakup for someone earning a monthly salary of Rs 10,000.

Thank you.

Hi, I would like to clarify the following:

1. Method of calculating PF
2. Who are the people eligible for deducting PF
3. What could be the exact salary breakup if a person's monthly salary is Rs. 10,000?

Answers:
1) PF is generally 12% of basic+DA, but sometimes companies have a fixed amount of PF, say 660 or 780.
2) Establishments employing 20 or more persons are required to deduct PF from the salary of employees.
3) The salary breakup for a monthly salary of Rs. 10,000 is not fixed. It varies from company to company. But, in general, it includes Basic, Conveyance (800), HRA (40% or 50% of Basic), special allowance, medical allowance, etc.

Hope this answers all your questions.

Dear All,

Please find attached the document that can help you.

Regards,
Vipin

I have a query. Is the PF calculated as a 12% contribution from both the employee and the employer, right? That means the company contributes 12% of the basic salary of the employee separately and does not deduct it from the employee's salary every month, correct?

Because my basic salary was Rs. 6500, and my company was deducting 24% monthly as PF contribution, not contributing separately. Kindly guide me on this. My salary was Rs 13000, with a basic of Rs. 6500, and the monthly deduction was 24%, i.e., Rs. 1560 (which should have actually been Rs. 780). Kindly calculate my PF amount for one year.

Mr. Gaurish,

PF Wages consist of Basic+VDA+FDA+Lunch Allowance, etc. Generally, 12% of wages will be deducted from the employee's salary, and the same amount, 12%, will be added by the employer.

Suppose:

Basic 6500

Less PF (12%) 780

Net Salary 5720

Ur PF Contribution 780

Less 8.33% on 6500 541 (To your Pension Fund)

Ur Balance amount in PF 239

Add Employer 12% Contribution 780

So, your PF Contribution is 780/- (12% of 6500/-), and the Employer PF Contribution is 780.

Out of your contribution, 8.33% of 6500 (i.e., 541) goes to your Pension Fund. The rest of your contribution, 3.67% (Rs. 239), and the Employer Contribution to you, i.e., 12% (780), together amount to Rs. 1019/- that goes to your Provident Fund Account.

I hope your PF Salary is 13000/- with Basic at 6500, and you may be paid DA or (VDA + FDA) and Lunch Allowance.

If your PF Salary is 10000/- (Your PF deduction is 1200/-, and the employer PF Contribution is 1200, out of 2400, Rs. 541 (8.33% of Rs. 6500) goes to your pension fund, and the rest, 1859, goes to your Provident Fund.

Note: If PF Wage is more than 6500/-, an amount of 541 (i.e., 8.33% on 6500) only goes to the Pension fund.

If you have any doubts, please provide your wage components, and I will clarify your doubts.

Regards,

PB Rama Swaroop

Dear Sir,

I am newly preparing the PF statement. How much salary is the minimum applicable in PF when applying for the employee?

Regards, Prabhu

Inquiry About Provident Fund (PF) Components

I would like to know if there are any new amendments or notifications regarding the change in the PF components. For example, if an employee has components of Basic, DA, HRA, Conveyance, and Special Allowance. Normally, for PF calculation, we consider Basic + DA. However, I have recently learned that if the sum of Basic + DA is less than 6500.00, then Special Allowance should also be considered as a PF component, and PF should be calculated on Basic + DA + Special Allowance.

Kindly clarify the above.

Regards,
Saraswathi.P

Clarification Needed on PF Calculation Method

I have a little confusion regarding the method of calculation for Provident Fund (PF). Before 2011, PF calculation was based on three conditions outlined in the HR policy of that particular company.

In the first condition, PF (EE) was calculated on the Basic Payable salary with no ceiling.

In the second condition, PF was calculated based on the ceiling limit of ₹6,500.

In the third condition, PF would be deducted from those employees' accounts whose basic salary is up to ₹6,500.

However, I am confused about whether in the second and third conditions, the ₹6,500 is the ceiling limit of Basic Payable wages or Basic Pension wages.

Kindly help me out as I am stuck and unable to understand the practice of PF in either case.

Thanks in advance,

Nupur Shukla

Sir,

My first question is, is it possible and right for an employer to choose not to contribute to PF for employees?

The second question, which relates to the first, is as follows: my employer is requesting either a 25% deduction from my current basic salary or a reduction in the basic salary followed by a 25% deduction. In both scenarios, the employer will not make any contributions. Is this correct?

Thank you.

Hi Rebecca/Saraswathi,

You should refer to this article: Provident Fund - What you need to know. It pretty much covers all the questions that you may have regarding Provident Fund.

Another pretty useful article is the one on how to register for PF. Registering for Provident Fund - Step by Step guide. I've also attached the PDFs of these articles to this email.

Dear Seniors, Greetings of the Day!!
I am preparing the PF statement for the first time. Could you please guide me on how to calculate it with a suitable example? Also, could you explain how to calculate DA, Special Allowances, HRA, etc.
Thank you.