Understanding PF Contribution Limits: What Are the Minimum and Maximum Wage Requirements?

From 1st September 2014, the EPFO has revised the basic wage limit on which PF contribution will be done from Rs. 6500 to Rs. 15000.

Minimum Wage Limit for PF Contribution

Q1. If Rs. 15000 is the upper basic wage limit on which PF contribution will be done, is there a minimum wage limit too? For example, if the basic wage is > X and < 15000, then the employee is eligible for PF – what is the value of X?

Calculation of PF Contribution

Q2. Is PF calculated on 12% of (Basic + DA) or 12% of (Basic, DA, Conveyance, Other Allowance, etc. – heads of pay which are included for PF calculation) and excludes House Rent Allowance, Bonus, etc. – heads of pay which are excluded for PF calculation as per the provisions of the PF Act?

Eligibility for PF Deduction with Higher Basic Salary

Q3. If an employee's basic salary is 20,000 and he wishes for a PF deduction, is he eligible? If yes, then will it be mandatory for the employer to contribute as well (given that the employer would not pay more than 12% of 15000 = 1800)?

Minimum Wage Limit for PF Contribution

Q1. If Rs. 15,000 is the upper basic wage limit on which PF contribution will be done, is there a minimum wage limit too? The minimum wages are prescribed under scheduled employment for a particular company. For example, if the basic wage is greater than X and less than 15,000, then the employee is eligible for PF. What is the value of X? It should be the minimum wages prescribed by the government authority.

Components for PF Calculation

Q2. Is PF calculated on 12% of (Basic + DA) or 12% of (Basic, DA, Conveyance, other allowances, etc., which are included for PF calculation) and excludes House Rent Allowance, Bonus, etc., which are excluded for PF calculation as per the provisions of the PF Act? PF is calculated on Basic + DA/Special Allowance declared by the appropriate government.

Eligibility for PF Deduction with Higher Basic Salary

Q3. If an employee's basic salary is 20,000, and he wishes for a PF deduction, is he eligible? Yes, the company agrees to do so. If yes, then will it be mandatory for the employer to contribute as well (given that the employer would not pay more than 12% of 15,000 = 1,800)? Yes, it is mandatory for the employer to contribute.

Dear friend,

1) The basic salary and DA = the ceiling is Rs. 15,000/-, so the contribution is equal to and less than Rs. 15,000/-.
2) PF is the basic salary and DA; the rest are variables, which is why the authorities have not included them.
3) If the basic salary itself exceeds Rs. 15,000/-, the employer has the full option of exempting paying the contribution. However, if the employee wants to remit the amount, it is the employee-employer relation in contribution. (PF Act is very clear in this regard).

Please let me know if you need any further clarification or assistance.

Dear friend,

Ans 1: If the basic salary + DA is Rs. 15,000 or less, the employee is eligible for taking the PF benefit because the ceiling limit is up to Rs. 15,000.

Ans 2: As per the rule, only the basic salary + DA is considered for deducting the PF amount from the employee's salary.