% of basic for PF purpose and salary limit for employer for PF contribution

Dear Members
The statutory limit of salary to mandatorily become pf member is Rs. 15000( if he is already not a member).
Can you please guide. Do not consider International workers.
If the attached circular is still valid, the employer has a right limit his contribution on Rs. 15000 only, irrespective of employee`s contribution ?
Please confirm.
I have recently come to know that PF authorities and PF consultants are suggesting that basic should be atleast 50% of Gross salary.
does this hold good for one employee who has gross salary Rs. 100000 and basic Rs. 50000 ?
or this 50% (basic of gross) clause is only for employees whose gross salary is 15000 or less ?
Please share your experience in this regard.
Regards
Puran Dangwal

Dear Puran,
As far as i comprehend your post, PF Ceiling limit and limiting basic pay are two separate points. Basic pay is limited to 40% or a max of 50% of total CTC; this gives an advantage to employees while claiming HRA exemptions; and also raising their PF contribution above the ceiling limit. PF deductions whether to be done on ceiling limit or actual basic pay is mostly mutual between the organizations n employees. Though an organization ends up paying more admin charges on PF if the PF deduction is made on actual basic than the ceiling limit.
For employees earning a gross of 15,000 or less, the general practice is to adjust the basic pay as per the Minimum Wages applicable.
Hope this helps.
Regards
Rahul Chhabra

Dear Mr. Chhabra
Thanks for taking time to reply.
Let me put my query afresh.
Pf authorities and some of the PF consultants are of the view that basic pay should not be less than 50% of the Gross salary. Is it true even if basic salary is more than 15000 Is there anything official about it. Any official communication from PF department in this regard ? If my gross salary is Rs. 60 000, and basic is 18,000, Can pf authority question my employer on this(basic less than 50% of Gross) ? or they will not question the employer as my basic is more than the basic PF ceiling(15000), though less than 50% of Gross ?
Secondly as per the circular, I have already attached employer can limit his contribution to PF ceiling salary which is Rs. 15000. Does this mean that if my basic salary is Rs. 18,000( Gross 60,000), I can contribute on full basic i.e. 12% of 18 000 and my employer can limit his contribution on Rs. 15000 only ?
If yes, then what is the rational of equivalent contribution by the employer? I think this is only when both employee`s and employer`s contribution is limited to 12% Rs. 15000.
Regards
Puran

Dear Puran,
1. PF authorities have laid no guidelines on the % of basic pay vis a vis total compensation. They have defined the ceiling limit for PF contributions. Though Basic pay not only determines PF contributions however also HRA exemptions, Leave Encashment, Gratuity etc. So a lower basic pay reduces the CTC, tax exemptions and other benefits of an employee. As per my experience, PF authority will not question if your contribution is on ceiling limit or higher than it; however will question for sure if your PF contribution is decreased from actual basic to ceiling limit in a particular FY.
2. The circular you mentioned is missing. Both employee and employer have to contribute their share of PF on the same basic wage. In case an employee wants to contribute more, can opt for Voluntary PF.
Hope it helps.
Regards
Rahul

Dear Mr. Rahul
Thanks ji.
regards
Puran

Dear Mr Puran,
Rightly said by Mr Chhabra, the PF authorities have nothing to do with Basic Wages. But as per my practical experience the PF Officials (Enforcement Officer) forces that PF contribution should be deposited as per the MW Act of the appropriate govt.). The Basic wages should not be less than the MW Act.
But if we check the Wages definition under the Act, it says contribution should be paid on gross salary (except HRA). In general we have accepted the PF Wages as Basic Wages of the CTC.
Now come to your second point what should be the PF Wages in case the Basic (being 50% or so) Wages is more than 15k. I would like to say the employer can restrict the PF wage ceiling on Rs. 15000 (for both shares). However, if the employee want to contribute at a higher rate than he can opt for VPF (as already explained by Mr Chhabra).
Pls find attached an article wherein some important court judgement referred and the author has explained his view in general language (Refer to Page 4). Though merely the article can’t be treated as valid document for framing any rule, but if you able to drag out the court judgement that can produced as legal doc.
Hope the above will serve the purpose.

Sir ji.
Thanks.
But is it fair that for a gross salary of Rs.1 Lac, the basic salary is 15k in the salary structure.
In the above case if we keep basic 50K (donot want to reduce other related benefits like Gratuity, leave salary) but restrict PF contribution on Rs.15K, can we do so.
I am of the opinion that we should inform the dealing agent at rpfc in advance in writing, if we do so.
Your thoughts.
Regards
Puran

Dear Mr Puran,
There could be two scenario:-
1 Minimum Compliance as laid down in the Act/Law.
2 There is no bar for maximum employee welfare. That all depends upon establishemtn strategic approach towards employee welfare, profitability, budget etc.
What I suggested is acceptable as per law, if you want to deduct and deposit PF on higher salary than you can do it. Moreover, in the CTC concept, the employer PF also included in CTC. So you can deduct PF on higher wages as well.
I think we don’t need to inform to RPFC in advance. In case any member join on Basic Wages more than 15k and don’t want to make PF deduction, than we need to fill some form and needed employee consent for non PF Deduction.
Senior member can throw more light on the matter.

Dear Puran,
EPFO has given the option to deduct PF at actual basic or ceiling limit if actual basic is higher than the ceiling limit. Thus yes one can have an actual basic pay of Rs. 50,000 but can be contributing to pf at the rate of ceiling limit.
There is no need to inform the epfo unless you are decreasing the pf contribution from actual basic to ceiling limit; but not in the case of vice versa.
Regards,
Rahul

Dear Sir,
Attached please find the Supreme Court judgment on Basic wages for PF Contribution on 28 Feb 19. How can we define the basic wages for calculations of PF ? What is limit of HRA in connection with basic wages ? What is your opinion on supreme court judgement?