Can Employers Switch PF Deductions from Actual Basic Salary to Statutory Cap?

One of my clients based in Pune is deducting PF contributions from the salary of the company's employees based on their Actual Basic Salary drawn. For example, if the Basic Salary is Rs. 19,000/-, then they deduct a PF Contribution of Rs. 2280 (i.e., 12% of Rs. 19,000/-). Similarly, if the Basic Salary is Rs. 23,000/-, they deduct a PF Contribution of Rs. 2760 (i.e., 12% of Rs. 23,000/-), and the employer also contributes an equal amount as per the PF Act.

Recently, they discovered that they should deduct PF contributions based on the statutory cap of Rs. 15,000/- and not on the Actual Basic Salary drawn.

Query:

1. Can they now change the practice of deducting PF contributions based on the Actual Basic Salary and instead start deducting PF on the statutory prescribed cap of Rs. 15,000/- per month as the Basic Salary for all existing employees?

2. If the answer to the above is NO, can they do it for new employees joining from this/next month?

3. If the answer to the above is YES, can they implement it immediately, or should they wait for the new financial year to start?

Query Response:

1. Can they now change the practice of deducting PF contribution on the Actual Basic salary and start deducting PF on the statutory prescribed cap of Rs. 15,000/- per month as the Basic salary in respect of all its existing employees? - You can do so with due consent from all employees in a written request letter to PF authorities to make such a change.

2. If the answer to the above is NO, then can they do it for new employees joining from this/next month? - With employee consent, you can keep the current PF ceiling of Rs. 15,000.00.

3. If the answer to the above is YES, then can they do it immediately or wait for the new financial year to start? - You can do it immediately with proper information provided to all employees as well as the PF authorities.

Thank you, Prashantji, for your quick response.

On oral inquiry with the PF authorities, they stated that you cannot change your practice for existing employees, but for new employees, you can deduct it on the statutory cap of Rs. 15,000.

If we put our issue in writing to the PF authorities, do you think they will reply differently because deducting PF contribution on the statutory cap of Rs. 15,000 is perfectly in accordance with the PF Scheme, 1952.