Is PF Required on Advance Salary Payments? Seeking Advice After Government Notice

Hello members,

My company has paid Rs. 1 lakh as advances to an employee. His basic salary is Rs. 12,000. Now my question is, is it required to deposit PF (whether employee contribution or employer contribution) to the government at the time of payment of advances, or should we comply with PF provisions each month for which the advance has been given? I am asking this because we have received a notice from the government to deposit PF on the advance paid to the employee. Please give your suggestions.

Salary Advance and PF Deductions

A salary advance is an amount recoverable from the employee, either in one installment or through monthly deductions from their salary. This advance is not considered salary earned by working; it is merely a loan from the employer. No PF should be deducted from this amount. Simply reply to the PF inquiry stating that the amount represents an advance paid to the employee and is recoverable from their salary.

If you pay PF on the amount advanced, will the EPFO refund it every month when you collect it from the employee? No. If you have recorded this amount as a salary advance, I don't believe the PF Enforcement Officer will consider it as salary paid. If there is a misunderstanding, you can clarify that the amount represents an advance recoverable from the employee and not salary paid.

I do not think you have to pay PF contribution for the amount advanced by you to your employee.

Can you exhibit the letter received from EPFO in this forum so that a suitable reply could be framed.