PF Contributions from both Employer & Employee - is there any provision or rule which says that Employee also needs to be restricted to 1800?

PF Contribution Deductions

We are deducting PF contributions as follows:

Employer: 12% on the basic up to the maximum limit of 15,000/- = 1,800, even though the basic is more than 15,000/-. For employees whose basic is less than 15,000/-, we are paying 12% on an actual basis.

Employee: 12% on the actual basic irrespective of any upper cap.

Query on Employee Contribution Cap

My query: Is there any provision or rule that says the employee also needs to be restricted to 15,000/- = 1,800/- even though the basic is more than 15,000/-, like the employer contribution? Does this come under voluntary contribution? If so, do we need to take acceptance from the employee for such a contribution?

Please clarify.

Statutory contributions towards PF should be equal for both shares. The employee's share should match the contribution made by the employer. If the employee's contribution exceeds that of the employer, the excess amount paid by the employee will be considered as VPF.

Hi Krishna, as you know, the contribution of an employer towards the employee's EPF account is 12% of the salary (basic salary + dearness allowance + retaining allowance). The maximum salary limit on which the employer's contribution is calculated is capped at Rs.15,000.

Similarly, the employee contributes 12% of their salary to the EPF account. However, the employee has the choice to voluntarily contribute more than Rs.15,000 to their EPF account at their discretion. There is no prescribed cap on the employee's contribution towards EPF as per the law. The contribution in excess of the mandated 12% goes towards the Voluntary Provident Fund (VPF).

VPF contributions also earn tax-free interest income in the EPF account.

However, it should be noted that not all of the employer's contribution goes to the EPF account. Out of the 12% of the employer's contribution, 8.33% goes to the Employees' Pension Scheme (EPS), and the balance is credited to the EPF account.

Further, the employer is not obligated to match the VPF or any amount of contribution made by the employee into their PF account as it's restricted to a maximum of Rs.15,000.

Additionally, the employer also pays 0.5% towards the Employee Deposit Linked Insurance (EDLI), 0.01% as EDLI handling fees, and 0.50% or Rs.500, whichever is higher, as the EPF administrative charges.

Dear Krishna, your question regarding the need to obtain acceptance from the employee for VPF has not been addressed by me. Yes, you do need to obtain and submit to EPFO a consent from the employee for deducting VPF from their salary. You may also refer to the link provided below for further clarification on the subject: https://www.citehr.com/620180-employ...clare-vpf.html

Thank you.

Dear Krishna, just to supplement the clarifications given by previous posters, please be informed that the entire basic salary (i.e., 100% of basic salary minus the statutory rate of contribution) may be contributed by an employee as a Voluntary PF contribution, and these contributions also fetch attractive interest as announced by EPFO every year. However, such an employee should authorize his employer to do so, and this authorization, with the employer's consent, should be filed with RPFC.

Regards, Panchsen P. Senthilkumar

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