New Wage Code Confusion: Are PF Rules and Salary Caps Changing in April 2021?

Hello everyone, under the new wage code which will be applicable from April 2021, are the PF rules the same as the earlier ones? Can we still have a capping of ₹15,000 basic salary with a 12% PF deduction, or have the rules changed as per the new wage code? Please guide me on this.

PF Rules and New Wage Code Impact

The PF rules remain the same, maintaining a capping of ₹15,000. However, the department will monitor the records of employees who receive gross wages below ₹15,000 to ensure that the difference between gross wages and EPF wages paid is based on genuine facts. If discrepancies are found, they will request contributions for that portion of payment.

Impact of the New Wage Code

The new wage code impacts more than just PF; its overall effect will be on annual income tax (TDS), potentially leading to many allowances becoming taxable. Additionally, terminal benefits such as gratuity and EL encashment will be higher for employees.

Thank you.

Could you kindly advise if an employee can opt out of the Provident Fund (PF) if their basic salary increases beyond 15,000? This question pertains to an employee who is currently a PF member.

If he is currently a PF member, and if his salary is increased beyond Rs. 15,000/-, his contribution (including the employer's) towards PF shall continue to be made as if his salary is Rs. 15,000/-.

New Wage Code and PF Contributions

The new wage code has been introduced to update changes in pay structures and has no concern with PF contributions. The capping continues to be 12% of gross wages (excluding HRA and standard allowances) up to ₹1,800 per month.