Understanding EPF Deductions: How to Calculate Basic Salary and Deductions for an 80,000 Gross Salary?

Hi Seniors, please suggest if an employee's gross salary is 80,000/-, should their basic salary be 40,000/-? Can I deduct EPF on a basic salary of 15,000/- or 40,000/-? Please advise.

EPF Eligibility for High Earners

EPF is optional for individuals drawing a salary of more than Rs. 15,000 per month.

PF Deduction Guidelines

PF is deducted at 12% of wages, subject to a maximum wage limit of ₹15,000. Therefore, you need to deduct PF on ₹15,000 only.

If the employee wishes to deduct 12% of the full basic and DA, they must submit a request for voluntary deductions. The company is not required to pay an additional amount beyond the statutory limit.

Let me also make it clear. PF is not exempt for those drawing a salary beyond ₹15,000. They are exempt only if they join your organization at a salary above ₹15,000, do not have any PF account at the time of joining, and opt for being exempt.

PF Deduction on Employee Salary

You can deduct PF either on the whole amount paid to the employee, i.e., Rs 80,000, or on the part of it described as basic pay, i.e., Rs 40,000, or on Rs 15,000. If you deduct and contribute PF on Rs 15,000 in respect of an employee who is paid more than Rs 15,000, the PF will not raise any question because PF cannot be demanded on an amount exceeding Rs 15,000, though the employer can very well contribute PF on any amount without any limit. Therefore, the decision to deduct and contribute PF in respect of an employee whose salary exceeds Rs 15,000 is purely a managerial decision.

PF Deduction on Basic Salary or Ceiling Limit?

An employee with a gross salary of Rs 17,000/- has a basic salary of Rs 10,000/-. The question is whether PF should be deducted on the basic salary amount or on the PF ceiling limit?

Regards, Gskumar

Employee-Friendly PF Deduction

If your establishment is an employee-friendly organization, you may deduct PF from Rs. 17,000, i.e., the gross salary. On the other hand, if you follow the law, since it is to be followed as part of your responsibility, then deduct PF from Rs. 15,000.

Eligibility for Family Pension Contribution for Employees Above 50

If we appoint an employee above 50 years old for the first time in EPF UAN, is he eligible for the Family Pension contribution?

Yes, you should contribute to the Pension Fund as well. If the age is above 58, then, of course, you need not contribute to the pension fund but should contribute your entire 12% to the PF.

If the employer contribution is $1,800 for staff with a salary above $15,000, then what is the employee's contribution? For example, if the basic salary is $21,000 and the employer's share is $1,800, what is the employee's share? Should I calculate it as $21,000 x 12% = $2,520 or $1,800? Please clarify.

Hi Mohan, Both PF contributions should be equal, i.e., Rs.1800 + Rs.1800/-. However, if an employee wants to save more in PF, they can opt for VPF, which will be an additional contribution apart from the employee's share of 12%.