PF percentage - if the employee agrees then can more than 12% be deducted on gross salary for PF?

Dear All, please discuss the deduction of PF percentage on Gross. We all know about the standard 12% for both sides. My query is - if the employee agrees, can more than 12% be deducted from the gross salary for PF?

First of all, it needs to be understood that PF is not payable on the gross salary, but is 12% of Basic Pay, DA, and retaining allowance. HRA is specifically excluded from reckoning. If the employee opts to do so, the deduction of the employee's contribution could be enhanced from the 12% stated above.

While the 12% deduction is a standard deduction on PF, if an employee wishes, they can contribute towards what is called a Voluntary Provident Fund, i.e., VPF. However, there would be no company contribution for the same, and there is no limit for contributing towards their VPF.

I have a related question. We doubled the basic + DA salary of a manager in the current financial year. His EPF/VPF is being contributed based on 18K previously. Now, should we double the EPF contribution of this employee? Also, how will it impact our company's contribution?

Any insights would be appreciated.

Thanks,

PF Deduction on Gross Salary

PF can be deducted on gross salary. Actually, it should be deducted on gross salary only. The Basic pay as per the PF Act means gross salary only. The exclusion part of HRA is that house rent which is borne by the employer for the employee and not the one included in the salary.

Understanding the Situation

Coming to Palahuja, I understand that the situation is like this. You have increased the Basic salary (or simply PF qualifying salary) of your employees. Now the amount that each one will contribute will obviously increase. That will benefit the employees by way of tax. Just because you have increased the salary and the employees are contributing higher amounts to PF, the employer is not liable to contribute on amounts higher than Rs 15,000. The employer's contribution can be restricted to 12% of Rs 15,000.

Observation on PF Qualifying Salary

One more observation. Suppose the employees' PF qualifying salary has become more than Rs 15,000. If the employees think that PF shall be contributed only on a maximum of Rs 15,000, the PF qualifying salary shall be kept at Rs 15,000. Normally, in such cases, the payroll will be modified and the PF will be deducted on a maximum of Rs 15,000.