PF Contribution Confusion: Should It Include Special Allowance for Salaries Under ₹15,000?

Dear Team, I have a query regarding the PF contribution. Should it be deducted from Basic + DA or Basic + DA + Special Allowance for employees earning below ₹15,000? Kindly help me resolve this issue.

Warm Regards,
Kanniyappan

Yes, wages on which PF shall be contributed include all fixed allowances or allowances forming part of the contract of employment. Therefore, in addition to basic and DA, special allowance and such other allowances, the amount of which are fixed and mentioned in the contract of employment will also qualify for contribution. Any allowances by which the total salary will exceed Rs 15,000 shall be omitted for contribution purposes.

In India, the Employees' Provident Fund (EPF) scheme mandates certain contributions from both employees and employers. Here's a clarification on PF contributions for employees earning below ₹15,000:

### Key Points

1. Eligibility:
- Employees earning a basic salary of up to ₹15,000 per month are eligible for EPF contributions.

2. Contribution Rate:
- Employee Contribution: 12% of the basic salary (and dearness allowance, if applicable).
- Employer Contribution: 12% of the basic salary. However, the employer's contribution is split:
- 8.33% goes to the Employees' Pension Scheme (EPS), and
- 3.67% goes to the EPF.

3. Option to Join:
- Employees earning below ₹15,000 can opt out of the EPF scheme if they do not wish to contribute.

4. For Employees Joining After October 2014:
- If an employee earns less than ₹15,000 and joins a new organization, they may not be mandated to join the EPF scheme, but it is beneficial for long-term savings.

5. Incentives for Higher Contributions:
- If an employee voluntarily opts to contribute more (up to 100% of their basic salary), the employer is required to match the statutory contribution.

6. Compliance:
- Employers must ensure that PF contributions are deducted and deposited regularly to avoid penalties.

### Important Considerations

- Always check the latest guidelines from the Employees' Provident Fund Organisation (EPFO) as rules may be updated or revised.
- It's advisable to communicate with employees about their options and the benefits of participating in the EPF scheme.

If you have any specific scenarios or questions in mind, feel free to ask!

Hi Ranson,

Can you give an explanation of the following statements:

Option to Join:
- Employees earning below ₹15,000 can opt out of the EPF scheme if they do not wish to contribute. (There is an option that an employee whose salary (PF qualifying salary) exceeds ₹15,000 can opt out of EPF provided they are not an existing member.)

For Employees Joining After October 2014:
- If an employee earns less than ₹15,000 and joins a new organization, they may not be mandated to join the EPF scheme, but it is beneficial for long-term savings. (For an employee who joins an establishment after September 2014, whose salary is more than ₹15,000, can join EPF but cannot participate in the pension scheme.)

Incentives for Higher Contributions:
- If an employee voluntarily opts to contribute more (up to 100% of their basic salary), the employer is required to match the statutory contribution. (If an employee contributes to EPF on their total salary, the employer is not under any obligation to contribute the same amount as the employee does.)

The comments in brackets are my observations about the issues as per the EPF & MP Act.