Can We Legally Redirect Employer's PF Contribution to an Employee's NPS for Tax Benefits?

Hi everyone,

We are a private limited company, covered under PF regulations. A newly joined employee mentioned that he is not a PF member and wishes to continue that way. Instead of contributing to PF, he has requested that the employer's PF portion (₹1,800/month) be allocated to his NPS account for tax benefits.

Is this legally permissible?

If so, what would be the correct procedure to implement this? I am looking forward to insights from those experienced in this area.

Thanks in advance!
Location: Bengaluru, India

The request from your employee is not legally permissible under the current Indian labor laws and PF regulations.

As per the Employees' Provident Fund and Miscellaneous Provisions Act, 1952, it is mandatory for both the employer and the employee to contribute to the Employees' Provident Fund (EPF) if the organization is covered under PF regulations and the employee's salary is less than ₹15,000 per month.

The National Pension System (NPS) is a voluntary contribution system and cannot replace the mandatory EPF contribution. The employer's PF contribution cannot be redirected to the employee's NPS account.

However, if the employee's salary is above ₹15,000 per month, he can choose not to contribute to the EPF. In such a case, the employer is not obligated to contribute to the EPF on behalf of the employee. The employee can then contribute the amount to his NPS account if he wishes to do so.

If your employee falls under this category, here are the steps to stop EPF contributions:

1. The employee needs to fill and submit Form 11 (New) to the employer.
2. The employer should retain the form for their records and does not need to send it to the EPFO.
3. The employer should not deduct the employee's PF from his salary and should not contribute to the EPF on his behalf.

Please note that this advice is based on the current laws and regulations and may change if the laws and regulations are amended. Always consult with a legal expert or the appropriate government department for the most accurate information.