Criteria for PF Deduction
What is the criteria for PF deduction? If the monthly salary of an employee is more than Rs. 6500, is the deduction of PF optional at the employee's discretion, or is it mandatory for the company to deduct PF?
Please provide the relevant section to support the response as my company is not deducting PF in some cases for employees with a salary exceeding Rs. 6500, while in other cases, PF is deducted based on a flat salary of Rs. 6500 regardless of the employee's actual basic salary.
Kindly respond with a reference to the relevant section.
From India, Chandigarh
What is the criteria for PF deduction? If the monthly salary of an employee is more than Rs. 6500, is the deduction of PF optional at the employee's discretion, or is it mandatory for the company to deduct PF?
Please provide the relevant section to support the response as my company is not deducting PF in some cases for employees with a salary exceeding Rs. 6500, while in other cases, PF is deducted based on a flat salary of Rs. 6500 regardless of the employee's actual basic salary.
Kindly respond with a reference to the relevant section.
From India, Chandigarh
Hi An employee whose pay at the time he is entitled to become a member of the fund exceeds Rs. 6500/- per month(BASIC+DA) is an excluded employee. Rgds
From India, Hyderabad
From India, Hyderabad
Means an employee who is working in an establishment that falls under the PF Act, but whose salary is more than Rs. 6,500, has an option to get or not to get the PF deducted at all?
Can you please tell me the relevant section or paragraph in the Act to support this?
From India, Chandigarh
Can you please tell me the relevant section or paragraph in the Act to support this?
From India, Chandigarh
Understanding PF and EPS Contributions
The ceiling of Rs. 6500 is for the Employees' Pension Scheme, 1995, which is linked to the PF. There is no ceiling for PF. Employees drawing a salary of more than Rs. 6500 per month are also entitled to become members of PF and receive a benefit of a 12% equivalent share to their respective PF accounts from the employer. There is no option for any individual employee to opt out of the PF; it is compulsory for all employees.
The ceiling of Rs. 6500 applies only to the Employees' Pension Scheme, 1995. However, employees earning more than Rs. 6500 will have to contribute a maximum of 8.33% of Rs. 6500, which is Rs. 541. In summary, all employees earning a salary of Rs. 6500 or more will only contribute a maximum of Rs. 541 to the EPS 1995. This amount is to be deducted from the 12% subscription to the PF. Every employee will contribute 12% of their basic pay + dearness allowance + dearness pay (if any) to the PF. Out of this amount, 8.33% will go to the EPS, and the remaining will go to their PF account.
For example, if an employee is earning a basic pay + dearness allowance amounting to Rs. 6500 per month, an amount of 12% will be deducted from their salary towards PF and EPS subscription. 12% of 6500 amounts to Rs. 780; 8.33% amounts to Rs. 541. This means out of the Rs. 780 deduction, Rs. 541 will go to EPS 1995, and Rs. 239 will go to the PF account of the employee. The employer will contribute Rs. 780, and the entire amount will go to the PF (employer's contribution account) of the PF.
If the salary exceeds Rs. 6500, the EPF subscription will be a maximum of Rs. 541, and the remaining amount will go to the PF.
Regards,
Shyam Agrawal of Pune
From India, Pune
The ceiling of Rs. 6500 is for the Employees' Pension Scheme, 1995, which is linked to the PF. There is no ceiling for PF. Employees drawing a salary of more than Rs. 6500 per month are also entitled to become members of PF and receive a benefit of a 12% equivalent share to their respective PF accounts from the employer. There is no option for any individual employee to opt out of the PF; it is compulsory for all employees.
The ceiling of Rs. 6500 applies only to the Employees' Pension Scheme, 1995. However, employees earning more than Rs. 6500 will have to contribute a maximum of 8.33% of Rs. 6500, which is Rs. 541. In summary, all employees earning a salary of Rs. 6500 or more will only contribute a maximum of Rs. 541 to the EPS 1995. This amount is to be deducted from the 12% subscription to the PF. Every employee will contribute 12% of their basic pay + dearness allowance + dearness pay (if any) to the PF. Out of this amount, 8.33% will go to the EPS, and the remaining will go to their PF account.
For example, if an employee is earning a basic pay + dearness allowance amounting to Rs. 6500 per month, an amount of 12% will be deducted from their salary towards PF and EPS subscription. 12% of 6500 amounts to Rs. 780; 8.33% amounts to Rs. 541. This means out of the Rs. 780 deduction, Rs. 541 will go to EPS 1995, and Rs. 239 will go to the PF account of the employee. The employer will contribute Rs. 780, and the entire amount will go to the PF (employer's contribution account) of the PF.
If the salary exceeds Rs. 6500, the EPF subscription will be a maximum of Rs. 541, and the remaining amount will go to the PF.
Regards,
Shyam Agrawal of Pune
From India, Pune
Thank you for sharing that valuable piece of information. However, I believe there may be a disconnect in your statement regarding the PF opt-out option for individual employees. You mentioned, "There is no option for any individual employee to opt out of the PF. It is compulsory for all employees."
Based on my experience as an auditor working with various clients, I have observed different practices. In some organizations, it is mandatory for all employees to have their PF deducted, regardless of their salary. Conversely, in other companies, employees with a salary exceeding Rs. 6500 have the discretion to choose whether or not to have their PF deducted. This variance has led to confusion in understanding the actual requirement.
I have been unable to find a specific text or section in the Act that definitively supports either perspective. If you could provide me with the relevant paragraph or section in the Act that clarifies this matter, I would greatly appreciate it.
Thank you for your assistance in this matter.
Best regards,
[User's Name]
From India, Chandigarh
Based on my experience as an auditor working with various clients, I have observed different practices. In some organizations, it is mandatory for all employees to have their PF deducted, regardless of their salary. Conversely, in other companies, employees with a salary exceeding Rs. 6500 have the discretion to choose whether or not to have their PF deducted. This variance has led to confusion in understanding the actual requirement.
I have been unable to find a specific text or section in the Act that definitively supports either perspective. If you could provide me with the relevant paragraph or section in the Act that clarifies this matter, I would greatly appreciate it.
Thank you for your assistance in this matter.
Best regards,
[User's Name]
From India, Chandigarh
Dear Mr. Shyam Agrawal, Very good posting. Thanks. I humbly feel that the words "Employee" and "Employer" should have been interchangeably used in your mail. I think only the employer contributes towards the EPS account at 8.33% (maximum Rs. 541.00 per month) and 3.67% (maximum Rs. 239.00) in the EPF account. Employees are exempted from contributing any amount to the EPS & EDLI Scheme under the Employees' Provident Fund and Miscellaneous Provisions Act-1952 when drawing Rs. 6500.00 or more per month as PF salary. The employees contribute their 12% or 10% as the case may be, PF salary to the EPF account only. Please rectify my views if I'm wrong.
Thanks,
R.K. SINGH
Regards
From India, Delhi
Thanks,
R.K. SINGH
Regards
From India, Delhi
PF Coverage and Contribution Details
The employee/employer has the option to cover an employee whose salary is Rs. 6500/- or more only at the time of appointment. Once an employee is covered under the PF, they do not have the option of exemption under PF. For example, if an employee, upon joining the fund, has a salary less than Rs. 6500/-, they are covered under PF. Later, when their salary crosses Rs. 6500/-, they continue to be covered under PF, provided they can restrict their contribution to Rs. 6500/- for both PF and the Pension scheme.
The employee contributes only to PF; it is only the employer who contributes to PF, the Pension scheme, EDLIS, and administrative charges. The employer has the option to restrict their contribution to Rs. 6500/- despite the employee contributing more.
12% of the salary is contributed to PF by the employee, and this percentage can be increased and decided by the employee if they want to contribute to voluntary PF.
As per Section 2(f) of the Act, these employees are exempted employees.
For further details, please email me at [Email Removed For Privacy Reasons].
Regards,
R. Alex Antony
HR Solutions
Chennai
[Phone Number Removed For Privacy Reasons]
From India, Madras
The employee/employer has the option to cover an employee whose salary is Rs. 6500/- or more only at the time of appointment. Once an employee is covered under the PF, they do not have the option of exemption under PF. For example, if an employee, upon joining the fund, has a salary less than Rs. 6500/-, they are covered under PF. Later, when their salary crosses Rs. 6500/-, they continue to be covered under PF, provided they can restrict their contribution to Rs. 6500/- for both PF and the Pension scheme.
The employee contributes only to PF; it is only the employer who contributes to PF, the Pension scheme, EDLIS, and administrative charges. The employer has the option to restrict their contribution to Rs. 6500/- despite the employee contributing more.
12% of the salary is contributed to PF by the employee, and this percentage can be increased and decided by the employee if they want to contribute to voluntary PF.
As per Section 2(f) of the Act, these employees are exempted employees.
For further details, please email me at [Email Removed For Privacy Reasons].
Regards,
R. Alex Antony
HR Solutions
Chennai
[Phone Number Removed For Privacy Reasons]
From India, Madras
Hi all, I want to shed some light on the exemption part. If the new joiner does not have the membership of the PF with their previous employer or is a fresher, then they only have the option of whether to join PF or not if their wages/Basic plus DA are more than 6500/- per month. However, if they were a member of the PF in their previous employment, then there is no exemption option available to them. The exempted amount can be up to 6500/-, but the employee/employer must ensure PF membership. For exemption support, the employer should have the new joiner fill out Form 11, i.e., a declaration from the new employee stating they were not a member of the PF in their previous employment.
In my opinion, the employer should make it compulsory for all employees to be members of the PF and not offer any alternatives. The HR personnel should effectively communicate to new employees the benefits of compulsory saving with the high rate of interest available through PF membership. The employer's cost is clearly stated in the CTC of the individual.
Everything I mentioned above is supported by proof and legal opinion in writing from noted advocates in Pune, so I don't believe there are any mistakes in the information provided.
Thanks,
Ramesh
From India, Mumbai
In my opinion, the employer should make it compulsory for all employees to be members of the PF and not offer any alternatives. The HR personnel should effectively communicate to new employees the benefits of compulsory saving with the high rate of interest available through PF membership. The employer's cost is clearly stated in the CTC of the individual.
Everything I mentioned above is supported by proof and legal opinion in writing from noted advocates in Pune, so I don't believe there are any mistakes in the information provided.
Thanks,
Ramesh
From India, Mumbai
Hello Sir,
Presently I am working in leading cement Industry, Employee's Compensation Act'(Amendment)2009, No.45 of 2009, December 23 ,2009. Weather this amendment is applicable to our employees or not.
Please clarify my dought.
S VENKATESWARLU
e_mail :
From India, Hyderabad
Presently I am working in leading cement Industry, Employee's Compensation Act'(Amendment)2009, No.45 of 2009, December 23 ,2009. Weather this amendment is applicable to our employees or not.
Please clarify my dought.
S VENKATESWARLU
e_mail :
From India, Hyderabad
From plain reading to EPF Act, one can understand as follows:
1) Employees drawing a salary less than Rs. 6,500/- per month are covered.
2) Employees drawing a salary more than Rs. 6,500/- can be covered if they give consent; otherwise, they are not covered.
From India, Tiruchchirappalli
1) Employees drawing a salary less than Rs. 6,500/- per month are covered.
2) Employees drawing a salary more than Rs. 6,500/- can be covered if they give consent; otherwise, they are not covered.
From India, Tiruchchirappalli
Hi friends,
Please provide more information about ESI and PF. Also, if an employee is receiving a salary of Rs. 6500, how much will they be able to take home after contributing to ESI and PF? Friends, please send me the answer with the calculation.
From India, Bangalore
Please provide more information about ESI and PF. Also, if an employee is receiving a salary of Rs. 6500, how much will they be able to take home after contributing to ESI and PF? Friends, please send me the answer with the calculation.
From India, Bangalore
Hi. It is quite justified article :- under the rule about EPF / EPS. You may go through with this article without any hesitation. Regard’s, Phaiboon
From India, Jaipur
From India, Jaipur
Hi, Please direct or guide me in detail with rules; how to RETRENCH a group of workers & Staffs after finishing construction of Project work. Regard’s PHAIBOON
From India, Jaipur
From India, Jaipur
Dear Shri Abhi-rumana, I stand corrected. The employees drawing pay more than 6500 have an option to be out of PF. Such employees are called exempted employees. Shyam Agrawal
From India, Pune
From India, Pune
At the outset, I correct myself. The PF is not compulsory for all. An employee drawing a salary of more than Rs. 6500 may opt out of the PF if they so desire. Such an employee is called an exempted employee. In one's own interest, one should not opt out of the PF. However, we are now discussing legal provisions. So, one thing is now clear. PF is compulsory for employees drawing a salary up to Rs. 6500 per month and optional for those drawing more than Rs. 6501. Shri R. B. Narwade of Pune has further clarified that once an employee opts for PF, they cannot opt out afterwards. Those interested may please see the posting of Shri R B Narwade in this discussion.
I appreciate the posting of Shri Alex Anthony of Chennai. He has summed up the subject very nicely. Thanks, Mr. Alex Anthony.
The assertion of Shri Ramkrishna Singhji is perfectly all right. The employees do not contribute to the EPS or the EDLI schemes. Their entire contribution goes to the PF account only.
Thanks to all.
Regards,
Shyam Agrawal of Pune
From India, Pune
I appreciate the posting of Shri Alex Anthony of Chennai. He has summed up the subject very nicely. Thanks, Mr. Alex Anthony.
The assertion of Shri Ramkrishna Singhji is perfectly all right. The employees do not contribute to the EPS or the EDLI schemes. Their entire contribution goes to the PF account only.
Thanks to all.
Regards,
Shyam Agrawal of Pune
From India, Pune
Types of Accounts for Social Security
There are five kinds of accounts for social security. Rates are based on basic allowance plus dearness allowances (BA+DA) of particular wages per month:
1) AC 1 (PF)
- Employee share: 12%
- Employer share: 3.67%
2) AC 2 10 (Pension)
- Employee share: 0.0%
- Employer share: 8.33%
3) AC 2 (Administration Charges)
- Employee share: 0.0%
- Employer share: 1.1%
4) AC 21 (EDLI - Employees' Deposit Linked Insurance)
- Employee share: 0.0%
- Employer share: 0.5%
5) AC 22 (EDLI Administration charges)
- Employee share: 0.0%
- Employer share: 0.01%
The above rates apply to wages less than or equal to 6500, which are common for all salaries above 6500.
- Employee share: 12%
- Employer share:
- For 6500 * 3.67% i.e., 239
- For 6500 * 8.33% i.e., 541
We will discuss the forms tomorrow.
From India, Jaipur
There are five kinds of accounts for social security. Rates are based on basic allowance plus dearness allowances (BA+DA) of particular wages per month:
1) AC 1 (PF)
- Employee share: 12%
- Employer share: 3.67%
2) AC 2 10 (Pension)
- Employee share: 0.0%
- Employer share: 8.33%
3) AC 2 (Administration Charges)
- Employee share: 0.0%
- Employer share: 1.1%
4) AC 21 (EDLI - Employees' Deposit Linked Insurance)
- Employee share: 0.0%
- Employer share: 0.5%
5) AC 22 (EDLI Administration charges)
- Employee share: 0.0%
- Employer share: 0.01%
The above rates apply to wages less than or equal to 6500, which are common for all salaries above 6500.
- Employee share: 12%
- Employer share:
- For 6500 * 3.67% i.e., 239
- For 6500 * 8.33% i.e., 541
We will discuss the forms tomorrow.
From India, Jaipur
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