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Dear Sir/Madam,

Good Day.

I am working in a small-scale IT company located in Chennai as an Asst. Manager-Human Resources. Here in my company, the way the salary has been calculated looks suspicious to me. Because, when a new employee is joining my company, we will ask for his previous CTC and increase it by 20% to 30% before offering him a salary. For instance, if his previous CTC is 200,000, we will offer him 240,000 with a 20% hike.

However, when it comes to the PF part, the actual commitment is that the employee needs to contribute 6% and the employer needs to contribute 6%. Therefore, an employee who has been offered 240,000 will have a deduction of 12% PF from his monthly salary of 20,000, with 6% (1,200) being deducted from the employee's portion and the employer contributing the other 6% (1,200), totaling 2,400 Rs every month.

So, my doubt is whether the employee will take home 18,800 or 17,600. If the employer is contributing 6% to the PF, then the total monthly package for the employee should be 20,000 + 1,200. Alternatively, can the employer deduct the 12% from the employee's 20,000 salary and provide him with 17,600 as take-home pay?

The main question is if it is an employer contribution, then why is the employer deducting the 6% from the employee's salary itself?

When I asked this question, they responded, "this is all included in your 20,000 salary, and we will deduct the employer's contribution from your salary. PF is your money, so you have to go with that. We have only committed to CTC, not take-home pay."

I am very confused. Kindly advise me on who is right.

Thanks for reading my message.

Thanks and Regards,

Vikna Prakash.S (Asst. Manager)

From India, Madras
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Dear Vikna,

Both the employer and the employee contribute 12% each for PF (not 6%). The full 12% of the employee gets deposited in the account. Out of the 12% of the employer, 8.33% gets deposited in EDLI and 6.66% in PF. Additionally, 1.67% service charges are also paid by the employer.

As per the PF Act, an organization only needs to contribute to PF up to 6500. After this amount is crossed, it is possible not to contribute. The company can structure the package where the full 24% is being paid by the employee, but normally to ensure goodwill, this is not done. Therefore, this information should be communicated to the employee to prevent any negative feelings.

Regards,

Annika

From India, Gurgaon
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Dear All,

Your EPF contribution depends on your (Basic + DA + Cash value of food concession). Generally, the contribution is 12% for both the employee and employer, and 10% in the case of a sick industry. Out of the employer's contribution, 8.33% or a maximum of Rs 541 is contributed towards EPS, and the remaining 3.67% is paid to EPF. Additionally, 1.61% is paid by the employer for administrative charges, which include (EDLI, Admin EDLI, and Admin EPF).

The CTC of an employee includes the total amount that the employer will spend on him/her.

I hope this is clear.

Regards,
Shaikh

From India, Bhubaneswar
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For salary (Basic + DA + Cash value of food concession) up to Rs 6500, EPF contribution is mandatory if your establishment is covered under the EPF Act. If it's more than Rs 6500, then it may or may not be exempted upon the mutual consent of the employee and employer.

Regards,
Shaikh

From India, Bhubaneswar
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Dear Sir if any employee basic salary is Rs.10000 then how can calculate PF and how much amount employer can contribute to him and how much employee can contribute
From India, Delhi
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Dear Pawan,

If you contribute Rs10,000, the breakdown is as follows:
Employee Contribution:
Rs10,000 * 12% = Rs1,200 (EPF Account)

Employer Contribution:
Rs1,000 * 8.33% (or a maximum of Rs541) = Rs833; since Rs833 exceeds Rs541, it will be considered as Rs541 (EPS Account)
Rs1,000 * 3.67% (Rs833 - Rs541) = Rs659 (EPF Account)

The same calculation applies if you contribute Rs6,500.

Regards,
Shaikh

From India, Bhubaneswar
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Hi Vikna Prakash,

CTC means Cost to Company; it includes any expenditure incurred by the company on the employee, whether monthly or yearly.

As far as PF is concerned, both the employee and the employer have to contribute 12% of the (BASIC+DA), not 6%. For example, if you are getting Rs. 100, then (Rs 12 + Rs 12) totals Rs. 24. Out of this Rs. 24, the Rs. 12 from the employer can be included in your CTC.

Regards,
Naresh

From India, Pune
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Subject: Contribution of EPF Regarding

Dear All,

For salary/wages (Basic+D.A), P.F contribution is at 12% each from the employee and employer. Apart from that, 1.61% charges are payable by the employer (i.e. 0.5% EdLI, 1.1% administrative charges, and 0.01% inspection charges respectively). The most important thing is that the employer's contribution should not be deducted from the employee's salary, as the provident fund is a social welfare measure provided to the employees by the Government of India.

The ceiling limit is Rs. 6,500/-.

From India, Coimbatore
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Dear Friends,

Many of us have written about PF contributions. However, the important aspect is how CTC deceives a new recruit. In many companies, CTC includes employer contributions to PF, gratuity, leave encashment, transportation, staff welfare (Tea/coffee provided in the office), and more. So, the candidate is very impressed with the big fat CTC, but what he takes home is nothing but peanuts. All colleagues in HR should ensure that CTC is not used as a tool to mislead new recruits.

Regards,
Bhavan

From India, Bangalore
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Dear Pawan,

If it's more than Rs 6500, then it's optional; you may or may not, but in mutual agreement.

Dear Bhavan,

During the salary negotiation, a Salary Annexure is given to the employee, which shows all earnings, deductions, gross, CTC, net, and many more. If an employee agrees to work for peanuts, I don't think it's a fault of HR. Hope you get it and take it in a constructive way.

Regards,
Shaikh

From India, Bhubaneswar
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Dear Vikana, Your CTC package is INR 240,000/-. Can your PF contribution be calculated in your CTC? First, you need to attach your entire CTC package, and then I can provide the correct answer to this question because in some organizations, both sides of PF are calculated in employees' CTC.

Regards,
Hemant
[Phone Number Removed For Privacy Reasons]
[Email Removed For Privacy Reasons]

From India, Ahmadabad
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hello every one, please help or guide about the calculationh of CTC. will bonus be the part of CTC? waiting for your valuable information. with regards rajnish
From India, New Delhi
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Mr. Vikna Prashad,

Please note that the employer's contribution to PF is part of CTC because the company is paying the contribution for the employee's savings and future financial security. Therefore, it is correct to deduct the amount of the employer's contribution to PF from the CTC package of an employee.

Thank you.

From India, Mumbai
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Subject: Re: Provident Fund Contribution - Important Query

Hello decentfriend11,

EMPLOYEE DEPOSIT LINKED INSURANCE (EDLI) contribution is payable by the employer, calculated at 0.5% (out of 13.61%) of the employee's salary/wage (Basic + DA). This deduction should be declared in form 6-A (Revised) in the annual return by the employer.

From India, Coimbatore
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Hi all,

Really, it is a very useful discussion. I came to know that the employer should not bear the PF amount (employer contribution) for the employees whose basic is above 6500. My doubt is, is it necessary to give PF to those persons, i.e., is it a must to deduct the PF amount from the employee's salary (employee contribution to their PF)? Then, what is the contribution of the company towards them? Is there any chance for the company or employee to skip the PF after attaining a basic of 6500? Please clarify it.

From India, Hyderabad
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Hellow All Please tell me that what is the celling amount for contributing EPF. and if the person want to deduct pf from his basic ie10000, the can he will be contribute pf??
From India, Panipat
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Pl go through the below:-

Statutory

Employees Provident fund organization, India (EPFO) EPF rates and calculation

The EPF & MP (Miscellaneous provision act) act was came in to existence from March 14th 1952.The act is applicable all over India except the state of Jammu and Kashmir. Presently the following three schemes are providing to employees under this act.

1. Employee provident fund scheme (EPF) 1952.

2. Employees' pension scheme (EPS) 1995

3. Employees deposit linked insurance (EDLIS) 1976.

An establishment with 20 or more workers should register with Employees provident fund organization which comes under any of the 180 industries mentioned. Click here for the list of industries comes under EPF. Even though there are certain exemptions are there will be discussed in another post. Here we mainly aimed for EPF rates and its calculation.

EPF, EPS, EDLIS rates in India

EPF, EPS and EDLIS are calculated on Basic salary, dearness allowances, cash value of food concession and retaining allowances if any.

“Retaining allowances means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.”

Most of the organizations are following Basic+ DA Method. Below table tells you the rates of contribution of EPF, EPS, EDLI, Admin charges in India.

Scheme Name Employee contribution Employer contribution Paid to A/c No

Employee provident fund 12% 3.67% 1

Employees' Pension scheme 0 8.33% 10

Employees Deposit linked insurance 0 0.5% 21

EPF Administrative charges 0 1.1% 2

EDLIS Administrative charges 0 0.01% 22

Sick industries like beedi, jute, guar gum factories, coir industry other than spinning sector

Scheme Name Employee contribution Employer contribution Paid to A/c No

Employee provident fund 10% 1.67% 1

Employees' Pension scheme 0 8.33% 10

Employees Deposit linked insurance 0 0.5% 21

EPF Administrative charges 0 1.1% 2

EDLIS Administrative charges 0 0.01% 22

Inspection charges payable by employer

Inspection charges must be paid by the employer in the following Cases.

1. Some establishment are exempted from EDLI contribution as they are providing the same nature of benefit without any contributions from employee, such establishments are liable to pay 0.005% on Basic salary

2. The establishments exempted under the scheme should pay 0.18% of Basic salary towards inspection charges.

EPF Ceiling Limit

EPF ceiling limit is fixed to 6500/-.The employer is liable to pay contribution only on 6500/- Whatever is the basic salary

Calculation of Employees provident fund

Let us calculate the contribution of an employee who is getting a basic salary of Rs 3500/-

Contribution Towards Calculation Amount

EPF Employees share 3500 x 12% 420

EPS Employer share 3500 x 8.33% 292

EPF employer share 3500 x 3.67% 128

EDLI charges 3500 x 0.5% 18

EPF Admin charges 3500 x 1.1% 39

EDLI Admin charges 3500 x 0.01% 0.35 ( round up to Rs 1/-)

The above calculation is easy and there no complication.

Calculation of EPF for employees getting a basic salary over and above the ceiling limit 6500/-

In such cases companies uses different method for calculation as per their pay roll policy.

Consider an employee getting a basic salary of 7500/-

We can calculate it in different ways. The only thing you should take care is, EPS is calculated only up to 6500/- that means the maximum amount is fixed to Rs. 541.00. The three methods mentioned below are based on the above example.

Method-1

If your company consider total basic salary above the limit fixed 6500.00 for PF calculation

Contribution Towards Calculation Amount

EPF Employees share 7500 x 12% 900

EPS Employer share 6500 x 8.33% 541

EPF employer share 7500 x 12% (-) 541 359

EDLI charges 6500 x 0.5% 32.5

EPF Admin charges 6500 x 1.1% 71.5

EDLI Admin charges 6500 x 0.01% 0.65 ( Round up to Rs 1/-)

I will explain how Employer contribution of EPS and EPF is calculated.

Employer is decided to contribute on total basic salary which is 12 % on 7500.00 equal to 900.00

EPS Share is fixed to 541.00

Balance (900-541) goes to EPF account 359.00

Total share 900.00

Out of Rs 900.00 EPS share is RS 541/- which is fixed for a basic salary greater than 6500/-. The balance amount is 900-541 = 359.00 which will go to EPF account.

You may be thinking that, what about 3.67%? Here you don't need to care about it.

Method2

Some companies follows the below method in which employee share is calculated on 7500/- and employer share is calculated on up limit Rs 6500/-

Contribution Towards Calculation Amount

EPF Employees share 7500 x 12% 900

EPS Employer share 6500 x 8.33% 541

EPF employer share 6500 x 3.67% 239

EDLI charges 6500 x 0.5% 33

EPF Admin charges 6500 x 1.1% 72

EDLI Admin charges 6500 x 0.01% 0.65 ( Round up to Rs 1/-)

Method3

Some are calculating both employer and employee shares on 6500/- in spite of higher basic salary than 6500.00

Contribution Towards Calculation Amount

EPF Employees share 6500 x 12% 780

EPS Employer share 6500 x 8.33% 541

EPF employer share 6500 x 3.67% 239

EDLI charges 6500 x 0.5% 33

EPF Admin charges 6500 x 1.1% 72

EDLI Admin charges 6500 x 0.01% 0.65 ( Round up to Rs 1/-)

YOU CAN DOWNLOAD AN EPF CALCULATOR IN EXCEL FORMAT HERE

Remittance of contribution

It is the duty of employer to remit the contribution deducted to the government before 15th of the following month.

Employer interest Liability

Employers are liable to pay @12% interest on late payment of EPF, EPS, EDLI, Administrative charges

Damage liability

An employer is remitting EPF, EPS, EDLI, and Admin charges late shall be liable to pay damages as penalty ranging from 17% to 37% depending up on delay.

I don't think the above post is a complete one, if you have different opinion and experience we can discuss it in our comment section that will make this post a complete one.

In the meantime you can subscribe our newsletter below to stay updated with us.

D. N . Sharma - Gurgaon HR

From India, Delhi
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Dear Vikna Prakash,

This is a significant issue in your company. It appears that they are not being transparent about the salary and PF contributions. If they have promised you a 20% raise, that should be reflected in your pay, and the 12% contribution should be made by the employer as committed.

I recommend checking the PF challans to ensure that the correct amounts are being deposited. If the company is only depositing 12% instead of the required 25.61%, it is a serious violation. Similarly, if they are showing 25.61% against a lower salary to deceive authorities, it is fraudulent behavior.

I suggest writing a confidential letter to the PF commissioner and notifying the IT department and police about these discrepancies. If you need assistance, feel free to share details, and I can help take action against such practices.

Best regards,
Colonel Gahlot
Proprietor, 'TRURECRUIT'
09810081197

From India, Delhi
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Dear All.

this for PF & EPF deduction

Employees Provident fund organization, India (EPFO) EPF rates and calculation

28 SEPTEMBER 2009 17 COMMENTS

The EPF & MP (Miscellaneous provision act) act was came in to existence from March 14th 1952.The act is applicable all over India except the state of Jammu and Kashmir. Presently the following three schemes are providing to employees under this act.

1. Employee provident fund scheme (EPF) 1952.

2. Employees' pension scheme (EPS) 1995

3. Employees deposit linked insurance (EDLIS) 1976.

An establishment with 20 or more workers should register with Employees provident fund organization which comes under any of the 180 industries mentioned. Click here for the list of industries comes under EPF. Even though there are certain exemptions are there will be discussed in another post. Here we mainly aimed for EPF rates and its calculation.

EPF, EPS, EDLIS rates in India

EPF, EPS and EDLIS are calculated on Basic salary, dearness allowances, cash value of food concession and retaining allowances if any.

“Retaining allowances means an allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.”

Most of the organizations are following Basic+ DA Method. Below table tells you the rates of contribution of EPF, EPS, EDLI, Admin charges in India.

Scheme Name Employee contribution Employer contribution Paid to A/c No

Employee provident fund 12% 3.67% 1

Employees' Pension scheme 0 8.33% 10

Employees Deposit linked insurance 0 0.5% 21

EPF Administrative charges 0 1.1% 2

EDLIS Administrative charges 0 0.01% 22

Sick industries like beedi, jute, guar gum factories, coir industry other than spinning sector

Scheme Name Employee contribution Employer contribution Paid to A/c No

Employee provident fund 10% 1.67% 1

Employees' Pension scheme 0 8.33% 10

Employees Deposit linked insurance 0 0.5% 21

EPF Administrative charges 0 1.1% 2

EDLIS Administrative charges 0 0.01% 22

Inspection charges payable by employer

Inspection charges must be paid by the employer in the following Cases.

1. Some establishment are exempted from EDLI contribution as they are providing the same nature of benefit without any contributions from employee, such establishments are liable to pay 0.005% on Basic salary

2. The establishments exempted under the scheme should pay 0.18% of Basic salary towards inspection charges.

EPF Ceiling Limit

EPF ceiling limit is fixed to 6500/-.The employer is liable to pay contribution only on 6500/- Whatever is the basic salary

Calculation of Employees provident fund

Let us calculate the contribution of an employee who is getting a basic salary of Rs 3500/-

Contribution Towards Calculation Amount

EPF Employees share 3500 x 12% 420

EPS Employer share 3500 x 8.33% 292

EPF employer share 3500 x 3.67% 128

EDLI charges 3500 x 0.5% 18

EPF Admin charges 3500 x 1.1% 39

EDLI Admin charges 3500 x 0.01% 0.35 ( round up to Rs 1/-)

The above calculation is easy and there no complication



D N Sharma ( Manager _ HR & Admin.) Gurgaon.

From India, Delhi
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Please confirm for me how much is the minimum amount we can set for an employee's basic salary. If an employee receives minimum wages, how should we define his basic salary, and how can we calculate his PF and ESI?

Yours Sincerely,

Pawan Verma

From India, Delhi
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