Dear Experts,
In my company, the following components are part of the salary:
- Basic
- HRA
- Special Allowance
- Book Allowance
- Conveyance Allowance
- Professional Development Allowance
- Medical Reimbursement
- Mobile Reimbursement
- Car Allowance
Can I deduct PF on all components or only on basic? Please help me; it is very urgent. Kindly send the minimum wages circular.
Regards,
Mangesh Sante
From India, Pune
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In my company, the following components are part of the salary:
- Basic
- HRA
- Special Allowance
- Book Allowance
- Conveyance Allowance
- Professional Development Allowance
- Medical Reimbursement
- Mobile Reimbursement
- Car Allowance
Can I deduct PF on all components or only on basic? Please help me; it is very urgent. Kindly send the minimum wages circular.
Regards,
Mangesh Sante
From India, Pune
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In the absence of DA/VDA in your salary structure, you can deduct PF from the basic salary only. However, if the basic salary is structured to reduce the company's liability towards PF, or if the basic salary alone is less than the gross minimum wages fixed by your state government for your industry, then you will have to consider some other component as well. There have been circulars from the PF and courts directing companies to contribute PF at least on the minimum wages.
Similarly, special allowance in your salary is also a component that may be disputed. If the special allowance is provided to all employees uniformly and is not limited to certain employees with specific tasks, then it will be considered part of the PF qualifying salary. However, if the basic salary itself is Rs 6500 or more, you can limit the PF contribution to the required percentage based on Rs 6500.
Regards,
Madhu.T.K
From India, Kannur
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4526Similarly, special allowance in your salary is also a component that may be disputed. If the special allowance is provided to all employees uniformly and is not limited to certain employees with specific tasks, then it will be considered part of the PF qualifying salary. However, if the basic salary itself is Rs 6500 or more, you can limit the PF contribution to the required percentage based on Rs 6500.
Regards,
Madhu.T.K
From India, Kannur
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Thank you. But as per the new circular, the PF is calculated on Basic + DA + Special Allowance + Conveyance + Education Allowance + Book Allowance. Can you please send me the circular regarding PF?
From India, Pune
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From India, Pune
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I need to know if an employer is liable to pay PF (assuming the employee strength exceeds 20) in case the basic is Rs 16,000 for an employee. What does the statute say on the payment of PF? Also, it would be great if someone could upload the statutory rules for PF.
Regards,
Saumya
From India, Madras
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Regards,
Saumya
From India, Madras
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As per statute, you can restrict the PF contributions to Rs. 6500 even if the single component, i.e., Basic salary, is more than that, i.e., Rs. 16000 in your example.
The case of special allowance is applicable only when the total qualifying salary is less than Rs. 6500. This matter has been discussed in various verdicts on the matter.
Regards,
Madhu.T.K
From India, Kannur
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The case of special allowance is applicable only when the total qualifying salary is less than Rs. 6500. This matter has been discussed in various verdicts on the matter.
Regards,
Madhu.T.K
From India, Kannur
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Dear Madhu Sir, Suppose the basic is Rs.2500/- special allowance Rs.1500/- ( Not DA)& total salary Rs.6550/- In such case we can consider the PF on which amount Regards Mangesh
From India, Pune
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From India, Pune
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In such cases, it is advisable to include a special allowance to fix the PF qualifying salary since the basic wage alone is much lower and may not be accepted by the PF authorities. However, if you can prove that the special allowance is paid to certain categories of employees only and is paid for some special skill hired, you can avoid it. But it is a matter to be debated what kind of special resource is available in an employee whose basic wage is just Rs 2500. Above all, it is a time when a heated discussion is taking place around the definition of wages as given in the EPF Act, and the authorities are trying their level best to enforce payment of contributions at least on minimum wages.
For your information, let me also quote some court verdicts. The Madras High Court in R Ramanathan Chettiar Jewellers, Madurai vs. Regional PF Commissioner, Madurai – 1988 (ii) LLJ 045, has held that where the special allowance is not paid under a contract of employment, settlement, or award but paid purely out of management's own will and pleasure, then such a special allowance would not be taken into account for the purpose of calculating contribution payable under the Act. This ruling stresses that a payment which is not of a regular nature and is paid purely at the discretion of the management would not be available for PF contribution.
In Associated Cement Company Ltd. and Ors. v. R.M. Gandhi, Regional Provident Fund Commissioner, Gujarat (1995-III-LLJ(Suppl.)-368), it has been held that ad hoc payments made to 'eligible employees and not to all employees' under agreement do not form part of basic wages for PF contribution.
The Apex Court, while giving a verdict in Bridges and Roofs (India) Ltd Vs. Union of India [1963 (2) LLJ 490], has said that "it seems that the basis of inclusion in Section 6 (of Employees Provident Fund and Miscellaneous Provisions Act, 1952) and exclusion in Clause (ii) is that whatever is payable in all concerns and is earned by all permanent employees is included for the purpose of contribution under Section 6, but whatever is not payable by all concerns or may not be earned by all employees of concern is excluded for the purposes of contribution."
The above verdicts support that if a special allowance is paid as a special case to some employees, it will not form part of the PF qualifying salary. At the same time, if it is common to all employees by virtue of an agreement with all employees or a settlement, then it will be deemed to be a part of the salary on which PF is to be contributed.
Regards,
Madhu.T.K
From India, Kannur
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For your information, let me also quote some court verdicts. The Madras High Court in R Ramanathan Chettiar Jewellers, Madurai vs. Regional PF Commissioner, Madurai – 1988 (ii) LLJ 045, has held that where the special allowance is not paid under a contract of employment, settlement, or award but paid purely out of management's own will and pleasure, then such a special allowance would not be taken into account for the purpose of calculating contribution payable under the Act. This ruling stresses that a payment which is not of a regular nature and is paid purely at the discretion of the management would not be available for PF contribution.
In Associated Cement Company Ltd. and Ors. v. R.M. Gandhi, Regional Provident Fund Commissioner, Gujarat (1995-III-LLJ(Suppl.)-368), it has been held that ad hoc payments made to 'eligible employees and not to all employees' under agreement do not form part of basic wages for PF contribution.
The Apex Court, while giving a verdict in Bridges and Roofs (India) Ltd Vs. Union of India [1963 (2) LLJ 490], has said that "it seems that the basis of inclusion in Section 6 (of Employees Provident Fund and Miscellaneous Provisions Act, 1952) and exclusion in Clause (ii) is that whatever is payable in all concerns and is earned by all permanent employees is included for the purpose of contribution under Section 6, but whatever is not payable by all concerns or may not be earned by all employees of concern is excluded for the purposes of contribution."
The above verdicts support that if a special allowance is paid as a special case to some employees, it will not form part of the PF qualifying salary. At the same time, if it is common to all employees by virtue of an agreement with all employees or a settlement, then it will be deemed to be a part of the salary on which PF is to be contributed.
Regards,
Madhu.T.K
From India, Kannur
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Subsistence Allowance and PF/ESI Contributions
Since subsistence allowance is not earned through employment, it is not treated as wages for the purpose of contribution to EPF. However, a different view is expressed by the ESI Corporation on this matter, stating that subsistence pay will attract ESI. Additionally, once the employee's suspension is revoked, they will receive the entire amount as salary arrears. At that time, PF deductions can be made because arrears of salary will attract PF. This may be the reason why subsistence allowance is not considered for PF deduction.
Regards,
Madhu.T.K
From India, Kannur
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Since subsistence allowance is not earned through employment, it is not treated as wages for the purpose of contribution to EPF. However, a different view is expressed by the ESI Corporation on this matter, stating that subsistence pay will attract ESI. Additionally, once the employee's suspension is revoked, they will receive the entire amount as salary arrears. At that time, PF deductions can be made because arrears of salary will attract PF. This may be the reason why subsistence allowance is not considered for PF deduction.
Regards,
Madhu.T.K
From India, Kannur
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We have appointed a contractor, and his wage bifurcation is as follows:
Wage Bifurcation Details
If the worker's wage is ₹250 per day, he bifurcates the amount as follows:
- **Basic:** Minimum wages - ₹194.50
- **Conveyance:** 50% of the balance amount - ₹27.75
- **Adhoc Amount:** 50% - ₹27.75
As per PF rules, is it okay, or do I have to ask him to deduct PF on the complete amount?
Your advice on the matter is highly appreciated.
Regards,
Ketan Shah
Ahmedabad
From India, Ahmadabad
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Wage Bifurcation Details
If the worker's wage is ₹250 per day, he bifurcates the amount as follows:
- **Basic:** Minimum wages - ₹194.50
- **Conveyance:** 50% of the balance amount - ₹27.75
- **Adhoc Amount:** 50% - ₹27.75
As per PF rules, is it okay, or do I have to ask him to deduct PF on the complete amount?
Your advice on the matter is highly appreciated.
Regards,
Ketan Shah
Ahmedabad
From India, Ahmadabad
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