Dear Seniors, Kindly help me by replying to the following query:
EPF Deduction Issue
We have an employee who joined our company on 4th July 2022. At the time of joining, he requested us not to deduct his EPF, which we accepted, and did not deduct his EPF. His gross salary is Rs. 34,800, and the basic salary is Rs. 13,920. Since this employee's basic salary is less than Rs. 15,000, his EPF deduction was mandatory from his joining month, which we just got to know during our internal office audit.
Request for Guidance
Now, I request you to guide me on how we can correct this mistake to avoid any action from the EPF department in this regard.
Thank you,
Gajinder Singh
From India, Patiala
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1EPF Deduction Issue
We have an employee who joined our company on 4th July 2022. At the time of joining, he requested us not to deduct his EPF, which we accepted, and did not deduct his EPF. His gross salary is Rs. 34,800, and the basic salary is Rs. 13,920. Since this employee's basic salary is less than Rs. 15,000, his EPF deduction was mandatory from his joining month, which we just got to know during our internal office audit.
Request for Guidance
Now, I request you to guide me on how we can correct this mistake to avoid any action from the EPF department in this regard.
Thank you,
Gajinder Singh
From India, Patiala
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Understanding Basic Salary and EPF Compliance
What do you mean by basic salary? Is it the salary as per the minimum wages notification? As per the EPF & MP Act, basic salary means the total salary. The only exclusion permitted is HRA. Therefore, if his gross salary less HRA is above Rs. 15,000 and he was never a member of PF in the past, your act of excluding him from EPF is legally correct. However, if you have been contributing to PF for other employees based on a basic salary only, and that basic salary is less than Rs. 15,000, there is a chance that you could receive a show cause notice for various omissions.
From India, Kannur
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What do you mean by basic salary? Is it the salary as per the minimum wages notification? As per the EPF & MP Act, basic salary means the total salary. The only exclusion permitted is HRA. Therefore, if his gross salary less HRA is above Rs. 15,000 and he was never a member of PF in the past, your act of excluding him from EPF is legally correct. However, if you have been contributing to PF for other employees based on a basic salary only, and that basic salary is less than Rs. 15,000, there is a chance that you could receive a show cause notice for various omissions.
From India, Kannur
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Madhu has clearly explained the definition of Basic as per the EPF Act.
Are you contributing to the EPF only on the basic or considering other allowances as well?
Even though the employee is drawing wages above 15,000/-, if the employee was already covered under EPF, then it's mandatory to cover. If not, there are provisions to exclude from EPF contribution, but still need to obtain a Joint Declaration, and the same should be communicated to EPF.
From India, Bangalore
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Are you contributing to the EPF only on the basic or considering other allowances as well?
Even though the employee is drawing wages above 15,000/-, if the employee was already covered under EPF, then it's mandatory to cover. If not, there are provisions to exclude from EPF contribution, but still need to obtain a Joint Declaration, and the same should be communicated to EPF.
From India, Bangalore
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