Dear Experts,
I would like to understand the criteria for employees regarding the maximum amount that can be deducted from an employee's EPFO contribution if his/her salary is above INR 15,000.
I look forward to your valuable feedback.
Thank you,
HR - Mturntech
Location: Jamnagar, India
From India, Jamnagar
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I would like to understand the criteria for employees regarding the maximum amount that can be deducted from an employee's EPFO contribution if his/her salary is above INR 15,000.
I look forward to your valuable feedback.
Thank you,
HR - Mturntech
Location: Jamnagar, India
From India, Jamnagar
Acknowledge(0)Amend(0)
The maximum limit for the Employee Provident Fund (EPF) contribution is governed by the Employees' Provident Fund and Miscellaneous Provisions Act, 1952.
As per the Act, both the employee and the employer contribute 12% each of the employee's basic salary and dearness allowance (if any) towards EPF. However, if the employee's salary (basic + dearness allowance) exceeds INR 15,000 per month, the employer is liable to contribute only on INR 15,000, i.e., INR 1,800.
The employee has the option to contribute on the full amount of basic + dearness allowance, but the employer is not bound to match this higher contribution. This voluntary higher contribution by the employee is known as Voluntary Provident Fund (VPF) and it is over and above the 12% standard EPF contribution.
Please note that the VPF contribution is also eligible for tax benefits under section 80C of the Income Tax Act. However, the interest earned on VPF contribution exceeding INR 2.5 lakhs in a financial year will be taxable as per the provisions announced in the Union Budget 2021.
To summarize:
- Standard EPF contribution: 12% of basic salary + dearness allowance (up to a maximum of INR 15,000) by both employee and employer.
- VPF contribution: Any amount above the standard EPF contribution, contributed voluntarily by the employee. The employer is not obligated to match this contribution.
- Tax implications: VPF contributions are eligible for tax benefits under section 80C. Interest earned on VPF contribution exceeding INR 2.5 lakhs in a financial year is taxable.
I hope this information is helpful. Please consult with a financial advisor or the EPFO directly for personalized advice.
From India, Gurugram
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54As per the Act, both the employee and the employer contribute 12% each of the employee's basic salary and dearness allowance (if any) towards EPF. However, if the employee's salary (basic + dearness allowance) exceeds INR 15,000 per month, the employer is liable to contribute only on INR 15,000, i.e., INR 1,800.
The employee has the option to contribute on the full amount of basic + dearness allowance, but the employer is not bound to match this higher contribution. This voluntary higher contribution by the employee is known as Voluntary Provident Fund (VPF) and it is over and above the 12% standard EPF contribution.
Please note that the VPF contribution is also eligible for tax benefits under section 80C of the Income Tax Act. However, the interest earned on VPF contribution exceeding INR 2.5 lakhs in a financial year will be taxable as per the provisions announced in the Union Budget 2021.
To summarize:
- Standard EPF contribution: 12% of basic salary + dearness allowance (up to a maximum of INR 15,000) by both employee and employer.
- VPF contribution: Any amount above the standard EPF contribution, contributed voluntarily by the employee. The employer is not obligated to match this contribution.
- Tax implications: VPF contributions are eligible for tax benefits under section 80C. Interest earned on VPF contribution exceeding INR 2.5 lakhs in a financial year is taxable.
I hope this information is helpful. Please consult with a financial advisor or the EPFO directly for personalized advice.
From India, Gurugram
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