Calculate PF on gross pay and NOT on Basic head of pay – Part I

A recent article on Provident Fund (PF) deduction in the Times of India has led to a number of employers and employees believe that there will be a significant increase in PF deduction in the near-future. According to the article, as per a recent directive from the PF department, employers will have to contribute and deduct 12% of gross salary (instead of Basic pay) towards PF, and consequently the PF contribution and deduction will go up significantly. A number of people have expressed concern on account of the possibility of having to make a higher PF contribution.

We have received emails and phone calls from payroll managers seeking our view on this issue. Here is our attempt to decode what the PF department has actually said and hopefully in the process, dispel the myths on this issue.

So, is it 12% of Basic head of pay or 12% of Gross pay?

PF contribution should be calculated on “PF Gross” and not the Basic head of pay.

Definition of PF Gross
Gross pay for the purpose of PF calculation is different from the term gross pay which is typically used in the payroll context. For the sake of clarity, we will use the term PF Gross in this post to denote the salary to be considered for PF calculation. PF Gross includes Basic, DA, Conveyance, Other Allowance etc. (heads of pay which are included for PF calculation) and excludes House Rent Allowance, Bonus etc. (heads of pay which are excluded for PF calculation) as per the provisions of the PF Act.

According to the Employees Provident Fund and Miscellaneous Provisions Act, 1952 , called the PF Act, the statute which governs Provident Fund contribution, the PF contribution should be calculated as 12% of “basic wages” (plus DA, cash value of food concession, and retaining allowance, if any), subject to a maximum of Rs 6500/- per month. In case an employee earns basic wages (plus DA, cash value of food concession, and retaining allowance, if any) of more than Rs 6500 per month, they can opt for a higher PF deduction (more than 12% of Rs 6500) at the joint request of the employee and the employer.

According to the PF Act:

1. PF contribution should be calculated on “basic wages” (plus DA, cash value of food concession, and retaining allowance, if any) and;

2. beyond basic wages (plus DA, cash value of food concession, and retaining allowance, if any) of Rs 6500 per month, the PF contribution is not mandatory but can be made if employees and employers so wish.

Let us examine the above in greater detail.

Basic wages, as stated in the PF Act, is not the same as the “Basic” head of pay.

Here is what is stated in Section 2b of the PF Act.

2(b) “basic wages” means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include-

(i) the cash value of any food concession;

(ii) any dearness allowance that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living, house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment;

(iii) any presents made by the employer;

A reading of Section 2b along with Section 6 of the PF Act leads us to understand that PF contribution should be calculated on basic wages, dearness allowance, cash value of food concession, and retaining allowance, if any.

It is not easy for a casual reader to figure out in the PF Act the exact definition of salary for the purpose of PF calculation. For example, while Dearness Allowance (DA) and cash value of food concession are excluded from the definition of Basic Wages in Section 2b, giving one an impression that DA and cash value of food concession are excluded for PF calculation. However, DA and cash value of food concession are included for the purpose of PF calculation (in addition to Basic Wages) in Section 6 of the PF Act, and Section 29 under Chapter 5 of the Employees’ Provident Fund Scheme, 1952. The text in the PF Act is somewhat laborious to read.

According to Section 2b of the PF Act,  basic wages means all emoluments which are earned by an employee in accordance with the terms of the contract of employment and which are paid or payable in cash to him. Section 2b explicitly excludes certain heads of pay such as house rent allowance, bonus, and overtime allowance, commission or any other similar allowance for the purpose of PF calculation.

Employers have all along been interpreting “basic wages” as the head of pay which is commonly called Basic and DA, if any, and hence have been calculating PF contribution on Basic (plus DA). While organizations offer salary under heads of pay such as Conveyance, Travel Allowance, Medical Allowance, Other Allowance, and Special Allowance, such heads of pay have been ignored for the purpose of PF calculation. This was probably because employers have all along interpreted “commission or any other similar allowance” excluded for PF calculation (as specified in sub-point ii of Section 2b in the PF Act) to mean commission and all allowances/heads of pay other than Basic (and DA).

Clarifications from the PF department

The PF department in its circular dated 30-Nov-2012 (Point no. 12) has clarified that “commission or similar allowance” means only commission and commission-like allowances and not allowances which are “necessarily and uniformly” paid to employees. In other words, pay paid under the heads such as Special Allowance and Other Allowance should be included for the purpose of PF calculation unless explicitly left out by the PF Act.

On the issue of determining salary for the purpose of PF calculation, court judgments in the last couple of years favour the PF department. In their judgements, the Madras High Court and Madhya Pradesh High Court have stated that organizations should add other allowances to Basic while calculating PF. You can read the PF department circulars which append the court judgements here and here.  As per the judgements, barring heads of pay such as House Rent Allowance and Bonus which are explicitly excluded (in the PF Act) from salary for the calculation of PF, the PF Gross of an employee should be used for the calculation of PF.

The PF department too has been reiterating that salary for PF calculation should include heads of pay other than Basic and DA, time and time again. Please take a look at a publication issued by the PF department which clarifies what basic wages are here. The PF department has also been conducting inspections in organizations and raising demand for additional recovery of PF from employers who have been calculating PF on the Basic head of pay instead of PF Gross.

What are payroll managers concerned about?

There are reports that the PF department has started actively advising employers to change the basis of PF calculation. Payroll managers fear that the change in salary amount on which PF is calculated will lead to a significant increase in the salary cost for employers. Employees may also get impacted if employers, not wanting to go beyond the budgeted cost-to-company figure, decide to pass on the burden on account of additional PF contribution to the employees.

We believe the above concern is not as serious as it is made out to be.

The additional burden to employees and employers may not be as severe as it looks since any PF contribution on PF Gross (which includes Basic wages, DA, cash value of food concession, and retaining allowance, if any) over Rs 6500 is not mandatory.  Employers are mandated to calculate PF as 12% of PF Gross only for employees whose PF Gross is Rs 6500 or less per month. For employees whose PF Gross is more than Rs 6500 per month, the organization could continue deducting PF on Basic head of pay (if the amount paid under Basic is above Rs 6500 per month) or restrict PF Gross to Rs 6500 for the purpose of PF calculation. In other words, the change in the basis of PF calculation is required only for employees whose PF Gross is Rs 6500 or less per month.

We will examine some illustrations on the practical aspects of PF calculation in the next post.

We welcome your point of view. Please leave your comment here or send an email to info@hinote.in if you wish to contact us in private.

Posted in: Blog

Leave a Comment (96) ↓

96 Comments

  1. Sadir December 30, 2012

    Nice article!! Definitely, clears lots of confusions.

    reply
  2. ashu February 6, 2013

    thanks for the detailed article.
    My new employer is a logistics firm.
    They are not deducting PF.
    On enquiring, we were told that PF deduction is not mandatory if basic salary is more than 6500 p.m.
    The company is having more than 500 onroll employees acrosss India.
    They deduct PF for new joinees only if basic is less than 6500 p.m. PF is also deducted for old employees who were already enrolled in the companies PF fund, irrespective of their basic pay whether less or more than Rs 6500 p.m.

    Is it true if basic pay is more than Rs 6500 p.m. Employers are not mandated to open a PF account or transfer a previous PF account with ex employer?? are there any exceptions for companies registered as Courier companies and governed by Couriers act?

    reply
  3. ashu February 6, 2013

    thanks for the detailed article.
    My new employer is a logistics firm.
    They are not deducting PF.
    On enquiring, we were told that PF deduction is not mandatory if basic salary is more than 6500 p.m.
    The company is having more than 500 onroll employees acrosss India.
    They deduct PF for new joinees only if basic is less than 6500 p.m. PF is also deducted for old employees who were already enrolled in the companies PF fund, irrespective of their basic pay whether less or more than Rs 6500 p.m.

    Is it true if basic pay is more than Rs 6500 p.m. Employers are not mandated to open a PF account or transfer a previous PF account with ex employer?? are there any exceptions for companies registered as Courier companies and governed by Couriers act?

    My previous company was deducting PF, and the new organization is not transferring that PF account, stating the above reason ofmore than Rs 6500/- baisc clause. It leaves me no option other than closing my previous PF account, which I don’t want to close.

    reply
    • gautham February 10, 2013

      A new joinee employee who joins a company where PF is in effect can be excluded from PF only if both the following conditions are satisfied.

      1. The employee’s PF salary is greater than Rs 6,500 per month and

      2. The employee does not have any PF balance from his earlier organization. In other words, the employee should have withdrawn his PF balance and hence does not have any PF balance.

      From every new joinee, an employer should receive a declaration (in accordance with Para 34 of the Employees’ Provident Fund Scheme) which contains details of the employee’s earlier PF membership details.

      If an employee had PF in his earlier organization and has not withdrawn it, he does not automatically become an “excluded employee” just because his Basic pay is more than Rs 6,500.

      If your organization is excluding new joinees — whose Basic pay is more than Rs 6,500 — from PF without ascertaining whether they still have the PF balance from their earlier employment, your organization may not be in conformance with the PF statutes.

      reply
      • vikas rajput October 26, 2017

        my basic is 16000 -/- pls. clear i am an employee in pf range or not…..

        reply
        • gautham October 30, 2017

          You can be out of PF subject to certain conditions.

          reply
  4. Meena November 14, 2013

    Dear sir,

    We are confused for basic salary calculate in salary sheet for PF. as per par day salary 220.

    reply
    • gautham November 18, 2013

      We are unable to understand your question. Are you asking us how PF salary is arrived at?

      reply
  5. sidharth singh February 13, 2014

    Dear Sir,

    Please let us know how salary is calculated for the purpose of Pf contribution from employer & employee.

    Thank U…..!

    reply
  6. LAKSHMAN PRASAD DAS September 30, 2014

    Pl. confirm about the deduction for pf contribution on salary- Basic Rs.6000 & gross salary of 15000/-. Now,what amount is applicable for pf share deduction.

    Thanks,

    reply
    • gautham October 7, 2014

      In the gross salary of RS 15,000, please exclude HRA and any other head of pay explicitly exempted by the PF act. In the resulting gross pay, calculate PF by multiplying it by 12%.

      reply
  7. HEMANT January 14, 2015

    sir my CTC is as follows:-
    BASIC :- 6734
    HRA :- 0
    EMPLOYERS PF:- 847
    EMPLOYERS ESIC:-380
    TOTAL CTC IS 7999
    IN PAY SLIP THEY GIVE ME
    BASIC:- 6734
    HRA :- 0
    LESS:- PF 808
    LESS:-ESI 118
    NT AMOUNT IS 5808
    I WANT TO KNOW IS IT CORRECT WAY OF COMPANY TO GIVE ME SALARY
    I THINK THEN WHAT IS THE MEANING OF THE CTC 7999

    reply
    • gautham January 26, 2015

      CTC refers to the total cost your employer has to incur in order to employ you. Employer PF and ESI contributions are costs incurred by your employer even though you don’t receive them as cash components each month. Hence, your CTC includes Basic, Employer PF and Employer ESI contribution.

      Net amount is the amount you receive each month after all deductions.

      reply
  8. Sandeep March 19, 2015

    sir
    if the salary given to the employee as under then please guide how to deduct PF component on employee salary.
    Basic: Rs.5800.00
    HRA: Rs.580.00
    Spl. Allowance: Rs.4620.00
    Total Salary: Rs.11000.00

    reply
    • gautham March 19, 2015

      The PF shall be calculated as 12% of Basic + Spl. Allowance which is about Rs 1,250.

      reply
  9. Sathishkumar.N April 28, 2015

    Now the revised PF ceiling is Rs.15000.

    Except house rent allowance, overtime allowance & bonus. Shall I want to deduct pf from other allowance (conveyance, medical, etc.,)

    reply
    • gautham April 30, 2015

      I am unable to understand your question. If you are asking if Conveyance and Medical amounts should be considered for the purpose of PF calculation, the answer is yes.

      reply
  10. yvonne June 24, 2015

    If I am offered 6500 CTC what will I get after deductions????

    reply
    • gautham June 28, 2015

      If you organization is enrolled under PF, ESI, and Profession Tax, your net pay should be arrived at after PF, ESI and PT deductions.

      reply
  11. latha July 9, 2015

    Sir, How do we treat Grade Pay ? Should it be included for PF
    calculation ?

    reply
    • gautham July 9, 2015

      Grade Pay should be included for PF.

      reply
  12. Raviteja July 18, 2015

    Hi sir,
    This is Raviteja. I have worked in a company for 20 months.Rs.690/- deducted from my salary as PF.I am a Consolidated Employee (Not CTC).My company would paid double amount(Rs.690+Rs.690=Rs.1380) as PF to EPF government or not?
    How much amount I will get as PF? Please give reply ASAP.

    reply
    • gautham July 20, 2015

      Your company must have deposited Rs 1,380 per month as the PF contribution to the PF department. Please check with your HR department in this regard.

      reply
  13. Mohammed August 1, 2015

    Dear Gautham –

    Appreciate your post and the clarifications. Expecting your advice in your context

    I have an organization where most staff salary is less than 6500. Here is how we have structured it. Help me the right approach to calculate PF

    Basic Salary – Based on General Educational and Experience
    Special Allowance – Based on Specific Educational Qualification relevant to job
    Monthly Performance – A percentage of basic + spl Allowance paid monthly for meeting certain criteria

    Bi Annual Performance – A percentage of basic + spl Allowance paid semi Annually for meeting certain criteria (more of a retention)

    Development Allowance – Money spent of staff training, uniforms,

    In this, i have calculated only on basic. Is that right ?

    What can i do to reduce the employer burden while still being complaint with act ?

    My staff is not interested to enroll in PF. How do i structure it to provide flexibility and exemption for them ?

    Looking forward to your help.

    nine eight eight four five zero zero nine three three

    reply
    • gautham August 2, 2015

      In this, i have calculated only on basic. Is that right ?

      No it is wrong. You should include the other heads you have mentioned.

      What can i do to reduce the employer burden while still being complaint with act ?

      You can restrict the employer PF contribution to Rs 1,800 each month. But until Rs 1,800 you have to contribute employer PF as per the actual amount calculated as 12% of the PF wage. PF wage is not just Basic head of pay.

      My staff is not interested to enroll in PF. How do i structure it to provide flexibility and exemption for them ?

      PF is a matter of statutory compliance and a company cannot exempt employees from PF just because they do not wish to enroll themselves. Employees and employers can restrict the contribution to a maximum of Rs 1,800 per month, if they so wish. Up to Rs 1,800 per month, PF contribution is mandatory.

      Please let us know if you have more questions on this.

      reply
      • Jitesh Kothari April 23, 2016

        Dear Gautham,

        Now the salary limit is increased to Rs. 15000 for PF calculation. I want to clarify few things.
        1. Rs. 15000 limit (what is the definition of salary for this purpose). is it total gross salary or BASIC+ DA + retainer allowance.

        2. If it is basi& da,(Basic&da – 12000, HRA-4500, special allowance- 6500; total – 23000) then will the employer will be required to pay 12% on entire 12000 or just 6,500/- as earlier.

        3. The restriction of employer contribution to Rs. 1800/month (12% of 6500) still applies or has it now increased now to 12% of Rs. 15000.

        Kindly reply.

        reply
        • gautham April 24, 2016

          1. Rs. 15000 limit (what is the definition of salary for this purpose). is it total gross salary or BASIC+ DA + retainer allowance.

          Ans: It is gross salary (after excluding exempted heads such as HRA).

          2. If it is basi& da,(Basic&da – 12000, HRA-4500, special allowance- 6500; total – 23000) then will the employer will be required to pay 12% on entire 12000 or just 6,500/- as earlier.

          Ans: The PF should be calculated as 12% of Rs 18,500 (Basic & DA + Spl Allowance). The employer can choose to restrict PF to 12% of Rs 15,000 if it so wishes. The limit of Rs 6,500 is no longer applicable.

          3. The restriction of employer contribution to Rs. 1800/month (12% of 6500) still applies or has it now increased now to 12% of Rs. 15000.

          Ans: The limit is now Rs 15,000. The limit of Rs 6,500 is no longer applicable.

          reply
      • shivaji June 1, 2017

        from 1st June i hv employee in u.p. (unskilled)

        can i decrease the min. basic so that employee net income can increase a little.

        or how can i give them more net income by lowering basic.

        reply
        • gautham June 2, 2017

          Not sure how this can be done unless you increase the amount under another head of pay or decrease a statutory deduction.

          reply
    • vijesh p October 1, 2015

      Hi,my salary slip details are following. I would like to know , how much home loan amount im eligibe for from any bank. BASIC :- 24880 grade pay:7600 special pay : 1900 da: 36702
      HRA :- 0 tra: 3200 tra da: 3616 varaible increment : 4500 Gmc: 6918 _________________ total gross amount : 89316 ______________________________ deductions : tier1: 6918 Gmc: 6918 cghs:500 cgegis: 120
      lic- 2274
      tax: 6283

      finalmy take home is 64872. Plz.help me, as im in the stage of finalizing to buy a flat.

      reply
      • gautham October 2, 2015

        Kindly check with a bank or housing loan institution in this regard.

        reply
  14. Vikrant Birje August 12, 2015

    Sir,
    I joined an organization subject to PF deduction at a basic salary of Rs. 7500/- + allowances two years ago.
    The company did not deduct PF nor contributed any employers contribution on Rs. 6500/- saying it is not mandatory since my salary is more than Rs 6500/- basic

    Now that the limit has been raised to 15000 they have started deducting PF on basic salary of 7500/- @12%
    I think they should have deducted 12% on Rs7500/- from my date of joining.

    Is their understanding correct or mine ?

    Regards,
    Vikrant Birje

    reply
    • gautham August 12, 2015

      It is fine that your employer started deducting PF after the salary limit was enhanced to Rs 15,000 per month. However, your employer should be calculating PF not just on Basic but on gross pay after excluding exempted heads of pay such as HRA, up to a salary of Rs 15,000.

      reply
  15. Sangeetha Nair September 8, 2015

    If the take home salary of any employee has to be 16500, with basic 7000 rs , conveyance allowance 1600 and other allowance 7400 , what all deductions will take place here? PT 200 rs would be deducted.Is he eligible for PF? If yes on which among it would be calculated?

    reply
    • gautham September 8, 2015

      The employee is eligible for PF, which will have to be calculated on the aggregate of all heads of pay you have stated. The statutory deductions would include income tax, if any, and PF.

      reply
  16. Umang Bhawsinka October 16, 2015

    Dear sir,

    Is pf is applied for Vda also?

    Regards.
    Umang
    Steelton

    reply
  17. sita December 23, 2015

    I used to get pf deducted with my previous employer and they have given me a UNA number and I have joined another company and submitted only the UNA number to them and they have not asked for any of the forms to be filled to transfer the amount from the previous PF account. clarify me whether I need to submit any other documents or forms to the new employer for transfer of the PF amount as I would not like to withdraw the amount as of now.

    reply
    • gautham December 29, 2015

      UAN should be enough. The PF amount will automatically be transferred.

      reply
  18. Babu Lal February 16, 2016

    A person whose basic is 20,000 has been in service since 2008. As per the revised EPS rule, will his employer stop EPS contribution or continue to contribute, because the rule says ‘those joining on or after Sep-2015 and drawing above 15000 basic wages’ are exempted from EPS.

    His employer has been giving full contribution without restriction on wage limit. Will this old employee continue to get EPS on 20,000 as usual or his EPs stops in Aug-2015 month itself. Please explain sir.I am not clear abou this.

    reply
    • gautham February 26, 2016

      Only new PF members joining after 01-Sep-2014 and with salary more than Rs 15,000 per month should be excluded from EPS. Existing employees (who became PF members prior to Sep 2014) shall continue to be under EPS even after 01-Sep-2014 even if the salary is more than Rs 15,000.

      reply
  19. Rishigupta May 14, 2016

    Dear Gautam,
    My salary is 11500 Rs per month. So company deducted PF? and How much?

    Please revert me…

    reply
    • gautham May 18, 2016

      Kindly check with your company for the exact calculation.

      reply
  20. Devanshu Gupta June 17, 2016

    Hey Gautam nice post !!!
    I have some querries..
    I am a new employer and have to pay pf for 110 employees. my employess earn total wages around 6500 per head per month including everything. (HRA+etc).
    1. How to split 6500 in basic + HRA +etc??? so that employer’s and employees contribution for the PF should be minimum.
    2. if there any relation of the calculated PF with employees attendance???
    3. if daily wages is certain amount then how to calculate PF on total earned wages for that employee based on his attendance (n. of present days)
    4. can u suggest some formula that calculates pf covering Employesr contribution+employees contribution+pension fund ect…..
    Kindly guide …..

    Thanks in advance… 🙂

    reply
    • gautham June 20, 2016

      1. How to split 6500 in basic + HRA +etc??? so that employer’s and employees contribution for the PF should be minimum.

      Ans: The current ceiling is Rs 15,000 per month and not Rs 6,500 (which was the amount when the blog post was published). If the salary is less than Rs 15,000, PF should be calculated as 12% of (gross minus HRA).

      2. if there any relation of the calculated PF with employees attendance???

      Ans: No direct relation. However, since attendance impacts loss of pay which in turn impacts wage amount on which PF should be calculated.

      3. if daily wages is certain amount then how to calculate PF on total earned wages for that employee based on his attendance (n. of present days)

      Ans: According to the PF department, “PF deductions made from the wages of a member paid on daily, weekly or fortnightly basis should be totalled up to indicate the monthly deductions”. This means that the PF calculation for the purpose of remittance should be for a month on the basis of actual wages paid for the month.

      4. can u suggest some formula that calculates pf covering Employesr contribution+employees contribution+pension fund ect…..

      Ans: Not sure what you mean by formula. You need to calculate PF contribution/deduction, EDLI admin charges etc. as per the prevailing rates.

      reply
  21. Vijay August 27, 2016

    Hello Gautham

    1. My question is if a persons Gross will be more than 15000 means , is he exempted from PF Contribution or have to remit minimum 12% of the slab.

    2. In heads of pay which are the components is excluded for the calculation of PF ” HRA alone or any other components is there?

    reply
    • gautham August 29, 2016

      1. My question is if a persons Gross will be more than 15000 means , is he exempted from PF Contribution or have to remit minimum 12% of the slab.

      He cannot be exempted just because the salary goes above Rs 15,000. If he is already a PF member he should continue to be a member until the end of his stint with the organization.

      2. In heads of pay which are the components is excluded for the calculation of PF ” HRA alone or any other components is there?

      Among the fixed heads of pay, HRA is exempted. The other heads which are excluded include overtime, statutory bonus and gratuity.

      reply
  22. manosh September 8, 2016

    my basic is 25000 , yet my PF contribution is 1800 & employer’s share is 551 . what is the rule to increase it to 12% of basic on both sides?

    reply
    • gautham September 14, 2016

      1. As far as your contribution is concerned, you can request your employer to increase it 12% of Basic by way of voluntary PF contribution from you.

      2. I do not know why the employer contribution is only Rs 551 given that your Basic is Rs 25,000. Seems to be a case of incorrect employer PF contribution.

      reply
  23. Varun November 10, 2016

    Hello Gautham,

    Thank you so much for all replies so far. Your every answer for all the above questions have helped me to understand PF better.

    Extremely sorry for many questions we are new startup we want to know what we can do best from employer side without disturbing employees minimum expectation of salary.

    I still have few question:

    1. What will be an employers and employees contribution for the below scenario?

    Basic Salary : 6000
    HRA : 4000

    2. In the above case if an employee recieves incentives ( it can be any amount from 3000 to 50000), then will have any difference in PF contribution.

    3. Kindly list of payments which are excluded from PF contribution like HRA?

    4. When will ESI will come in the picture as statutory compliance ?

    5. What will be the minimum employee numbers to enroll for PF as mandatory?

    6. Is pf is applicable for temporary employee?

    7. We just want to ensure we credit atleast 10,000 to an employee post PF deduction with lowest possible contribution from employer and employee then what will the best combination of salary structure?

    Waiting for your reply……

    Thank you so much for your help……

    reply
    • gautham November 10, 2016

      My replies are as follows.

      1. What will be an employers and employees contribution for the below scenario?

      Basic Salary : 6000
      HRA : 4000

      Ans: Employer contribution = Rs 720 and employee contribution = Rs 720 – both calculated as 12% of Rs 6,000.

      2. In the above case if an employee recieves incentives ( it can be any amount from 3000 to 50000), then will have any difference in PF contribution.

      Ans: If the incentive is in the nature of bonus or commission, it can be left out of PF calculation. Else, it should be included. One cannot leave out a fixed head of pay, just because it is called incentive.

      3. Kindly list of payments which are excluded from PF contribution like HRA?

      Ans: The typical heads which are excluded are house rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment.

      Please see http://esewa.epfoservices.in/faq.php – Question no. 43.

      4. When will ESI will come in the picture as statutory compliance ?

      Ans: When the employee strength in your organization crosses 10, ESI comes into picture.

      5. What will be the minimum employee numbers to enroll for PF as mandatory?

      Ans: 20 or more employees.

      6. Is pf is applicable for temporary employee?

      Ans: Please define “temporary” employee. All employees are to be covered under PF unless specifically exempted. We need to examine the nature of the relationship between the so-called temporary employees and the organization for us to answer the question.

      7. We just want to ensure we credit atleast 10,000 to an employee post PF deduction with lowest possible contribution from employer and employee then what will the best combination of salary structure?

      Ans: Please specify the total cost to company for a position and then work to arrive at a target net pay. For a certain gross pay, we can apply the mandatory and statutory deductions and then check if the take-home salary would be at least Rs 10,000.

      reply
  24. anand December 7, 2016

    hi sir,
    i recently joined in a firm and my salary structure is added below
    Basic 3,600.00
    Convey Allow. 600.00
    DA 3,000.00
    Spl. Allow 1,800.00
    Medical 600.00
    HRA 2,400.00
    pf is calculated on the basis of CTC ie. 24% . so pf deduction is 2304 which includes (Basic,Convey Allow,DA , Spl. Allow, Medical). Is this right way of calculation. can i ask my employer to reduce pf deduction, which i believe deduction is little bit more.

    reply
    • gautham December 8, 2016

      If you want your employer to deduct more PF, you can do so. The employee’s PF contribution can be increased.

      reply
  25. PABAN KUMAR RAJU December 16, 2016

    Sir,
    I am giving salary 8000 to one of my employee,but basic is 2400 for pf ,will there be any problem,what should be the minimum basic,pls clarify.

    reply
    • gautham December 16, 2016

      PF should be calculated on Rs 8,000 minus HRA, if any, and not on Rs 2,400.

      reply
  26. M.S.S January 18, 2017

    Hi,

    1.If Basic -6000/-, DA-2000/-, HRA-2000/-, Convy-1000/- then, P Fwages will be 9000/-. Now this is less than 15000/-, so Pf will be calculated on 9000/- is it correct.
    2. If Basic- 10000/-, DA- 3000/-, HRA- 4000/-, Convy- 3000/-, then PF wages will be 16000/-. Now this is more than 15000/-, so PF will be calculated on 15000/- or Rs 16000/- as above. what is mandatory. please clarify the two conditions.

    Thanks

    reply
    • gautham January 18, 2017

      1.If Basic -6000/-, DA-2000/-, HRA-2000/-, Convy-1000/- then, P Fwages will be 9000/-. Now this is less than 15000/-, so Pf will be calculated on 9000/- is it correct.

      Ans: Yes, it is correct.

      2. If Basic- 10000/-, DA- 3000/-, HRA- 4000/-, Convy- 3000/-, then PF wages will be 16000/-. Now this is more than 15000/-, so PF will be calculated on 15000/- or Rs 16000/- as above. what is mandatory.

      Ans: The mandatory PF is 12% of Rs 15,000. However, one can contribute PF at 12% of Rs 16,000 if one so wishes.

      reply
  27. swati March 24, 2017

    I am getting 3500 I am not interested in pf
    can you plz tell me from how much salary they can cut pf as per rules

    reply
    • gautham March 27, 2017

      PF should be calculated as 12% of PF wage.

      reply
  28. Venila April 14, 2017

    Hi sir,

    Actually my CTC is increased from 12000 to 13800. While am getting 12k my PF deduction is around 12% of my basic and they have deducted around 560 approx and after this appraisal they are deducting around 24% of my basic and they are deducted around 1400 approx.. Is this calculation after appraisal is correct or not? Can you please help me in this…

    reply
    • gautham April 17, 2017

      Please let us know the break-up of your salary. You can also request your employer to provide you with the basis of PF calculation.

      reply
  29. megha April 17, 2017

    As per present salary, can any person have salary structure? basic salary 4250+D.a.850+hra and conveyance.4250. pf calculation (4250+850)
    *12% =612. is this correct calculation?
    suggest

    reply
    • gautham April 27, 2017

      PF should be 12% of (Basic + DA+ Conveyance).

      reply
  30. Raja April 26, 2017

    Dear Gautham

    My salary Structure is Basic -8500.00-, DA-4250.00, HRA-3188.00, Other conveyance -1062 and my employer deducted PF is1530.00.

    Kindly confirm what basis my employer calculated and deducted PF is 1530.00, is it correct correct calculation or challenge my employer.

    Advance thanks.

    RAJA

    reply
    • gautham April 27, 2017

      Your employer should have calculated PF as 12% of (Basic + DA + Other Conveyance).

      reply
  31. Vivant May 2, 2017

    Under the low can any firm or Organization
    Pay salery on weekly basis so how deduct they EPF of the employees??? And weekly pay worker is elegible for epf ??

    reply
    • gautham May 3, 2017

      You need to deduct PF for the payment made for each calendar month.

      reply
  32. Nadeem June 21, 2017

    This means if an employee is getting a consolidated salary(as per contract) of Rs 14,000/- and conveyance allowance of Rs 1500/-. Then for the purpose of pf calculation, the gross salary is Rs 15,500/- and thus the employee is exempted and no required to contribute to PF.
    Please clarify.

    reply
    • gautham June 22, 2017

      Yes, the employee can be exempted subject to conditions specified in the PF rules.

      reply
  33. TINA July 22, 2017

    Sir,
    I joined a NGO this April, 2017 with a gross salary of Rs.28,000/- . Am I eligible for EPF ?

    reply
  34. Prashant kumar August 5, 2017

    Dear Sir,

    My basic salay as per delhi gov. Is 16,500 /- but my company paying me 13900 /- net salary(In hand) . Is it right or i should take legal action against it.

    reply
    • gautham August 5, 2017

      What are the deductions from your salary?

      reply
  35. Jignesh August 9, 2017

    My employee is cutting 24 % PF of basic+DA from CTC. Company is not adding his 12 % . Is this ok as per PF rules. Can i take any legal action.

    reply
    • gautham August 17, 2017

      It depends on how your compensation offer was structured. What does your offer/appointment letter state regarding the PF deduction?

      reply
  36. K.C.Dhiman August 11, 2017

    Dear Gauthem,
    We have an employee drawing basic pay Rs.15500/- besides other allowances. We have been contributing E.P.S. @ 8.33% of maximum limit of Rs. 15000/-, since the date of enhancement of limit from Rs.6500 to 15000/-. But when we have to remit employer’s contributions for July, 2017, the computer has not accepted it with following coments:-
    Error EPS Contribution Remitted: Max equal to rounded 8.33% of EPS Wages added with rounder 1.16% of the EPS Wages above 15000/- found on line numbers:(11).
    What it means? Whether some additional EPS contribution is required for EPS in this case and if so how it is to be calculated?.

    reply
    • gautham August 17, 2017

      Can you please check if you have stated the EPS wage correctly in the challan? You can get in touch with us, if you wish to discuss this in private, by sending an email to info@hinote.in.

      reply
  37. Baban Tuplondhe October 6, 2017

    Dear sir,
    When i started working was was getting 18000 gross salary but the management refused me P F saying my salary is more than 15000 . i feel the salary is divided in different ways such as DA, HRA , TA . Management is not giving me P F what should i do to get PF

    reply
    • gautham October 30, 2017

      Salary split does not matter. Please check with your management in this regard.

      reply
  38. Shailesh Dwivedi November 17, 2017

    Hi
    to who so ever it may concern
    I am an employee of “x” company! I am earning an amount which is less than EPF wages ceiling and now I am getting increment of my salary which is higher than EPF wages ceiling and now i would like to get out of EPF contribution. kindly give me suggestion how to do

    reply
    • gautham November 24, 2017

      You cannot get out of PF just because your salary has crossed the threshold for PF. You need to continue to remain under PF until the end of your service with the current organization.

      reply
  39. K.Murugesan January 17, 2018

    Please calculate the pf subscription for monthly income Rs.50000.

    reply
    • gautham January 23, 2018

      Please let us have the break-up of the salary.

      reply
  40. Ganga February 8, 2018

    Hi! My basic is 30000. My employer is contributing 1250 towards EPS and 550 towards EPf. I have a doubt if this calculation is right. Can you please clarify?

    reply
    • gautham February 13, 2018

      The calculation is correct.

      reply
  41. RANJAN MAHATO March 21, 2018

    sir,
    I am Ranjan Mahato,My gross salary is 27300/ Rs. my pf change every month e.g 2026,1258,1325,975 . i wants to deduct fixed pf deduction or more then 3000.

    Ranjan mahato

    reply
    • gautham March 21, 2018

      You can request your employer to deduct additional PF amount each month under Voluntary Provident Fund (VPF).

      reply
  42. Jeeva March 23, 2018

    Hi Gautham,

    Could you please explain me what is the use of getting more deduction in salary. So, that it will add more amount to PF account?
    Example: If a person is taking 40,000rs and company has given a option of deduction 1800 or 3500 (amount the person is interested to pay) per month for his PF account.

    reply
    • gautham April 9, 2018

      PF is a long-term saving avenue. Hence, you can go for higher PF deduction if you believe that PF as a saving avenue is attractive for you.

      reply
  43. Aradhna August 2, 2018

    Hi,

    My basic salary is more than 15000. In my salary structure, my company has mentioned 12% of my actual basic salary as a mandatory pf contribution from both employer’s and employees’ side.
    Is this correct? Can’t I opt out of paying extra pf?

    reply
    • gautham August 14, 2018

      You can opt out of paying PF greater than 12% of Rs 15,000. This is because PF contribution beyond 12% of Rs 15,000 is not mandatory. Please talk to your employer in this regard.

      reply
  44. Situ August 4, 2018

    Sir make video on YouTube and do calculation on board
    So that we easily get understand and also concept and it’s benefits
    Very informative
    You are awesome

    reply
  45. Arwin001 November 19, 2018

    Is there any fixed percentage range for the Basic Salary Component in the overall salary? Is there any minimum and maximum % of basic salary as per law?

    reply
    • gautham November 20, 2018

      There is nothing in law which specifies that Basic should be fixed at a certain percentage of the total compensation.

      reply
  46. Gopalakrishnan Nair February 10, 2019

    As per recent supreme court ruling, all amendments done by EPFO in 2004 and September 2014 are nullified. What about the average salary clause, if it is average o 60 months total salary or 12 months (total means EPF GROSS) , because the amendment was modified wef 01/09/2014. Please clarify.

    reply
    • gautham March 8, 2019

      Can you please post a link to the Supreme Court judgement?

      reply

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