PF Contribution

General Discussions
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1

Hi,

Due to competitive nature of our industry, the resource pool is quite limited and normally it is very limited set of companies where people move.

We currently have a 12% PF rule on basic salary in comparison to many competitors as they have PF contribution at 15,000 only (1800 per month) thus, while hiring, we have to pay higher CTC to account to provide even matching take home salaries.

Now, we are thinking towards moving PF contribution at 15000. Is this something we can do and is statutory compliant?

Also, it seems that there was a Supreme Court ruling where it is mandatory to do minimum contribution at 15000, even if basic is less than 15,000. Is that correct? Kindly refer - https://www2.deloitte.com/content/dam/Deloitte/in/Documents/tax/SC%20Ruling%20on%20PF%20wages.pdf

Looking forward to receive feedback at the earliest.

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3

Hi Aakash,

There is no ruling stating that even if the basic is 12K, we need to pay for 15K. See, it is not mandatory to cut PF above the statutory limit. It is upto the companies’ discretion whether to remit PF for the entire gross salary or cap it at 15K. (if your emplyees’ salary is above 15K)

Regards,

Anand C
8089946456
PAYOF
#PAYOF

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4

Hi Aakash,

Here is the contribution rate table of PF along with explanatory note issued by EPFO.

The supreme court ruling that you are referring to provides clarification about the interpretation of ‘wages’ and the ‘allowances’ that are taken into consideration to compute the PF contribution.

ContributionRate.pdf (493.0 KB)

Regards,
Bhuvana Anand

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5

The Madras High judgement was computation of EPF on gross wages, which subsequently the Supreme Court excluded HRA from gross wages has been upheld. Hence, it is mandatory to deduct EPF on gross wages less HRA. Therefore, the notification of deduction on Rs. 15,000/- has become irrelevant in the light of Supreme Court Judgement.

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