Provident Fund Calculation

PF contributions are deducted @ 12% of PF wages. In cases where PF wages is capped @ 15k, wish to ask the experts to confirm which is correct in following:

Full PF salary (Gross-HRA) - Rs. 30,000/-
Present days - 25
Earned PF salary (Gross-HRA) - Rs. 25,000/-
Case1 - PF Wages Rs. 15,000/- (least of Rs. 25,000/- & Rs. 15,000)
Case2 - PF wages Rs. 12,500/- (i.e. Rs. 15,000/30*25)

As far as I know, generally we go with Case1. However, PF consultant is advising to go with Case2

Can you please confirm if this is correct? Also can we get the exact supporting provisions in PF rules with reference to specific sections?

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Hi @sneham95

Let’s take this example:

An employee getting 15,000 as basic - and has PF.

This month he worked only for 10 days - then it’s 15/30*10 = 5000 which is his basic earning for the month.

Now 12% of 5k will be contributed to PF from the employee side as a deduction.

Hope this is clear.

3 Likes

Thanks Dinesh

My query is when his Full basic is 30k & if he works for 25 days then PF Basic to be considered as

  • 30k/30*25 = 25k so Min of 25k & 15k is 15k. So PF Basic is 15k OR
  • 15k/30*25 - 12.5k (Since PF Basic for full days is 15k so it is prorated)

Generally it goes with 1st case. But client is insisting on 2nd case. Hence wanted confirmation & supporting provisions in PF rules

3 Likes

Your calculation is correct. According to the Supreme Court judgement, PF is applicable on all fixed allowances except HRA. There might be some more fixed allowances which can be excluded, but generally it’s considered as Gross-HRA. This practice needs to be followed in case the Basic Salary of employee is below 15k. In case it is more than 15k, you can cap it on 1800 or contribute on Full Basic.
As PF Basic in this case is pro-rated you have to comply with the judgement and calculate PF on Gross-HRA limited to 15k.
Hope this helps.

2 Likes

Hi @sneham95

If PF is to be restricted for 1800 then the second case is applicable. (which is usual way of calc).

If PF is to be calculated on the entire Basic then the first case is applicable. (likely in cases like VPF etc).

Depennding on which employee is liable for.

1 Like

Hi,

We also faced the same situation last month. When we checked with PF Enforcement officer, he suggested the first option. When we remit correct or the higher contribution there will be no issue but if we are remitting less contribution then it is non-compliance. So it’s better go with option 1. Same time in the NCP days you should make “0”.

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