What is the Salary limit for PF deductions?

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Hi
What is the salary limit for PF deductions?

How much salary should be there for PF deduction. Minimum how much like 10,000/- & 12,000/-

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Minimum EPF basic salary is 15,000/- Hope this is helpful

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I have a little doubut if someone can help please.
some companies do not deduct PF on actual basic salary like suppose if gross salary is 50K and Basic is 25K. but companies do PF deduction taking basic salary as 15K only. is it correct?

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Hi @accountsjumbaya

In India, the Employees’ Provident Fund (EPF) Act mandates that the contribution to the EPF should be a certain percentage of the ‘basic wages’. As per the EPF Act, the employer and employee both contribute 12% of the basic wages towards the EPF. Out of the 12% employer’s contribution, 8.33% is directed towards the Employee Pension Scheme (EPS) subject to a maximum of Rs. 1,250 per month, while the balance goes to the EPF.

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Thank you Trisha for the reply. But the doubt remains is that, is it correct to consider 15K as Basic salary while the actual basic salary of employee is 25K. the company is contributing 12% of 15K only and not of 25K. what is correct as per law.

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The basic wages are defined as 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.

Here are the key points to consider:

  1. Calculation of PF Contribution: Both the employee and the employer are required to contribute 12% of the basic wages towards the PF. The employer’s contribution is divided as follows:
  • 3.67% towards EPF
  • 8.33% (capped at Rs. 1,250 per month) towards EPS (Employee Pension Scheme)
  • 0.5% towards EDLI (Employee Deposit Linked Insurance)
  1. Definition of Basic Wages: The EPF Act does not provide a maximum limit on the basic wages for the purpose of calculating the PF contribution. However, it specifies that the PF contribution should be calculated as a percentage of the ‘basic wages’. Therefore, the actual basic wages should be considered for calculating the PF contribution, and not a lower amount.
  2. Compliance and Legal Implications: Deducting PF based on a lower basic salary than the actual basic wages may be considered non-compliance with the EPF Act and could lead to legal implications and penalties. It is important for employers to ensure compliance with the EPF Act and accurately calculate and deduct the PF contribution based on the actual basic wages of the employees.

In conclusion, according to the EPF Act and guidelines provided by the EPFO, the PF contribution should be calculated as a percentage of the actual basic wages of the employee and not a lower amount. Therefore, considering 15K as the basic salary while the actual basic salary of the employee is 25K and contributing 12% of 15K towards PF may not be compliant with the EPF Act. It is advisable for employers to ensure compliance with the EPF Act, accurately calculate and deduct the PF contribution based on the actual basic wages of the employees, and consult with legal and payroll experts to address any doubts or concerns regarding PF deduction and compliance.

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okay.understood. thank you for your reply.

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Hi @Mudassir,

There is no Minimum and Maximum Salary limit for PF deduction. All employee is eligible for PF deduction other than Government employee.

For example, your basic is 4,000. Then PF is 480Rs.

According to PF rule, 12% is deducted from salary (employee contribution) and same 12% is contributed by your employer.

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if gross salary is 15000/- what is the % of basic wages
if gross salary is 18000/- what is the % of basic wages

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Deduct HRA Allowance from the Gross Salary and than calculate 12% of same for PF , Capping PF Amount to Rs.1800/-

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The % of Basic Salary can be 50% of the Gross Salary.

regards

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