Which allowances (except HRA) are considered for calculation of PF?

I want to create a revised salary structure , so need idea about the allowances that are considered in PF calculation as it will have an impact on the net take home salary.


Hi Rashida,

As per the definition of ‘basic wages’ under the PF Act, it states that
“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.

PF contribution will be based on the basic wages, dearness allowance and retaining allowance if any.

So, considering the above aspect, you may plan your revision.

Bhuvana Anand

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If employers are trying to create a new salary structure then its best to do so keeping in mind the new code of wages. These codes will get implemented sometime in 2022 for sure.

Basic salary should be 50% of CTC. The rest can be HRA and certain other allowances that are allowed under the new code of wages.

Pls refer to the new code for a detailed definition of wages.

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