Pf deduction

This query is : Resolved

S.Siju Gemin (Querist)
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10 August 2012 Dear Experts,

One of our employees salary was increased from Rs.12000/- to Rs.20000/- in the month of April 2012.

Since April 2012 we had fixed Rs.10000/- as his basic salary and have been deducting PF on Rs.10000/-.

Now in the month of August 2012 employee wants his basic salary to be reduced to Rs.6500/- and PF deducted on Rs.6500/-

Is this possible?

CA Amit Jaiswal

CA Amit Jaiswal (Expert)
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10 August 2012 This is possible.

If the Basic salary is INR 6500/-, then PF to be deducted on this amt only.

You can give him the remaining salary in the form of allowances.

Ki$hor B

Ki$hor B (Expert)
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10 August 2012 It's possible. Give your payroll division the green signal to restructure the CTC of the employee as per his requirement.

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S.Siju Gemin

S.Siju Gemin (Querist)
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23 November 2012 Dear Experts,
In case if the employee wants his basic salary to remain at Rs.10000/-, is it possible to deduct PF only on Rs.6500/-

Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 Under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, here’s how PF contributions should be handled:

### **PF Contribution Limits:**

1. **Pre-September 2014:**
- **Salary Cap for PF Calculation:** Before September 2014, the Provident Fund contributions were capped at a basic salary of ₹6,500. This meant that even if an employee's basic salary exceeded ₹6,500, PF contributions would only be calculated on ₹6,500.

2. **Post-September 2014:**
- **New Salary Cap:** From September 2014 onwards, the salary ceiling for mandatory PF contributions was increased to ₹15,000. Contributions are to be calculated on the full basic salary up to this limit.

### **Specific Scenario:**

- **Basic Salary of ₹10,000:**
- **Contribution Calculation:** With a basic salary of ₹10,000, PF contributions should be calculated on the entire amount (₹10,000) if the employee's salary exceeds ₹15,000, as per the updated regulations.

- **Employee’s Request to Deduct PF Only on ₹6,500:**
- **Legal Compliance:** You cannot legally deduct PF contributions only on ₹6,500 if the employee’s basic salary is ₹10,000. As per the current rules, PF must be calculated on the full basic salary of up to ₹15,000.

### **Key Points:**

1. **For Salaries Up to ₹15,000:**
- PF contributions must be made on the actual basic salary, not limited to ₹6,500.

2. **For Salaries Above ₹15,000:**
- Contributions can be capped at ₹15,000. If the basic salary exceeds ₹15,000, PF contributions are calculated on ₹15,000.

### **Summary:**

- For a basic salary of ₹10,000, PF contributions should be calculated on ₹10,000 and not on the ₹6,500 ceiling.
- The ceiling of ₹6,500 applied only until August 2014. From September 2014 onwards, the ceiling was raised to ₹15,000.

### **Action Steps:**

1. **Confirm with HR/Payroll:** Ensure that PF contributions are being calculated in compliance with current laws and salary ceiling limits.
2. **Review PF Statements:** Regularly check your PF statements to ensure the accuracy of contributions.
3. **Discuss with Employer:** If there are specific requirements or if you want to understand your contributions better, discuss them with your HR or payroll department.

This approach ensures that both employee and employer contributions comply with legal requirements and are calculated accurately based on current regulations.