Pf (urgent)

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

08 February 2012 Hi Friends,

We are deducting 12% as PF from employees and also contributing 12% as PF contribution(employers). Its a 100% owned foreign company.
Now foreign company directors saying that employers contribution can be restricted to 12% on Rs. 6500 for which they also got legal opinion from reputed consultancy.

They downloaded such information from http://epfindia.com/payments.htm :

CONTRIBUTION OF EMPLOYERS

Rates of Contribution:

a) The Employees' Provident Fund Scheme

In respect of establishments employing 20 or more persons and engaged in industry notified under Section 6 of Act ( other than the Establishments. declared as sick ) 12% of the basic pay DA , Cash value of food concession and retaining allowance , if any, subject to a maximum of Rs.6500/- per month. Voluntary higher contributions are also acceptable at the joint request of the member and the employer . However, the rate of contribution is 10% in respect of the following categories of establishments:

Any establishment covered prior to 22.9.97 in which less than 20 persons are employed.

Any sick industrial company as defined in Clause(0) of Sub-Section(1) of Section 3 of the sick industrial companies ( special provisions ) Act 1985 and which has been declared as such by the Board for Industrial and Financial Reconstruction.

Any Establishment which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.

Any Establishment engaged in manufacturing of (a) Jute , (b) Beedi , (c) Brick , (d) Coir (other than spinning sector), (e) Guar Gum Industries/Factories.

Can employer contribution be restricted to Rs. 780(12% on 6500)?

Please explain with supportings. Its urgent.

Thanks in Advance.

CA. SHIVA SHANKARA R. SHETTY

CA. SHIVA SHANKARA R. SHETTY (Expert)
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09 February 2012 If, employer wishes, then they can remitt exceeding 12%. But, 12% contribution is mandatory.

Querist : Anonymous

Querist : Anonymous (Querist)

09 February 2012 12% is mandatory. But Can amount be restricted to Rs.6500/-?

Eg: Mr.A has 10000/- P.M. basic... Can employer contribution be reduced to Rs.780 P.M( 12% on 6500/- even though he has 10000 basic. the same thing given in pf website which I pasted above.)

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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10 August 2024 The confusion here is regarding the applicability of the ₹6,500 wage ceiling for PF contributions, and whether it applies to both employee and employer contributions. Let’s clarify this:

### **Understanding the PF Contribution Limits**

**1. **Current Contribution Rates:**

- **Employee Contribution**: 12% of Basic + DA (Dearness Allowance) + Cash Value of Food Concession + Retaining Allowance (if any).
- **Employer Contribution**: Also 12% of the same components as above.

**2. **Wage Ceiling and Contribution Limits:**

- **Maximum Wage Ceiling**: The maximum wage ceiling of ₹6,500 per month for PF contributions refers to the wage limit up to which the contribution rates are applied. This ceiling was established to limit the amount on which the PF contributions are calculated.
- **Contribution Beyond Wage Ceiling**: If an employee’s basic salary exceeds ₹6,500, the PF contribution is calculated only up to this ceiling amount. Therefore, for wages above ₹6,500, contributions are not increased.

### **Employer Contribution:**

- **Historical Ceiling**: Historically, there was a wage ceiling of ₹6,500 for both employee and employer contributions. This means the employer's contribution was also capped at 12% of ₹6,500, resulting in a maximum contribution of ₹780 per month.
- **Voluntary Contributions**: Employers and employees can make higher contributions voluntarily, but the mandatory contribution is restricted to ₹6,500 as per historical rules.

### **Legal Interpretation and Practice:**

1. **Applicability to Employer Contribution**:
- According to the past norms, the employer’s contribution was capped at 12% of ₹6,500, which amounts to ₹780. If the basic wage exceeds ₹6,500, the mandatory contribution was restricted to this ceiling.
- **Legal Advice**: If your foreign company's legal advisor has confirmed this practice, it aligns with historical provisions where the maximum limit was imposed on employer contributions.

2. **Recent Developments**:
- **Current Practice**: It’s crucial to verify if there have been recent amendments to this ceiling. The maximum wage limit of ₹6,500 may have been updated or amended in the latest guidelines. Consult the official EPFO website or legal advisors for the latest regulations.
- **Voluntary Contributions**: If your company wishes to contribute more, it can do so voluntarily, but the mandatory part adheres to the ceiling.

### **Example Case**:

- **For Mr. A with a Basic Salary of ₹10,000**:
- **Employee Contribution**: 12% of ₹10,000 = ₹1,200.
- **Employer Contribution**: Historically capped at 12% of ₹6,500 = ₹780 (as per past norms).

### **Verification and Compliance:**

1. **Check Latest Regulations**: Refer to the most recent EPFO notifications or consult with a legal expert to ensure compliance with current regulations.
2. **Documentation**: Ensure all contributions are documented and comply with EPFO guidelines, especially if your company is considering voluntary higher contributions.

### **Conclusion:**

Historically, the employer’s contribution was indeed restricted to a maximum of ₹780 per month (12% of ₹6,500). However, always verify with the latest EPFO guidelines or consult with legal experts to ensure compliance with current regulations and practices.