4. In the first case, if the employee’s starting salary (basic wage + DA) is above 15000 during joining itself then it is not mandatory to deduct PF. It is calculated on the basis of your Basic+DA from your salary. 3. Even if PF is calculated at higher amount, For EPS, we will take 15000 limit only. ThinkStock Photos. Calculate PF on gross pay and NOT on Basic head of pay – Part I Posted by gautham on December 29, 2012. 15000/- would be covered by PF contribution. What to expect from the new wage rules. Every setup with more than 20 employees or more has to offer PF to its employees. Background • Persistent dispute on what constitutes wages for the purpose of PF (PF wages) • The definition of basic wages The breakup of EPF contribution is different for the employee and the employer. salary allowances when determining PF contributions March 5, 2019 In brief In a recent ruling, the Supreme Court of India (SC) laid down principles to exclude a particular allowance/payment from salary for the purpose of calculating Indian social security (PF) contributions. Supreme Court Judgment on PF Contribution . There exists no such cap for foreign IWs, and … The government is set to raise the monthly wage ceiling for mandatory Employees’ Provident Fund (EPF) cover to `21,000 from `15,000 at present, … If your company is considering revised PF rules then Gross salary-HRA i.e 22000-7700=14300, your pf would be 14300*12% = 1716 As per the new PF notification now employees who are getting a basic pay or Rs. To simply the math, assume that your basic salary is Rs.25,000, including dearness allowance. 15000/- or less above that PF is not deducted. EPF=12% *20000=2400. The basic PF deductions rules are given below: EPF act applies to factories and establishments having 20 or more employees. Through a provident fund (PF), you contribute a part of your salary each month towards the pension fund.The amount accumulates over a period of time and you get it as a lump sum upon retirement or at the end of the employment. Your contribution towards EPF is 12% of Rs.25,000, which amounts to Rs.3,000 each month. [Last Updated Aug 2017]Every Employee in India should have an Employee Provident Fund if He / She has a salary above Rs. 19 of 2019 (arising out of T.P. Contribution to EPF will be, 12% of Rs.46,000 which is Rs.5,520. NEW DELHI: The Supreme Court ruling on provident fund contribution by employers and employees is unlikely to impact those with basic salary … In case of deceased employees, their dependents will be entitled for the benefits. PF admin charges are the contribution from the employer’s end. Both these amounts are, typically, a part of the cost to company (CTC). The Supreme Court ruled that employers cannot segregate ‘special allowance’ from basic wages and must include it for calculation of PF deductions. Contribution to the Provident Fund by Indian employees can be capped at 12 percent of Rs 15,000 a month. Part -1 of 2. 1. No. But if your employer wants to pay PF for more than 15000 Rs then they can do that, but it is their choice . Pf Deductions On Gross Salary - Pdf Download. 1. If you earn more than ₹ 15,000 per month in basic salary plus dearness allowance, employers can limit the PF deduction … The Supreme Court ruling is unlikely to impact those with basic salary and special allowances above Rs 15,000 a month. 1) Employee – 12 % (of Basic + DA & Food concession allowance & retaining allowance, if any) 2) Employer – 13.61 % (of Basic + DA & Food concession allowance & retaining allowance, if any) The Supreme court on 28 February 2019 ruled that all allowances in question are to be treated as wages for the purpose of provident fund (PF), effectively widening the definition of pay for the purpose of PF. In addition to 12% of employer PF/PS contribution, the employer also has to pay other charges. 25443 of 2010 against the show cause notice issued by the authority under the Both employer and EPFO are at fault. Can be consider HRA is an excluded for PF if the gross salary is less than 15,000/- per month. The writ petition and review petition filed by the appellant were dismissed. Note-. Under the Employees’ Provident Fund Scheme (EPF Scheme) both employers and employees have to make their contributions towards the Fund. Effects of Supreme Court Judgement in the matter of Surya Roshini Ltd Dated 28-02-2019. 1. Please let me answer. Employee & Employer contribution is 12% each of Basic salary +DA+ Retain allowance. B. Kapish Saluja | Labour Law Consultant | Mumbai. It is a statutory benefit available to the employees post retirement or when they leave the services. EPS=8,33%*15000=1250. The Supreme Court said that “Whatever is payable by all concerns or earned by all permanent employees had to be included in basic wage for the purpose of deduction under section 6 of the act.” The mandatory deduction of PF from a salary of more than 15000 depends on Two cases. jagriti.bhagat. 07 November 2009 PF is deducted on Basic salary i.e Basic + DA is Rs. Download EPFO Circular on Basic Salary 15000 As per the above notification, every employee whose monthly basic salary + DA is less than or equal to 15000 Rs will become eligible for employee provident fund scheme. part of basic wage and was liable to deduction. - Your employer’s contribution towards EPF is 3.67% of Rs.25,000, which comes to Rs.917.50 per month. PF deductions to be on basic salary including spacial allowances, rules Supreme Court "Whatever is payable by all concerns or earned by all permanent employees had to be included in basic wage for the purpose of deduction under Section 6 of the Act," the court ruled. GSR 299(E) dated 28.04.2021 All employees earning basic salary + DA + Retain allowance upto Rs. Complain to Labour commissioner. Suppose, your basic wages is Rs. 2) 3.67% of … S Thakur. Earlier, such PF contributions was calculated as 12% of Basic Salary. 6500/-. 6500/-. PF deduction: Supreme Court Decision – Practical Examples Posted by Team Proactly Effects of Supreme Court Judgement in the matter of Surya Roshini Ltd Dated 28-02-2019 In our organisation most of the employee salaries are above 20,000/- per month gross. Calculate PF on gross pay and NOT on Basic head of pay – Part II Posted by gautham on January 15, 2013. On August 28, 2019, EPFO issued a circular with respect to ushering inspection notices and inquiries to the employers by the EPF authorities in the wake of landmark judgement of the Hon'ble Supreme Court of India (Supreme Court) in the matter of Regional Provident Fund Commissioner (II) West Bengal vs. Vivekananda Vidyamandir and Others Civil Appeal 6211 of 2011. Application Date of Notification The wage structure and the components of salary have been examined on facts, both by the authority and the appellate authority under the Act, who have arrived at a factual conclusion that the allowances in question were essentially a part of the basic wage camouflaged as part of an allowance so as to avoid deduction and contribution accordingly to the provident fund account of the employees. EPFO won the Platinum Award, ... Gazette Notification No. The Supreme Court of India, held this judgment on 28 th February, 2019.. Total Employer PF=1250+1150=2400. On May 27, 2014, the Employee Provident Fund Office issued a circular permitting Companies to limit its PF contributions against the required salary ceiling limit of INR 6,500 per month. Now: PF contributions to be made on 15,000 minimum (lower of A. Rs 15,000 statutory ceiling limit or B. For the PF deduction, the maximum limit of salary of the employee is Rs 15,000 per month. On 15000 PF deduction will be 1800 Rs and the same amount will be paid by the employer also. 12% of 20000 = INR 2,400. The increased ceiling limit notification of EPF wages was released on 29 August 2014 and became effective from 1 September 2014. in Many Companies, Employee and Employer are Paying PF on higher amount of 20000. As per New Notification issued by EPFO & Supreme court ruling, Employer can cap PF contribution limit to Rs 6500 Basic Salary. b) Most of the companies hire employees on CTC basis and if employer’s increased contribution is also factored in your current CTC; the take home salary will be reduced further. 2. PF deductions to be on basic salary including spacial For revised PF rules, formal notification still awaited about deduction of PF on gross salary if salary is less than 15000/-. Benefit Of increase in original pension amount (which may or may not include the benefit of service after 58 years of age — to be decided by Pension division)of 4% in case of one completedyear and 8.16% in case of two completedyears. Previously as the meaning of salary was only Basic+DA, so 12% of Rs.30,000=Rs.3,600 was considered for EPF payout from your end and equally from your employer end too. Employer Contribution. Till final notification, you can deduct PF only on Basic component of a salary structure . "Interest for the year 2019-20 has been credited at 8.5%. 20,000 total of basic salary and allowances) Example for the period prior to 1 September 2014: Basic salary: Rs 6,000 Allowances: Rs 6,000 Total monthly salary: Rs 12,000 Earlier: PF contributions made on 6,000 A recent article on Provident Fund (PF) deduction in the Times of India has led to a number of employers and employees believe that there will be a significant increase in PF deduction in the near-future. 4. Wages or Salaries are emoluments earned by an employee. Earlier this limit was Rs. As per EPF rules, the PF amount will be calculated at a limit of 15000 Rs (basic+ DA). (C) No. So your total salary from above example will be Rs.46,000. Your in-hand salary is likely to come down significantly if the Employee Provident Fund Office goes ahead with its proposal to redefine the salary component used for calculation of provident fund contribution. ©2019 Deloitte Touche Tohmatsu India LLP Provident Fund applicability on allowances 7 • The PF authorities issued a circular in November 2012, which inter alia indicated that the term “ any other allowance of a similar nature” which is to be excluded for PF computation refers only to an allowance akin to a commission. Example: Basic Salary-8000/-, HRA-4000, Medical Allowance-1000/- and Conveyance – 2000/-. PF ruling may not cover salary over Rs 15k/month. In such a case how to treat the PF deduction. Your PF deduction would depend on your company policy. Difference=2400-1250=1150. Transfer Case (C) No. Kindly seed UAN accounts with KYC, if not already done, to view credit of interest and updated PF accounts." PF Deduction As Per The New Circular. Employee Contribution. Latest Provident Fund rule: EPF contribution must for Special Allowances part of your basic salary Provident Fund rule change: The Supreme Court ruled this week that employers must consider special allowances paid to the employees as a part of the "basic wage" for deduction … salary, but will not be considered for determining eligibility. So below is the breakup of EPF contribution of a salaried person will look like: 1) 12% of Employees Share in EPF i.e. This means that even if the employee's salary is above Rs 15,000, the employer is liable to contribute only on Rs 15,000 that is Rs 1,800. If the company’s contribution is 12% of actual basic then your pf would be 8800*12%= 1056. Here, what is the procedure of PF deduction. In a recent circular, the PF department has stated that the salary for the purpose of PF calculation should not be an amount which is less than the minimum wages as specified by the Minimum Wages Act. Dear All. 15000 p.m are eligible for PF. PF deduction on Gross Salary Supreme Court Decision. Can be consider HRA is an excluded for PF if the gross salary is less than 15,000/- per month. In our previous post we talked about the why PF should be calculated on gross salary and not on Basic head of pay.. a) Your PF contribution deduction will be higher and your take home salary may be reduced. 1273 of 2013): The petitioner filed W.P. But from now onwards it includes Basic+DA+Allowances. Since now PF have issued a circular saying tha PF contrbutions have to be deducted on gross, is it valid that we deduct only to the minimum of Rs.6500/- gross i.e only Rs. 5. Posted by Team Proactly. Your take-home salary will go down. According to the draft of new wage rules, employee wages for calculation of gratuity and provident fund (PF) contributions will be at least 50% of their gross pay.. To simplify, the basic salary will be 50% of the total employee compensation. Now, let’s have a look at an example of EPF contribution: Let assume the basic salary of a person is INR 20,000.
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