What is the rule of EPF deduction if salary (basic+DA) is above Rs.6500.
Date: 01 Dec 2012 Posted By:
If an organizaton is a member of the Employees Provident Fund Organisation (EPFO) and a new employee joins this organisation whose salary (basic+DA) is above Rs.6500. Is the PF deduction from this members salary @12% of basic+DA is mandatory or optional. Can the management force such an employee to contribute to the epf? If not, what are the provisions under the law. Can such an employee refuse contribution or he has to compulsorily contribute to the epf. In case it is mandatory, then what is the maximum salary to be taken into account for deducting his epf. If his salary is fixed at Rs.25000 (basic+DA), has he to compulsorily pay Rs.3000 per month as epf calculated at the rate of 12% of salary. In this case, what will the contribution of the employer?
Want to know about the EPF deduction if the salary is above Rs. 6500? Learn more about Employees Provident Fund (EPF) deduction rules here.
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02 Dec 2012 Member Level:
Points : 5 (
A Employess provident fund (EPF) is a fund that is created by the EPFO of India, a statutory body of Indian Government. An organiztaion having 20 or more than 20 permanent employees should register with EPFO. Monthly contributions are deducted from the employees to provide financial support to individuals post retirement age. The funds are managed by a trust.
Investment under this scheme is tax free under section 80C. Interest earned on EPF is also exempted from Tax.
The following are the three schemes operating under EPF.
a) Employees' Provident Fund Scheme (1952)
b) Employees' Deposit Linked Insurance Scheme (1976)
c) Employees' Pension Scheme (1995)
EPF, EPS and EDLIS are calculated on the basis of your Basic + Dearness Allowance (DA), which most organizations follow. The contributions from employees @ 12% of basic pay are pooled and managed by trustees. A maximum of 8.33% of Rs6500/-basic pay or Rs.541 is taken /adjusted towards EPS. Goverment contributes 1.17% of employees monthly contribution to EPS.
The EPF deduction from the employee is presently pegged at 12% of Basic pay. It is mandatory. The employer contributes equal amount of employees contribution to EPF. There are different contribution appropriations /calculations for different levels of basic pay. Like, the employer might decide to calculate the EPF, the EPS and the employee's share towards EPF as well, on the specified upper limit of Rs. 6,500. This is despite the fact that the employee is drawing a basic pay more than Rs.6500/-./ The administrative charges for both the EPF and the EDLIS are borne by the employer. One can ascertain the system of appropriation of EPF contributions from the respective employers,
02 Dec 2012 Member Level:
Points : 8 (
I expect that what is PF and when it becomes applicable is already known to you, so i am not explaining them.
Coming directly to your question where you have asked regarding the contribution part, when it is compulsory and when optional. Provisions regarding them are as follows.
1. When the Basic Salary + Dearness Allowance(DA) does not exceed Rs.6500 and the organisation is covered under the PF Act then in such case it is mandatory on part of the employer or organisation to deduct PF and deposit it with PF fund every month.
2. In case the Basic Salary + DA exceeds Rs.6500 then in such case:
a) the employee has option to get his PF deducted from his salary. It means it becomes optional and it is not mandatory.
b) Option to get PF deducted once exercised cannot be revoked. If once PF is deducted then it continues to be deducted till he the employee is in employment.
This has been interpreted from the following case law:
Andhra University Vs R.P.F.C. 1985(51)FLR605(SC)
Rate of PF is at present 12% and the computation is usually on basic salary, so it will be always 12% of basic.
In this contribution also the sum is segregated into:
i) Provident fund and
ii) Pension fund
From last week the facility to view PF balance online has become operational and any employee can view his PF balance after registering himself on the epfoindia website. One can also download the PF passbook where each single deposit and withdrawal if any will be mentioned.
Those of you who want to view their balance online can visit the url given below register yourself to know the updated balance as on date.
The last balance displayed will be the balance as per the return filed by your employer with the PF organisation.
Er. Devvrat Singh
06 Dec 2012 Member Level:
Points : 5 (
Every month a small contribution is deducted from your salary and many of us think what difference will it make in their life. EPF stands for employee provident fund. It is often mistaken with EPS which employee pension scheme. Both are different thing and often deducted cumulatively. Now coming to the topic :
1. The statutory requirement : The EPF is maintained by Employee 'Provident Fund Organisation of India'. Any company who employs more than 20 persons has to strictly contribute towards EPF.
2. Employees contribution towards EPF consists of 12% of the basic + DA. An equivalent amount of 12 percent is added by the employer to your contribution. If you want to save more thinking of the exceptional returns and tax saving you can voluntarily add more amount known as VPF (Voluntary Provident Fund). But in this case employer is not bound to pay an equivalent amount rather his contribution may remain same.
3. For basic salary up to Rs6,500 contribution towards EPF is compulsory. Basic above this you have the option to choose whether you want your complete salary in hand or you need EPF. Once you have decided to opt for EPF you can't set back.
4. You should contribute towards EPF as it yields maximum with a piece of mind unlike other money saver options such as mutual funds, shares and debentures, etc.
5. Present interest rate on EPF is 12%PA.
6. Complete peace of mind and clarity with introduction of online EPF balance and contribution checking facility. Now nobody can cheat with you and you hard earned money.
Kindly find attached the Flexible EPF calculator to get your yearly contribution and yield after a given year.
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