In continuation of my last Article ‘Implication of Supreme Court Verdict on Provident Fund‘ published on 2nd March, 2019 on PF calculation after verdict of Hon’ble Supreme Court Judgment, the following illustration will help you to understand that how to calculate salary for PF deduction and extra cost you have to bear as Employer:

Calculation of Eligible amount at which Provident Fund (PF) should be Deducted after Supreme Court Ruling

%

Emp. 1 Emp. 2 Emp. 3

Em. 4

GROSS SALARY 12500 14900 30000 45000
0 0 0 0
Basic 40% 5000 5960 12000 18000
HRA (60% of Basic) 24% 3000 3576 7200 10800
Medical Allowance 800 800 1500 3000
Conveyance 1200 1200 2500 6000
Travel Allowance 3000 5000
Canteen Allowance 2000 2000 0
Lunch Incentive 500 1200 0
Other Allowance 164 3800 2200
GROSS FIXED SALARY A 12500 14736 30000 45000
Overtime 10000 8500 0 0
Variance Bonus related to pieces stitched over regular production 2500 4500 0 0
GROSS VARIABLE PAY B 12500 13000 0 0
GROSS TOTAL EARNING C=A+B 25000 27736 30000 45000
SALARY FOR PF CALCULATION 12500 14736 30000 0
Employee Contribution 12% 1500 1768 3600 0
Employer Contribution new employees if registered with PMRPY up to 31/03/2019 12% 1500 1768 3600 0
Employer Contribution – Normal 13% 1625 1916 3900 0
Earlier Employer Cost 13% 650 775 1560 0
Extra Cost   975 1141 2340 0

Here in case of Employee 1, 2 & 3 all have Basic Salary is below 15000 therefore they are covered under PF deductions. Further, as per Supreme court ruling for calculation purposes all special additional allowances shall be treated as part of calculation, IF BASIC IS UP TO 15000/-  but excluding pure variable salary which can be correlated with work production or extra time.

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Qualification: CA in Practice
Company: RAJIV NIGAM & ASSOCIATES
Location: NEW DELHI AND NOIDA, New Delhi, IN
Member Since: 17 Jul 2017 | Total Posts: 30
RUNNING RAJIV NIGAM FCA PRACTISING FIRM FOR DIRECT & INDIRECT TAXATION & VIRTUAL CFO FOR START UPS View Full Profile

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18 Comments

    1. RAJIV NIGAM says:

      As per new ruling you can not break 15000 if it is above then possible; Actually court said anything if paid on regular basis by any name up to 15000 can not be break but no such order effect gave at PF site so employers are doing at their sweet will.

  1. Kiran says:

    Sir,

    My Gross Salary is 15000/-, but our employer has deducting epf (employee) contribution is Rs.780/- Only. It is correct / Wrong.

    Basic: 6500/-
    H.R: 3620/-
    Medical Allowance: Rs.2250/-
    Traveling Allowance Rs.2630/-

    It is correct or / wrong kindly advice.

  2. Balasubramanian says:

    In case a employee salary constitutes ie Basic-Rs.7800/-,HRA 3900 and Other allowance Rs.1800. Do we need to pay PF of 12% for the total salary ie Rs.13500/- or can we calculate from lesser amount ie 60% or 80% of the total salary. Whether it is allowed under the PF rules. Kindly clarify

  3. Suneel says:

    Hi ,

    All our employees Basic is more than 15000 , We follow unrestricted pf of 12% on basic.
    Do we need to deduct EPF on Basic + Medical +Conveyance + Special Allowance or only on Basic as all employees Basic is more than 15000.
    Please advice

  4. YOGANATHAN R says:

    Can be consider HRA is an excluded for PF if the gross salary is less than 15,000/- per month. Example: Basic Salary-8000/-, HRA-4000, Medical Allowance-1000/- and Conveyance – 2000/-. Here, what is the procedure of PF deduction. Please let me answer.

  5. Ras says:

    Is it right to assume if the Basic Pay is more than 15000/- the Employer and employee contribution can be limited to 12% of the basic pay .

  6. Isaq pasha says:

    Dear Team

    Greeting for the day.

    I am isaq pasha I am looking for full training for Income tax as well as GST tax .Let us know the Free training institution are Government training center were i can train myself and forward those skill in colleges.

    warm regard
    Isaq pasha

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