EPF is 12% of basic or 12% of 6500?

smnrock

Skilled
Guys i need help here...

I know EPF is deducted on 12% of actual basic and some companies deduct 12% of restricted basic, which is Rs.6500. Apart from these, employer also has similar contribution which includes EPS and other stuffs.

Now my question is, Is there rule/law says, In a organization all employees has to follow same PF contribution? Like all employees should follow 12% of actual basic or all should follow 12% of 6500?

Or i put my question in different way,... there are 20 employees in a company. Is it possible 10 employees can pay 780(12% of 6500) and other 10 employees can chose 12% actual basic? Basic pay of all the 20 employees are more than 10000.

Thanks in advance :)
 
It is 12% of basic. Only compulsory for people have salary less than 6500 PM. I hope that makes it clear. To put it differently, every employee earning less than 6500 has to contribute 12% of their basic salary.
 
Now my question is, Is there rule/law says, In a organization all employees has to follow same PF contribution? Like all employees should follow 12% of actual basic or all should follow 12% of 6500?

Or i put my question in different way,... there are 20 employees in a company. Is it possible 10 employees can pay 780(12% of 6500) and other 10 employees can chose 12% actual basic? Basic pay of all the 20 employees are more than 10000.
COmpanies with less than 20 are not mandated to deduct PF (or that's what I remember).

The PF can technically be different for different people, as in, for some people it can be 780 and for others 12% of actual basic. That said, companies don't usually get into this mode of providing customized PF for everyone, so they settle on one scheme for all
 
^^ Yes, but there are also companies like mine which do give the option to choose between the two at the start of each financial year based on ones own preference. We can either opt to get 12% on 6500 = 780 Rs or we can go with the 12% on full basic. Once selected, the option will be applied for the whole year for that employee.

Since the PF amount has be matched by the company and the companies does not change its own share from 780 Rs we would need to take the hit for the balance employer PF amount as well from our pocket

For example if my monthly basic is 70k, my contribution at 12% will work out to 8400/-, but the same has to be matched by the employer, I will end up with a deduction of 16800 - 780 = 16020 Rs per month.
 
@Lord Nemesis and others thanks for the replies... My employer says as per rule, all employees has to go through either of one option... ie 780 or 12% of actual basic. Both cannot be mixed :( ie., some people chosing 780 option and some are choosing 12% of actual basic is not possible as per the rule :(

I guess maximum PF deducted per month cannot be more than 6500 :) if anything additional, then tax needs to deducted for that amount!
 
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Lord Nemesis and others thanks for the replies... My employer says as per rule, all employees has to go through either of one option... ie 780 or 12% of actual basic. Both cannot be mixed :( ie., some people chosing 780 option and some are choosing 12% of actual basic is not possible as per the rule :(

The guy who said that is either lazy or stupid. As @honest1 already mentioned, as per the IT Act, PF isn't even mandatory for salary with basic amount greater than 6500.

I guess maximum PF deducted per month cannot be more than 6500 :) if anything additional, then tax needs to deducted for that amount!

There is no upper cap to PF deduction as such. If your basic pay is 10L per month :)D), the PF would be 1.2 L per month. That 6500 is the limit beyond which PF isn't mandatory.

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That said, I think the Act also states that once someone with a basic greater than 6500 opts 'in', he cannot opt 'out' of PF.
 
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^^ Exactly, there is no upper limit as such. As far as tax goes PF comes under the 80C section and its rules applies. There is nothing like only the pf for 6500 is exempted. I used to get exemption for 65k pf per year.
 
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