Understanding EPF Calculation and Salary Contribution in Compliance with EPF Act

Dear friends,

I was away from CiteHR for the last two days; hence, I am unable to notice the above discussions. If the salary is above the ceiling limit, the employer will have two options to contribute to EPF.

1. To contribute based on the ceiling salary. The contribution for one month will be 15000 x 12% = 1800/- and for 18 days (out of 31), it is 1800 x 18/31 = 1045.

2. To contribute based on the actual salary with the consent of the employee. The contribution for one month is 22000 x 12% = 2640/- and for 18 days (out of 31), it is 2640 x 18/31 = 1533.

However, the initial query is very specific on the contribution based on the ceiling salary. So, why is there room for confusion?

Abbas.P.S

Dear Rajasree Manoj,

You should choose the first option. The basic salary is calculated as 22000/31*18=12774. Then, the PF contribution would be 12774*.12=1533. This is because, as per the EPF Act, the contribution will be Rs 1800 or the actual deduction, whichever is lower.

Dear Harishcbansal,

The above statement is incorrect. If you have a different opinion, kindly quote the specific act as per your posting.

Abbas.P.S

Basic 22000/- PF deposit = 1800/- i.e. 12% of 15000/- (as per PF limit).

18 days PF will be calculated on the Basic of 18 Days.

Even though the salary is Rs. 22000, PF payment is being based on a salary of Rs. 15000. Hence, Rs. 1800 (@12%) is paid to PF. If the attendance is 18 days, the rest of the 13 days have to be recorded as NCP (non-contributory period). Therefore, it is not feasible to pay 22000 x 18/31 x 12%.

I request my friends that if you are not thorough with the provisions of the act, kindly do not misguide others.

Dear Concern,

The PF amount is always deducted from the net earnings. Now, the restriction for PF deduction on Salary (Basic + Da) is 15000. This means that 15000 would be your (basic + da). You are not obligated to deduct the PF above this amount. Therefore, when calculating the salary, you can base it on 15000. For instance, if the Basic is 15000, then the PF would be on 15000, i.e., 15000 * 18/31 = 8710 Salary (Basic). The PF amount is calculated as 12% of 8710, i.e., 1045.

In Case 2, if the Basic is 22000 as per your calculation, then the calculation would be 22000 * 18/31 = 12774. The PF would be on 12774, i.e., 1533 rs/-

Thanks,
Shubham

Maximum ceiling limit of salary for PF is Rs. 15,000 effective from 01.09.2014. If Basic + DA exceeds Rs. 15,000, then the contribution is optional.