Epf Deduction On Special Allowances - PDF Download

Dear Senior,
Can we deduct EPF on Special Allowances ?
As per Notification dated 4th feb -11 issued by the competent authority under the minimum wages (Maharastra) Rules 1948.,” The special allowance has been increased to Rs. 1645.40/- per month from the earlier Rs. 1394/- per month.
Take Home Salary= (Gross Salary) - (Basic+ Special Allowances)*12%?
Or
Take Home Salary= (Gross Salary)- (Basic)*12%?
Regards
Alok

Dear Alokji,
I think the allowances does not attract P.F. just like HRA, Conveyance Allowance, Medical Allowance. So I think even Special Allowance will not attract P.F. By reading the definition of "wages" as per EPF Act, there is special exclusion of allowances like HRA, conveyance and special expese etc. So the take Home Salary will be Gross Salary - Basic * 12%.
Thanks,
Niraj J. Shah
Advocate

Dear Alok,
Undet Minimum Wages (Maharashtra) Rules , 1948, employer need to deduct PF from the salary of the employees.
The parameters for PF are (Basic + Special Allowace) i.e. 12% of the (Basic + SA)
However it will not include HRA, Conveyance, OT or Bonus.
I hope your query is satisfied.
Regards,
Avinash K.

Dear Alok,
Greetings for the day,
Gone through your posting, one things this need to clerify that the allowanc eof Rs.1645.40 is defined as special allowance or da or vda.As per my knowledge is concern if this issuence is from the state governmemnt by the competent authority then this msut be treated as vda or da which should be merged with basic salary, and the deduction of epf on the same will be must.
As far as applicability is concern the EPF should be deducted on Basic+da/vda+food conc.(if any) and it also include the allowances which are undefined like special alloawance or other allownces.Please go through the EPF act and consult with labour law consultants on the same.
Thanks & Regards,
From,
Sumit Kumar Saxena,
+91-9899669071, 0120-4131277

Dear Mr Alok,
It seems that there is mistake. There is no figure like Rs. 1645.40/-anywhere in this notification. Same time you should mention type/schedule of employment too.
Kindly revert

Under ordinary circumstances special allowance stands for that allowance which is paid to some 'special category of employees and not to all employees. If so, special allowance will not qualify for PF contribution as was decided in a lot of cases, the latest in that series is Gurukripa Beedi industry P Ltd Vs Asst. PF Commissioner.
However, the special allowance in Maharashtra stands for variable Dearness Allowance and a part of the minimum wages fixed by the government. As such it will attract PF contribution. Besides, all other payments like, gratuity, bonus etc are also to be calculated taking in to account the special allowance as part of statutory salary.
Regards,
Madhu.T.K

Dear All,
My personal experience as in our organization one component of salary as "Special Allowance" during the PF inspection, we are asked that it will attract PF contribution.
Minimum wage rate published by A Navratan Organization in which one component of wage "Additional Element" which also qualify for PF and ESI contribution.
Requesting Mr.Madhu to guide for the same.
Regard's
Shaikh

Dear all,
as per court judgment of punjab & haryana, the minimum wages can be bifurcated into allowances, and pf cannot be deducted on allowances,
i am also bit confused with the judgment please suggest. I am attaching herewith the judgment for kind consideration.

Dear FMSSERVICE,
Greetings for the day,
As stated clear that the epf act was enacted subsequent to the enactment of the minimum wages act, and the minimum wages include basic salary+da/vda+food conc. if any. but to exclude HRA,Washing allowance, convy. allowance and various other allowance exceot other/spl. allowance which was consider as a part of DA/VDA since it was undefined.
So deduction of epf Should be on minimum wages which inculdes(basic+da) & describe by state govt. time to time after considering the price index.It can only be split into other component like HRA,Cony & other allowances, if bifurcated it is complete voilation of minimum wages & epf act.
Thanks & Regards,
From,
Sumit Kumar saxena,
+91-9899669071, 0120-4131277

As already stated in my post special allowances as such will not attract PF contribution as it is paid only to some special type of employees and is not available to all employees.

The Madras High Court in R Ramanathan Chettiar Jewellers, Madurai vs. Regional PF Commissioner, Madurai – 1988 (ii) LLJ 045, has held that where the special allowance is not paid under contract of employment, settlement or award but paid purely out of management’s own will and pleasure then such special allowance would not be taken into account for the purpose of calculating contribution payable under the Act. This ruling lays stress that a payment which is not of a regular nature and is paid purely in the discretion of the management, would not be available for PF contribution.

The Apex Court while giving verdict in Bridges and Roofs (India) Ltd Vs. Union of India [1963 (2) LLJ 490], has said that "it seems that the basis of inclusion in Section 6 (of Employees provident Fund and Miscellaneous provisions Act, 1952)and exclusion in Clause (ii) is that whatever is payable in all concerns and is earned by all permanent employees is included for the purpose of contribution under Section 6 but whatever is not payable by all concerns or may not be earned by all employees of concern is excluded for the purposes of contribution."

The special allowance in the instant case is paid to all employees and is a part of statutory minimum wages and therefore, it will attract PF contribution. More over, special allowance as per the Maharashtra Govt. notification is nothing but variable dearness allowance. Therefore, there is no point of doubt that it will attract PF.

Regards,

Madhu.T.K