Seeking Clarity: Why Was My Friend Denied PF Contribution Exemption Despite Eligibility?

Good morning all, Recently, my friend approached the PF office for the allotment of a new PF Code. As all his employees (more than 20) are earning a salary of more than Rs. 15,000, he wishes to get an exemption from PF contribution. However, the PF officer refused to grant the exemption and insisted on contributing the PF amount.

Even after pointing out the provision for the exemption, the PF officer persisted in requiring the PF contribution.

Please clarify.

From your posting, I understand that the above employees are already registered with EPF. Those registered with EPF have to continue until the end of service, even if their salary crosses the ceiling limit. That is why the EPF authorities reject the request for exemption.

Regards,
Abbas.P.S

Abbas's comments are correct. The PFO is fully justified in rejecting the application made.

Regards,
S. Krishnamoorthy

Your query is not very clear. Please clarify:

1. Whether you are deducting the PF for existing employees and paying the same to PF "ON ACCOUNT" basis;
2. Whether your employees are employed fresh or they were members earlier elsewhere?
3. Whether yours is a new establishment? Or since how many years have you been in operation?
4. When did you cross the 20 employees limit to be applicable for PF?

I can perceive that either you are asking a hypothetical question or your friend has fed you with a concocted story of visiting the PF Office. I can bet that no PF officer can say that employees who are getting a salary of more than Rs. 15,000 can be covered under the PF Act. As far as I know, there is no such limit of Rs. 15,000 existing in the PF Act. The same limit is fixed for ESI coverage. The salary limit under the PF Act is Rs. 6,500. Section 26A of the Act provides that once a member is enrolled under the scheme, they will continue to be a member until they finally withdraw the PF amount standing to their credit and not otherwise. Of course, their contribution can be restricted to Rs. 6,500 per month.

Regards,
BS Kalsi
Member since Aug 2011

I do not know why the department fixes the limit. It may reduce the contribution of 12%. It may advise the employer to deduct the EPF without a ceiling.

Clarification on PF Exemption

The PF department does not enact any laws or rules; that responsibility lies with the government. PF may be exempted for recovery from employees with a valid reason submitted to the Employees Provident Organization (EPO). Please refer to the Rules of the EPFMP Act in the schedule for information on permitted exemptions.

Though the employees are crossing the Rs. 6,500 limit and they are new, they have to fill up Form No. 11. For this, a PF Registration number is mandatory. So, in any case, PF registration is required as requested.

You just need to take a separate code and submit nil contribution returns. Please check the break of Rs. 15,000 to ensure no contribution as per the wages definition.

Good sharing. I have another doubt, a related one, regarding the salary breakup and PF. Can the full salary be shown as basic? Please comment.

In reference to your query, I wish to clarify that you are allowed to split the salary of the employees, but ensure that PF contribution is granted on prevailing minimum wages declared by the state in which the establishment is situated. The EPFO has also issued an inter-department clarification on May 23, 2011, indicating that splitting of minimum wages for the purposes of PF contributions is not permissible. In other words, salary for PF calculation should not be less than "minimum wages."

Regards,
BS Kalsi
Member since Aug 2011

Thank you for sharing. The clarifications are as follows for your queries:

1. Whether you are deducting the PF for existing employees and paying the same to PF "ON ACCOUNT" basis:
No, this concern is a new one. The PF amount is not deducted from existing employees.

2. Whether your employees are employed fresh or they were members earlier elsewhere?
No, they are fresh employees.

3. Whether yours is a new establishment? Or since how many years have you been in operation?
Commencement of business: 01.04.2012.

4. When did you cross the 20 employees limit to be applicable for PF?
01.06.2013.

I conveyed that the salaries drawn by the employees are more than ₹15,000, not about the PF limit or ESI limit.

You can start deducting the PF of your employees from 01.06.2013 onwards since you have crossed the threshold of the minimum number of employees and are to be compulsorily covered under PF. Apply for obtaining the code number from your local jurisdictional PF Office, and until then, start deducting and pay on account until you get the code number. All the best.

It is not clear whether all the 20 employees are new members or existing PF members. If all the employees are new contributors, we can submit nil returns. If their salary is more than Rs. 6,500 per month (basic + DA), kindly check the allowances and salary structure.

Regards,
Purushothama

The department cannot force the deduction of contributions on a salary exceeding ₹6,500 in a fresh case and also cannot refuse to issue a P.F. code number based on having 20 or more employees. As per the law, you will deposit ₹5 and ₹2 in the respective accounts only. Additionally, if any employee was a member in a previous firm and did not withdraw the contribution, then you are bound to deduct the P.F. up to a salary of ₹6,500.

I hope this clarifies the position. Thank you.

EPF Applicability in X Company

If EPF is not applicable in X Company and someone joins the company whose PF was being deducted in their previous firm, and they request to stop the PF contribution, what should be done? Please note that X Company does not have the license for PF.

Please answer this for me as I am confused about it.

[QUOTE=kkadvocate;2076281]

The department cannot force the deduction of contributions on salaries exceeding Rs. 6500 in a fresh case.

Dear Kkadvocate, if I were the department, I would enforce the deduction of contributions even if the salary exceeds Rs. 6500 for a new employee. You are not liable to deduct PF for excluded employees as defined in Para 2(f) of the scheme. The onus is on you to prove that the employees are excluded.

If I were your employee, as a new hire, I would choose to have PF deductions even if my salary is above Rs. 6500. In this scenario, you must include me under PF. If I was a PF member in a previous job, you must deduct my PF contributions even if I provide written notice that I do not want PF.

I reiterate, your decision to include me in PF or not needs justification. The responsibility lies with you. This may be the answer to the query in this thread. The method of his representation is unknown. If his representation is correct, and even if his case is rejected, he has the right to appeal.

Kind regards

Once an organization starts employing 20 or more employees, it needs to be covered under the EPF & MP Act. The employer shall submit a coverage proposal providing the list of employees on the payroll, and the EPF organization shall allot the code number. After the code number is allotted, the PF contributions are remitted for the employees eligible for PF, and there is no need to pay PF for all employees on the payroll.

Regards,
PRATAP

You have clarified that once the Rs. 15,000/- limit is crossed, there is no need to go for ESI. At the same time, once Rs. 6,500/- is crossed, there is no need to go for PF. However, in the case of PF, continuity is to be followed, whereas in the case of ESI, medical allowance or other medical aid will take place. For a new employee whose salary is fixed above Rs. 6,500/-, even though the company is registered with PF, is it necessary to contribute to PF?

Regards,
Hrkpati

Dear Sundaram, ESIC is not applicable for salaries above ₹15,000. PF is not applicable for a basic salary exceeding ₹6,500, but once it is already deducted, it becomes compulsory to continue deducting it, although the ceiling limit is ₹6,500. In the case of a person whose PF was deducted in their previous company, but if they join a new company where PF is not applicable, then Form 11 is compulsory, and a statement is required from that person, along with permission from the PF Department. If anyone can clarify this further, as per my knowledge, this is correct.

As per the PF rules, if an employee is already a member of the PF, then the new company has to make a PF contribution for Rs 6,500/-, which is Rs 780/- per month. If he is not a member, then he will be exempted.

As per the Employees' Provident Fund Act, the below-mentioned conditions are applicable:

1. In case a new employee's basic salary is more than Rs. 6500/-:
- If he is an existing member of the Provident Fund, PF deduction is compulsory.
- If he has already withdrawn his Provident Fund and is not a member of the Provident Fund, we have to get Form No. 11 filled (please find the attachment) from the employee, and then PF deduction can be avoided.

2. In case a new employee's basic salary is less than Rs. 6500/-, Provident Fund deduction is compulsory.

Please note: Once an employee becomes a member of the Provident Fund, Provident Fund deduction is compulsory even if his basic salary exceeds the limit of Rs. 6500/- after an increment or promotion.

Dear Mr. Kamlesh, you have written the point B as follows:

B. If he has already withdrawn his provident fund and is not a member of the Provident Fund, we have to get Form No. 11 filled (find the attachment) from the employee, and then PF deduction can be avoidable.

Furthermore, you have written:

Once an employee becomes a member of the Provident Fund, Provident Fund deduction is compulsory even if his basic salary crosses the limit of Rs. 6500/- after an increment or promotion.

Please clarify what the rule is. Thanks.

Attribution: https://www.citehr.com/466542-exempt...#ixzz2ad9XXl4z
Attribution: https://www.citehr.com/466542-exempt...#ixzz2ad9DnrYf