Dear Parimal,
It appears from the post that you want to separate the salary block into Basic, DA, etc., and want to contribute only to Basic. So, you are asking whether there will be any legal obligation.
This question is asked in many posts by many angles, so I thought to give a detailed reply:
(Figures are imaginary and are for illustration only)
Assume Minimum Wages are Basic= 4,000, Special Allowance= 2,000, and HRA (@ 5%)= 300.
Gross Wages (B+SA+HRA)= 6,300
Employer's Contribution of PF will be on Basic and SA = 12% of 6000= 720.00
Employer's Contribution on ESI on Gross= 4.75% of 6300= 299.00
Case 1: Employer's Trick of flouting PF
Basic= 1000, DA= 1000, and HRA @40% on Basic and DA= 800, Allowance 1 @50%= 1000, Allowance 2 @50%= 1000, Allowance 3 @ 50%= 1000, and Allowance 4 @25%= 500.
Gross= 6,300
PF only on Basic and DA= 240
ESI on Gross= 299.
The difference of PF in the above calculations is (720-240)= 480
If we consider the purposes of the PF Act, the trick of the employer as shown in Case 1 will not work. Anything below the MW for PF will not work. Employers should avoid fooling with the PF act and should have a policy of proper implementation of the PF scheme.
I hope I have answered the query.
Adv. K. H. Kulkarni