DEDUCT THE EPF CONTRIBUTION ON BASIC FROM GROSS SALARY

As of now, my company deducts EPF contributions from the gross salary of an employee. However, we are planning to start deducting their contributions from the basic salary starting May 2024. If we deduct from their basic salary, we will need to update the amount based on the basic salary in the employer's profile on the EPF site. Will this cause any issues in the future? Please suggest the process and if there will be any consequences from EPF in the future or not.

In order to reduce or redefine the PF qualifying salary, there is no need to edit the data on the EPF site. When you file the next return, you can upload the sheet after deducting PF from the basic salary only. However, reducing the PF qualifying salary is not permitted as per section 12 of the EPF & MP Act. This does not apply if you have been paying PF on actual gross salaries above Rs 15000 and now wish to set it at Rs 15000.

To clarify further, if you have been contributing to the PF based on Rs 15000 and now want to switch to the basic alone, which is less than Rs 15000, it may cause issues in the future. Therefore, it is advisable not to do so. However, if your PF qualifying salary was above Rs 15000 and you decide to align it with Rs 15000, then there should be no problem, and you can proceed.