Provident Fund contribution will be on total salary excluding HRA, bonus, incentive, commission, overtime but will include allowances or any other payment included in any other head which is paid across the board, grade etc.
Is PF calculated on gross salary?
As per the Fourth Schedule of the Income Tax Act, 1961, the employer contribution to PF is exempt from income tax only to the extent of 12% of Basic pay and DA. When PF calculation is based on PF Gross instead of Basic (plus DA), the employer contribution to PF could attract tax.
Is PF and ESI applicable on overtime?
Both the remuneration received during the working hours and overtime constitutes a composite wage and thereby it is a wage within the meaning of Sec. 2(22) of the ESI Act. Therefore, the contribution is payable on the overtime allowance .
Which allowances are not included in PF calculation?
The industry practice has been to exclude special allowances and specific allowances under the ambit of basic wages for PF calculation. # The allowances (subject matter of the SC ruling) formed a part of basic wage and are camouflaged as allowances to avoid deduction and contribution to PF.
What is included in PF calculation?
For EPF, both the employee and the employer contribute an equal amount of 12% of the monthly salary of the employee . Employees can contribute more than 12% of their salary voluntarily, however the employer is not bound to match the extra contribution of the employee.
What is the new rule of PF deduction?
The rule requires all PF accounts to be split into separate accounts – one with the taxable contribution and interest earned on that component, and another with the non-taxable contribution that shall include the closing balance of the PF account as on March 31, 2021 and all fresh non-taxable contributions and interest ...
How is PF deduction calculated?
The employee contributes 12 percent of his or her basic salary along with the Dearness Allowance every month to the EPF account. For example: If the basic salary is Rs. 15,000 per month, the employee contribution shall be 12 % of 15000, which comes to Rs 1800/-. This amount is the employee contribution.
How is PF salary calculated?
How to calculate EPF? Salary = Basic in private companies . The EPF contribution is usually 12% of the salary. All of this adds up to Rs 4,800, which is deposited monthly as part of the EPF.
Is PF mandatory for salary above 15000?
EPF eligibility criteria
If you are drawing a salary higher than Rs. 15,000 per month, you are termed a non-eligible employee and it is not mandatory for you to become a member of the EPF , although you can still register with the consent of your employer and approval from the Assistant PF Commissioner.
How is PF interest calculated?
The interest calculation on the EPF of the employee is explained by the given example. The employee provident fund interest rate for FY 2019-2020 is 8.50%. the interest applicable per month When calculating interest, is = 8.50 %/12 = 0.007083% .
What is the PF percentage in salary?
For EPF, an employee contributes 12 per cent of the basic salary while the employer contributes 8.33 per cent towards Employees’ Pension Scheme and 3.67 per cent to employees’ EPF. The total of the employee and employer contribution is deposited in a fund created with the Employee Provident Fund Organization.
What is PF basic wage?
The change in basic wage will result in a change in contribution towards PF in cases where the employer is contributing towards PF on the actual basic salary rather than the minimum required contribution of 12% of ₹15,000 (the minimum wage for PF contributions).
On which allowance PF is not applicable?
First, the employees earning more than ₹15,000 in basic wages plus dearness allowance will not be affected. This is because employers of these types of workers are exempted from making PF contributions on amounts higher than ₹15,000 by the Proviso to Para 26A of the Employees’ Provident Fund Scheme, 1952.
Is PF calculated on bonus?
It is also earned in accordance with the terms of the contract of employment but because it may not be earned by all employees of a concern, it is excluded from basic wages. ... A rate of pay for a standard work period exclusive of such additional payments as bonuses and overtime.
Is PF part of taxable income?
The main USP of the Employees’ Provident Fund (EPF), apart from safety and high returns (compared to other fixed options such as PPF, FD), is that it has exempt-exempt-exempt tax status . That is, it is exempted from tax at the time of maturity.
Is 12 percent pf mandatory?
Employer’s Contribution towards EPF
The minimum amount of contribution to be made by the employer is set at a rate of 12% of Rs. 15,000 (although they can voluntarily contribute more). ... It means that both the employer as well as the employee has to contribute Rs. 1,800 each per month towards this scheme.
