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Employer contribution to pf

Hariharan Sitaraman (Principal Consultant) (31 Points)

24 March 2015

Please advise whether Employer contribution to PF is a part of the gross salary.

Also let me know employer controbution to PF is tax exempted.

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4 Replies

CA Parul Saxena (CA) (8426 Points)
Replied 24 March 2015

Employers' contribution to PF is exempted under section 80C and it is a part of gross salary.

Hariharan Sitaraman (Principal Consultant) (31 Points)
Replied 24 March 2015

I got the below from the IT dept website.

Please explain.

The Fourth Schedule

Part A 92

Recognised Provident Funds 93

[See sections 2(38), 10( 12), 10(25), 36(1)(iv), 9487(1)( d), 111, 192(4)]

Employer’s annual contributions, when deemed to be income received by employee.

6. That portion of the annual accretion in any previous year to the balance at the credit of an employee participating in a recognised provident fund as consists of—

( a) contributions made by the employer in excess of ten per cent of the salary of the employee, and

( b) interest credited on the balance to the credit of the employee insofar as it 1 [* * *] is allowed at a rate exceeding such rate as may be fixed by the Central Government in this behalf by notification in the Official Gazette,

shall be deemed to have been received by the employee in that previous year and shall be included in his total income for that previous year, and shall be liable to income-tax 2[* * *].

Hariharan Sitaraman (Principal Consultant) (31 Points)
Replied 24 March 2015

3. Employees Provident Fund

Tax treatment in respect of contributions made to and payment from various provident funds are summarized in the table given below:

Particulars	Statutory provident fund	Recognized provident fund	Unrecognized provident fund	Public provident fund
Employers contribution to provident fund	Fully Exempt	Exempt only to the extent of 12% of salary*	Fully Exempt	-
Deduction under section 80C on employees contribution	Available	Available	Not Available	Available
Interest credited to provident fund	Fully Exempt	Exempt only to the extent rate of interest does not exceed 9.5%	Fully Exempt	Fully Exempt
Payment received at the time of retirement or termination of service	Fully Exempt	Fully Exempt (Subject to certain conditions and circumstances)	Fully Taxable (except employee’s contribution)	Fully Exempt

* Salary = Basic Pay + Dearness Allowance (to the extent it forms part of retirement benefits) + turnover based commission

sesha (accounts executive) (1101 Points)
Replied 25 March 2015

EPF (EMPLOYEES’ PROVIDENT FUND )  All the organizations having employee strength of at least 20 are eligible for PF deductions.  Employer has to contribute 13.61% towards PF deduction. It is divided as: i. Pension Fund : 8.33% ii. Provident Fund : 3.67% 12% iii. Employee Deposit Lin ked Insurance : 0.5% iv. Administrati ve Charges for PF Scheme: 1.10% v. Administrative Charges for EDLI Scheme: 0.01%  All employees who earn up to INR 15,000 are now mandatorily required to get enrolled as members of the EPF .  Make a contribution of 12% on the basic wages, dearness allowance and retaining allowance .  All the employees drawing wages more than INR 15,000 per month (and who are not members of the Employees Provident Fund) shall continue to be exempted from mandatory coverage.  E mployee earning more than INR 15,000 (i) be enrolled as a member of the Employees Provident Fund; or (ii) contribute on more than INR 15,000 (if the employee is already a member of the Employees Provident Fund), both the employer and the employ ee shall make a joint request (in writing) to an officer not below the rank of an Assistant Provident Fund Commissioner who shall have the authority to permit the same . EPS (EMPLOYEES’ PENSION SCHEME )  The wage threshold for determining the maximum pensionable salary h as been increased to INR 15,000 per month.  The minimum pension for members of the EPS and widow (er)/ nominee/ dependent parent has been fixed at INR 1,000/ month for the financial year 2014 - 15.  The amount of contribution by the Central Government to the pension fund has been increased to a maximum of INR 174/ month (1.16 % of INR 15,000).  New EPF members enrolled on or after September 1, 2014 and having salary of more than INR 15,000/ month at the time of joining, will not become members of the EPS. Accor dingly, the entire contribution of 24% (from the employee and employer) will go to the provident fund account of the employee.  M embers who have already been contributing to the Pension Scheme above INR 6,500 per month (as on September 1, 2014) have been g iven a n option to exercise fresh option within 6 months to contribute to the Pension Scheme above the statutory ceiling of INR 15,000 per month  if not opted any contributions to the Employees' Pension Fund over the wage ceiling shall be diverted to the Employee's Provident Fund account of the member and  if opted such a member would have to contribute the Central Government’s share of contribution at 1.16% on the salary exceeding INR 15,000/ month from his/ her share of contribution. In case of failur e, contribution to the EPS will be limited to 8.33% of INR 15,000/ month effective September 1, 2014.  In cases where the wages of a member exceeds INR 15,000 per month, the contribution payable by the employer and the Central Government is limited to the amount payable on his pay of INR 15,000 EDLI (EMPLOYEES’ DEPOSIT - LINKED INSURANCE)  The insurance benefit under the EDLI has been increased by 20% in addition to the existing admissible benefits.  The limit on contributions payable by the employer has been increased from the amounts payable on a monthly pay of INR 15,000.