Provident fund deduction from salary of employee

This query is : Resolved 

12 September 2011

Dear sir,

my question is whether P.F. deduction is liability under Provident fund act or any other act on the part of company if employee's basic salary exceeds maximum ceiling limit of Rs. 6500 & employee does not want to make provident fund deduct from his salary.

Whether pf should be deducted by company or not?

CMA. Subhash Kumar Jha (Expert)
13 September 2011

Its covered by PF Act.

If the basic salary is more than 6500/- p.m then PF deduction is optional & the employee can chose for PF deduction or Non-deduction.

However, if PF deduction has been opted once, it can not be revoked.

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
13 September 2011

(i) Employer's liability to deduct employee's contribution
arises before paying wages to employees (and not
as and when wages are earned by employees) in respect of
any period or part of period. Thus the employees' contribution
comes in the hands of the employer during the
wage disbursal month and not during the wage period
(which may be a calender month or any other period and
not necessarily a period equal to one month.)

Under the EPF and ESIC Acts, the Principle Employer is liable for the compliance of the Immediate Employer /Contractor. It is good that the contractors are complying with the provisions of EPF and ESIC Acts under the respective Codes. But what is important is the proof of regular compliance by these contractors.

The Supreme Court has stated in Andhra University v. R.P.F.C. 1985 (51) FLR 605
(SC) that in construing the provisions of the Employees Provident Funds and
Miscellaneous Provisions Act 1952, it has to be borne in mind that it is a beneficent piece
of social welfare legislation aimed at promoting and securing the well-being of the
employees and the court will not adopt a narrow interpretation which will have the effect
of defeating the very object and purpose the Act. The preamble to the Act also states that
this is an Act to provide for the institution of:
(i) Provident Funds
(ii) Pension Fund and
(iii) Deposit Linked Insurance Fund
for employees in factories and other establishments. It is with this background that one
must interpret the various provisions of the Act and the Scheme related to it.
The Employees Provident Funds and Miscellaneous Provisions Act 1952 applies to the
whole of India except the State of Jammu and Kashmir (Section 2). This Act applies
(Section 3) to:

• Contractor’s Employees: It has been held by the court in Enfield India v RPFC 2000
(85) FLR 519 (Mad) a person doing work of the principal employer, even though
employed by a contractor is also an employee covered by the definition.
• “Excluded Employee” has been defined in para 2(f) to mean an employee:
(i) who having been a member of the fund, withdrew the full amount of his
accumulations on retirement or emigration or
(ii) whose pay at the time he is otherwise entitled to become a member of the fund
exceeds Rs. 6,500.00 p.m.

n India, for a company employing 20 or more employees on salary, the PF deduction is mandatory for a person whose salary is equal to or more than 6500. The amt. deducted is fixed to 12% out from Basic Salary deducted both from the employee and the employer share.

Any company violating this rule may be in trouble.

s per PF Act 1952, ceiling limit is6500/M i.e. (Basic+DA) of an employee.

If the employee’s emoluments exceed6,500/- per month, he has the option to join the Scheme(s) with the consent of employer.

Employee Status:-

If Employee is already member of PF Scheme.

Emoluments :-
1. Up to 6500/M (Basic +DA) -Mandatory @ 12% of Basic +DA.
2. 6501/- & above (Basic +DA)
A.Mandatory @12% up to 6500/M.
B.Above 6500/M it’s up the organization & its policy.

If Employee is not member of PF Scheme or New Entrant.

Emoluments :-
1. Up to 6500/M (Basic +DA) -Mandatory @ 12% of Basic +DA.
2. 6501/- & above (Basic +DA) - It’s not Mandatory, but generally in the interest of employees organizations cover their employees under the scheme.


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