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PF Contribution

CA Vishal (CA working in industry) (620 Points)

08 March 2010

Please let me know if there is minimum limit for PF contribution .what I know is that PF contribution should be @ 12% of Basic and it can be higher subject that both employee & employer agree on the same. Someone told me that the rule says that employer has a choice to either give at 12% of Basic or Rs 780per month ... I am not sure of Rs 780per month Clause just want to confirm.

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10 Replies

Vivek Angrish (Manager Finance & Accounts) (232 Points)
Replied 08 March 2010

Sir, I also never heard about this Rs.780/- per month clause, what i know is the same what u told.

CA Sumit Arora (CA) (1410 Points)
Replied 08 March 2010

Sir, I never heard about this rule. I also know the same as you told.

CA Dhiraj Ramchandani (CA, M. com) (10823 Points)
Replied 08 March 2010

Hi vishal... There is such rule existing, but in other way round...

Look, As per the Act the employees who are drawing the Basic + DA equal or less then Rs.6500 ,The deduction for such employees towards PF is manadtory....

This means 6500*12% = Rs.780 are mandatory

2 Like

Vivek Angrish (Manager Finance & Accounts) (232 Points)
Replied 08 March 2010

Thanks Mr. Dhiraj

CA Vishal (CA working in industry) (620 Points)
Replied 08 March 2010

Thanks all for your valuable opinions I also had never heard about the Rs 780 p. m clause but just wanted to reconfirm with you all in case there was anything such...

saranraj (CA FINAL) (419 Points)
Replied 08 March 2010

as per pf act employer has to contribute 10% of basic and DA.It is Income tax act which has specified non taxable limit at 12% of basic and DA.

1 Like

Nandesu (Asst Manager - F&A) (28 Points)
Replied 08 March 2010

Yes, Mr. Dheraj is right. As per PF act, upto 6500/- basic, there is a compulsion on the part of the employer to deduct @ 12% i.e., 780/- and contribute th same % age i.e. 12% to the department making nit a total of 24%. and after 6500/- with the consent of the employer & employee, PF can be deducted but once PF contribution started from 6500, it will continue even though his basic may exceed that 6500 mark.

CA Priya (CS Final) (1049 Points)
Replied 08 March 2010

thanks for the info............ Weeeeeeeeee...........

manish (Article Assitant) (358 Points)
Replied 08 March 2010

Agree with Dheeraj that 6500/12= 780 and 12%.

if excess of 12% then it will taxable on the above percent of 12%.

Sudhanshu (Partner) (25 Points)
Replied 09 March 2010

Dear All,

The rule is that employer employing 20 or more staff, has to deduct PF @ 12% on the salary paid. This deduction shall be done only from those employees whose basic+DA exceeds 6500/- per month. So, in case each of the 20 staff have basic+DA less than 6500/- per month, employer need not deduct PF. And in cases of staff whose basic+DA exceeds 6500/- per month, employer can chose to deduct PF on 6500/- i.e for PF calculation, employer can restrict the actual basic+DA to this limit or alternatively employer can chose to deduct PF on actual basic+DA paid to staff .

Employer can also chose to deduct PF on salary paid to employees even if there basic + DA is less than 6500/- as PF act has prescribed the condition for mandatory deduction of PF. But employer has liberty to deduct and deposit PF at their wish as it is a social security contribution for the benefit of the staff.

Sudhanshu