EPF Deduction

EPF Deduction

The EPF deduction might be increased but it is not applicable to employee

PF (Provident Fund) or EPF is called the Employee Provident Fund Scheme. It is a scheme where the employees pay a small amount of their salary, that is 12% of their basic earning per month. A matching sum is paid by the employer also. Such an input, together, build up an amount. This amount would be utilized to finance the worker's retirement. EPF withdrawal by the employees could be that as it may, be done prior itself, for example during the course of their service. However, very soon the employees would be contributing a larger portion of their remuneration in the  Employees’ Provident Fund (EPF) account.

Recently, the Supreme Court held that each and every allowance, for example, special allowance and dearness allowance, must be incorporated while calculating EPF deduction. The allowances which are variable and connected towards the worker’s efforts, for example, overtime allowance, could be barred.

The Supreme Court also held that allowances which are remunerated towards every employee and are not variable or connected to any production incentive must not be barred. Such allowances must be included in the remuneration limit for the PF deduction. But the implication of this ruling by the Supreme Court does not include the international employees. The international employees who are posted in India might see a higher sum was deducted to PF.  Such employees are not exempted by the stipulation exempting residential employees having income above Rs. 155,000 every month.

EPF deduction

As per the Employees’ Provident Fund (EPF) Act, 1952, 12% of an employee’s basic remuneration and dearness allowance must be put into EPF and the employer requires to contribute an equivalent amount as well. For instance, if the employee’s basic remuneration, as well as dearness allowance, add together Rs.12,000, then the employer’s required to deduct Rs.1,440 towards PF per month and match it with Rs.1,440 from its very own pocket. Both these sums are, normally, a share of the cost to company (CTC).

If the employee earns above Rs. 15,000 every month in basic remuneration as well as dearness allowance, the employers they could constrain the PF deduction to 12% of Rs.15,000 ( Rs.1,800) under the stipulation to Para 26A of the Employees Provident Fund Scheme, 1952. This additionally cuts down their matching input to 12% of Rs.15,000. Numerous organizations decide not to take advantage of this stipulation and pay 12% of the actual basic remuneration as well as dearness allowance, regardless of whether the amount is higher than Rs.15,000.

The companies, be that as it may, often eliminate special allowance, travel allowance or canteen allowance when calculating PF deduction. For instance, if the employee’s basic remuneration and dearness allowance indicate Rs.30,000 and the employee get Rs. 10,000 as special allowance another Rs.10,000 as transport allowance, then the employer’s might just deduct 12% of Rs.30,000 or Rs. 3,600. This retains the in-hand remuneration high and decreases the CTC for the organization.


eStartIndia Team

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