Dear All, Can you help me ? I want to know according to SC in the salary breakup HRA and basic is important, means we can add all components in HRA and Basic as per norms. Is it correct or not.
From India, New Delhi
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From India, New Delhi
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Hi Rana,
Any restructuring of the components of emoluments with a view to reduce EPF contribution by the employer is illegal. This has been the case even before the pronouncement of the Supreme Court judgment in the 'Special Allowance' case. Moreover, the quantum of every component and its reasonability is subject to review by government agencies associated with enforcing labor legislations such as EPF, ESI/EPS, etc. Abnormal clubbing of many allowances in HRA, as suggested, is also subject to scrutiny.
From India, Bangalore
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1273Any restructuring of the components of emoluments with a view to reduce EPF contribution by the employer is illegal. This has been the case even before the pronouncement of the Supreme Court judgment in the 'Special Allowance' case. Moreover, the quantum of every component and its reasonability is subject to review by government agencies associated with enforcing labor legislations such as EPF, ESI/EPS, etc. Abnormal clubbing of many allowances in HRA, as suggested, is also subject to scrutiny.
From India, Bangalore
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Hi,
Please find the clarity as under:
1. There are mandatory components as per the state-specific rules. There are some states like Maharashtra where HRA can be paid between a minimum of 5% to a maximum of up to 50% of the basic, but not more than that. Statutory bonus is also mandatory for those whose wages are less than ₹21,000. So, to avoid the additional PF burden, you cannot plainly add all the components into excluded components. Every component needs to be audited with reference to the applicable laws and statutory limitations.
Crux and key pointers here are as under:
1. PF ceiling of ₹15,000 per month remains the same; it has not been revised.
2. If the minimum PF contribution as per the ceiling is paid, i.e., ₹1,800 per month from both employee and employer, then there is no need to change.
3. If the contribution is less than ₹1,800 and if the gross is more or up to ₹15,000 per month, where the basic is less than ₹15,000 and the remaining amount is bifurcated among different heads, then excluding HRA and Statutory Bonus, all other heads should be considered with Basic for framing PF wages up to ₹15,000 or on the total of all heads if the total of all heads is less than ₹15,000, then on that entire total amount as arrived to be considered as wage for PF to be calculated on.
4. There is no new provision, but it is an interpretation of the existing section/term. Hence, the date of implication is not expected as it is an ongoing rule.
5. PF authority may have recourse to the verdict of the Supreme Court while conducting the inspections and computation of liability up to the wage ceiling as defined under the law.
Regards,
Adv. Amruta M
From India, Pune
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Please find the clarity as under:
1. There are mandatory components as per the state-specific rules. There are some states like Maharashtra where HRA can be paid between a minimum of 5% to a maximum of up to 50% of the basic, but not more than that. Statutory bonus is also mandatory for those whose wages are less than ₹21,000. So, to avoid the additional PF burden, you cannot plainly add all the components into excluded components. Every component needs to be audited with reference to the applicable laws and statutory limitations.
Crux and key pointers here are as under:
1. PF ceiling of ₹15,000 per month remains the same; it has not been revised.
2. If the minimum PF contribution as per the ceiling is paid, i.e., ₹1,800 per month from both employee and employer, then there is no need to change.
3. If the contribution is less than ₹1,800 and if the gross is more or up to ₹15,000 per month, where the basic is less than ₹15,000 and the remaining amount is bifurcated among different heads, then excluding HRA and Statutory Bonus, all other heads should be considered with Basic for framing PF wages up to ₹15,000 or on the total of all heads if the total of all heads is less than ₹15,000, then on that entire total amount as arrived to be considered as wage for PF to be calculated on.
4. There is no new provision, but it is an interpretation of the existing section/term. Hence, the date of implication is not expected as it is an ongoing rule.
5. PF authority may have recourse to the verdict of the Supreme Court while conducting the inspections and computation of liability up to the wage ceiling as defined under the law.
Regards,
Adv. Amruta M
From India, Pune
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Statutory Compliance of a Industrial or Commercial Unit.xls
Statutory-compl iance.pdf
Statutory Compliance.zip