What are the components to be considered while contributing to EPF?
We are contributing on basic only. Whether we have to take into consideration of HRA and uniform allowances. CTC being 16000 Basic 8000 per month HRA 3200 per month Uniform 1500 per month Other allowance balancing figure 3300. We have deducted 1200 from the employee, and the same is contributed by the company and remitted to EPFO. Do we have to consider another allowance of 3300 to calculate PF? As HRA and uniform allowances are exempted from EPF, we have not considered them for EPF calculations. Do we have to consider them for calculating EPF as it is below 15000 (8000 + 3300 + remaining 3700)?
You can also send clarifications to sl.Chandtashekar@yahoo.com or WhatsApp to 8150902999. Please send notifications if there are for the above-stated questions.
From India, Bengaluru
Acknowledge(0)
Amend(0)
We are contributing on basic only. Whether we have to take into consideration of HRA and uniform allowances. CTC being 16000 Basic 8000 per month HRA 3200 per month Uniform 1500 per month Other allowance balancing figure 3300. We have deducted 1200 from the employee, and the same is contributed by the company and remitted to EPFO. Do we have to consider another allowance of 3300 to calculate PF? As HRA and uniform allowances are exempted from EPF, we have not considered them for EPF calculations. Do we have to consider them for calculating EPF as it is below 15000 (8000 + 3300 + remaining 3700)?
You can also send clarifications to sl.Chandtashekar@yahoo.com or WhatsApp to 8150902999. Please send notifications if there are for the above-stated questions.
From India, Bengaluru
Acknowledge(0)Amend(0)
It is true that HRA and allowances to buy and maintain a uniform, washing allowance, etc., will not qualify for contribution to PF. But if these allowances are universally paid to all employees, then it MAY qualify for contribution. Suppose, if the HRA is paid only to those employees who reside in leased houses, then it is an allowance, but if it is paid to all employees without reference to their ownership or lease status of residence, then it shall be part of the salary only. In the former case, HRA will be a reimbursement and is paid even if the employee is absent without leave for a few days. But in the latter case, it is not a reimbursement, and the proportionate amount will be deducted when an employee takes even a single day LOP.
Regarding the uniform allowance, I would like to say that this is an allowance to buy a uniform. Normally, it will be excluded because it is a payment made once a year. You cannot pay a uniform allowance every month because the life of a uniform is not one month. Obviously, employees who are given a uniform will be paid a washing allowance (to maintain the uniform), and the amount will not form part of wages either under ESI or under PF because the objective of such payment is specific. However, you cannot have a huge amount as a washing allowance in the salary structure. Including an amount that is much above the cost of maintaining the uniform shall be viewed as an attempt to reduce the burden of contributions towards statutory funds like ESI and EPF. For a salary of Rs 16000, an amount of Rs 1500 towards a uniform every month will not be allowed anyway.
Other allowances are yet another component of salary that will always create problems. There are various court rulings which say that any allowance paid universally to all employees should be treated as part of the basic salary. As such, other allowances should be considered for payment of PF, Bonus, Gratuity, etc.
Now, coming to the present situation, I would say that you may consider a salary excluding HRA as the base for PF contribution. If that amount is equal to or more than the minimum wages fixed by the government in respect of that trade/employment, then it will take care of your future liabilities of bonus and gratuity also.
From India, Kannur
Acknowledge(0)Amend(0)
4769Regarding the uniform allowance, I would like to say that this is an allowance to buy a uniform. Normally, it will be excluded because it is a payment made once a year. You cannot pay a uniform allowance every month because the life of a uniform is not one month. Obviously, employees who are given a uniform will be paid a washing allowance (to maintain the uniform), and the amount will not form part of wages either under ESI or under PF because the objective of such payment is specific. However, you cannot have a huge amount as a washing allowance in the salary structure. Including an amount that is much above the cost of maintaining the uniform shall be viewed as an attempt to reduce the burden of contributions towards statutory funds like ESI and EPF. For a salary of Rs 16000, an amount of Rs 1500 towards a uniform every month will not be allowed anyway.
Other allowances are yet another component of salary that will always create problems. There are various court rulings which say that any allowance paid universally to all employees should be treated as part of the basic salary. As such, other allowances should be considered for payment of PF, Bonus, Gratuity, etc.
Now, coming to the present situation, I would say that you may consider a salary excluding HRA as the base for PF contribution. If that amount is equal to or more than the minimum wages fixed by the government in respect of that trade/employment, then it will take care of your future liabilities of bonus and gratuity also.
From India, Kannur
Acknowledge(0)Amend(0)
As per the Apex Court verdict and considering the definition of Basic Wages as per EPFO, which has not been amended, the PF contribution should be on basic, DA, and all other allowances paid regularly on a monthly basis except HRA as per the definition of Basic Wages.
S K Bandyopadhyay (WB, Howrah) CEO USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in
From India, New Delhi
Acknowledge(0)Amend(0)
S K Bandyopadhyay (WB, Howrah) CEO USD HR Solutions +91 98310 81531 skb@usdhrs.in www.usdhrs.in
From India, New Delhi
Acknowledge(0)Amend(0)Engage with peers to discuss and resolve work and business challenges collaboratively - share and document your knowledge. Our AI-powered platform, features real-time fact-checking, peer reviews, and an extensive historical knowledge base. - Join & Be Part Of Our Community.
EPF ON LINE REGN. USER MANUAL.pdf