Dear All, My query is that Can Salary be adjusted for PF Contribution:
The facts are as under-
1. The basic salary of an employee is Rs 600,000. Both employee and Employer are paying 12% contribution.
This is happening for past 4 years
2. Thus annually, both employee and employer are contributing Rs 8,64,000 each as PF contribution.
3. After the recent amendment to Income-tax Act, the contribution by the employer exceeding Rs 750,000 attracts TDS, hence the employee is not interested to contribute/ get employer contributions exceeding Rs 750,000. Therefore he wants to get his salary rationalized.
4. I understand in such cases, where an employee opts for PF contribution, he can restrict his contribution 1800pm (21,600 per year) onwards till any amount upto limit of salary.
5. can he restrict PF Contribution to Rs 750,000 per year ( even though he had been contributing higher earlier)
6. Please share provisions of the EPF Act, for yes or no as an answer. If yes, would there be any implications on the employer?
The facts are as under-
1. The basic salary of an employee is Rs 600,000. Both employee and Employer are paying 12% contribution.
This is happening for past 4 years
2. Thus annually, both employee and employer are contributing Rs 8,64,000 each as PF contribution.
3. After the recent amendment to Income-tax Act, the contribution by the employer exceeding Rs 750,000 attracts TDS, hence the employee is not interested to contribute/ get employer contributions exceeding Rs 750,000. Therefore he wants to get his salary rationalized.
4. I understand in such cases, where an employee opts for PF contribution, he can restrict his contribution 1800pm (21,600 per year) onwards till any amount upto limit of salary.
5. can he restrict PF Contribution to Rs 750,000 per year ( even though he had been contributing higher earlier)
6. Please share provisions of the EPF Act, for yes or no as an answer. If yes, would there be any implications on the employer?
The Voluntary PF contribution is provided in the EPF Act 1952 & EPF Scheme. Section 6 of the Act and the para 29 of the EPF Scheme reads as under:
Section 6:
Contributions and matters which may be provided for in Schemes.—The contribution which shall be paid by the employer to the Fund shall be ten percent of the basic wages, dearness allowance and retaining allowance if any for the time being payable to each of the employees whether employed by him directly or by or through a contractor, and the employees’ contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten percent of his basic wages, dearness allowance and retaining allowance if any, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section:
The para 29 of the EPF Scheme on Contribution specifically mentions:
(2) The contribution payable by the employee under the Scheme, shall be equal to the contribution payable by the employer in respect of such employee:
Provided that in respect of any employee to whom the Scheme applies, the contribution payable by him may, if he so desires, be an amount exceeding [ten percent] or [twelve percent], as the case may be, of his basic wages, dearness allowance and retaining allowance (if any) subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Act;
So the Section 6 of the Act as well as the proviso to the Para 29 makes it abundantly clear that the statutory norm of equal contribution between employer and employee would not be applicable for VPF contribution. When it is said that the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Act, it automatically follows that the employer has the right to contribute an amount lesser than the voluntarily contributed amount of the employee.
hat means while the employee can continue to contribute Rs. 8,64,000/- to the EPF Scheme, the employer share could be limited to Rs. 7,50,000/-.
From India, Mumbai
1534Section 6:
Contributions and matters which may be provided for in Schemes.—The contribution which shall be paid by the employer to the Fund shall be ten percent of the basic wages, dearness allowance and retaining allowance if any for the time being payable to each of the employees whether employed by him directly or by or through a contractor, and the employees’ contribution shall be equal to the contribution payable by the employer in respect of him and may, if any employee so desires, be an amount exceeding ten percent of his basic wages, dearness allowance and retaining allowance if any, subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section:
The para 29 of the EPF Scheme on Contribution specifically mentions:
(2) The contribution payable by the employee under the Scheme, shall be equal to the contribution payable by the employer in respect of such employee:
Provided that in respect of any employee to whom the Scheme applies, the contribution payable by him may, if he so desires, be an amount exceeding [ten percent] or [twelve percent], as the case may be, of his basic wages, dearness allowance and retaining allowance (if any) subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Act;
So the Section 6 of the Act as well as the proviso to the Para 29 makes it abundantly clear that the statutory norm of equal contribution between employer and employee would not be applicable for VPF contribution. When it is said that the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under the Act, it automatically follows that the employer has the right to contribute an amount lesser than the voluntarily contributed amount of the employee.
hat means while the employee can continue to contribute Rs. 8,64,000/- to the EPF Scheme, the employer share could be limited to Rs. 7,50,000/-.
From India, Mumbai
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