Dear All,
Greetings for the day!
I am an HR Executive, and our employees are interested in contributing towards Voluntary PF Contribution. Can anyone clarify the following points:
1. What is the maximum limit of PF contribution towards Voluntary PF Contribution? Is it 88% of Basic? If employees want to contribute, can they contribute less than 88%?
2. How will the administration charges be calculated?
3. What is the process to start contributing to the voluntary contribution?
4. Currently, employees contribute 12%. Can they contribute the additional 88% so that the total contribution amounts to 100% of their basic salary?
Please provide the information.
Thanks & Regards,
Pourna.
From India, Hyderabad
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1Greetings for the day!
I am an HR Executive, and our employees are interested in contributing towards Voluntary PF Contribution. Can anyone clarify the following points:
1. What is the maximum limit of PF contribution towards Voluntary PF Contribution? Is it 88% of Basic? If employees want to contribute, can they contribute less than 88%?
2. How will the administration charges be calculated?
3. What is the process to start contributing to the voluntary contribution?
4. Currently, employees contribute 12%. Can they contribute the additional 88% so that the total contribution amounts to 100% of their basic salary?
Please provide the information.
Thanks & Regards,
Pourna.
From India, Hyderabad
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Hi Pourna,
I didn't seem to understand your logic of 88%. Nonetheless, the EPF scheme is as below -
Employer's contribution -
Employer has to contribute 12% of basic + DA or 780 (12% of the currently prescribed 6500), whichever is less as the contribution. Out of the 12% of the employer's contribution, 8.33% goes to the Pension fund (EPS) and the remaining 3.67% goes to the PF account (EPF).
Above this 12% of the contribution towards the PF And Pension Fund, an employer is also expected to bear the following expenses -
a) 0.1% admin charges for PF and Pension accounts
b) 0.05% towards the employee insurance scheme
c) 0.01% admin charges for the insurance account.
Please note that if the company provides an at par or better insurance scheme, they are exempted from contributing (b) and (c).
Employee's contribution -
An employee as well is expected to contribute 12% of basic + DA or 780 (12% of the currently prescribed 6500), whichever is less as a contribution. The employee can voluntarily increase their contribution to the PF account. The maximum employee contribution allowed as per the act is 20% of basic + DA (or 20% of the currently prescribed 6500 limit), whichever is lower. The whole contribution made by the employee goes to the PF account only.
Also note that when an employee wishes to voluntarily increase the contribution to PF, there ought to be a joint declaration provided by the firm and the said employee declaring the percentage of contribution that the employee is willing to contribute.
I hope I have answered your query.
From India, Mumbai
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I didn't seem to understand your logic of 88%. Nonetheless, the EPF scheme is as below -
Employer's contribution -
Employer has to contribute 12% of basic + DA or 780 (12% of the currently prescribed 6500), whichever is less as the contribution. Out of the 12% of the employer's contribution, 8.33% goes to the Pension fund (EPS) and the remaining 3.67% goes to the PF account (EPF).
Above this 12% of the contribution towards the PF And Pension Fund, an employer is also expected to bear the following expenses -
a) 0.1% admin charges for PF and Pension accounts
b) 0.05% towards the employee insurance scheme
c) 0.01% admin charges for the insurance account.
Please note that if the company provides an at par or better insurance scheme, they are exempted from contributing (b) and (c).
Employee's contribution -
An employee as well is expected to contribute 12% of basic + DA or 780 (12% of the currently prescribed 6500), whichever is less as a contribution. The employee can voluntarily increase their contribution to the PF account. The maximum employee contribution allowed as per the act is 20% of basic + DA (or 20% of the currently prescribed 6500 limit), whichever is lower. The whole contribution made by the employee goes to the PF account only.
Also note that when an employee wishes to voluntarily increase the contribution to PF, there ought to be a joint declaration provided by the firm and the said employee declaring the percentage of contribution that the employee is willing to contribute.
I hope I have answered your query.
From India, Mumbai
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Hi Pourna,
If your PF contribution is over and above 6500/-, that's Rs. 780/-. The remaining amount shall be treated as VPF.
For example, if the wages are 10000/- and your contribution is 12% on 6500/- (i.e., 780, which is treated as compulsory PF contribution), if you are contributing 12% on 10000/- (i.e., 1200/-), then the difference between 1200 and 780, which is 420/-, is treated as VPF.
As part of VPF, you shall contribute up to 20% of the wages. All the admin charges of Account 2, 21, and 22 are calculated on a maximum of 6500/- only.
Hope it is clear now.
From India, Bangalore
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If your PF contribution is over and above 6500/-, that's Rs. 780/-. The remaining amount shall be treated as VPF.
For example, if the wages are 10000/- and your contribution is 12% on 6500/- (i.e., 780, which is treated as compulsory PF contribution), if you are contributing 12% on 10000/- (i.e., 1200/-), then the difference between 1200 and 780, which is 420/-, is treated as VPF.
As part of VPF, you shall contribute up to 20% of the wages. All the admin charges of Account 2, 21, and 22 are calculated on a maximum of 6500/- only.
Hope it is clear now.
From India, Bangalore
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Hi,
Just a very tiny correction:
b) 0.05% towards employee insurance scheme
c) 0.01% admin charges for the insurance account.
The above is the Employee Deposit Linked Insurance Scheme (EDLIS). The contribution for the same is 0.50%, and the EDLI Admin Charges are 0.01%, making the total 0.51% (EDLI + EDLI Admin).
From India, Pune
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Just a very tiny correction:
b) 0.05% towards employee insurance scheme
c) 0.01% admin charges for the insurance account.
The above is the Employee Deposit Linked Insurance Scheme (EDLIS). The contribution for the same is 0.50%, and the EDLI Admin Charges are 0.01%, making the total 0.51% (EDLI + EDLI Admin).
From India, Pune
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Are u sure there is a limit of 20% as max for voluntary PF ? I know many large companies (mnc mostly) that compute PF on full salary for managers. That would be far above the 6500 limit.
From India, Mumbai
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From India, Mumbai
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While studying labor laws last year, it was communicated in my textbook that an employee's contribution to the PF fund is compulsory at 12% and can be voluntarily increased to 20%.
Upon searching after your query, I found this -
attribution https://www.citehr.com/110130-what-v...#ixzz2PemE8bYA
On the contrary, I also found -
Can I contribute over and above the mandatory 12%, as a voluntary provident fund?
A. Yes, but subject to a total contribution of not more than 100% of the basic salary. However, the employer will not contribute towards such voluntary contributions made by the employee. Furthermore, the said voluntary contribution will be treated as normal contributions and cannot be withdrawn as and when the employee wishes to. The voluntary contribution will be at a fixed percentage of basic and will remain the same throughout the year (Mar-Feb). You can give the mandate for the deduction of voluntary PF at the start of the financial year and can cancel it anytime during the year.
Source: http://sunshineconsultants.co.in/yah....311162455.pdf
However, I think seniors should help us solve this confusion. I shall search for the text at home. If I find one, I shall attach the scanned copy of the text from it.
From India, Mumbai
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Upon searching after your query, I found this -
attribution https://www.citehr.com/110130-what-v...#ixzz2PemE8bYA
On the contrary, I also found -
Can I contribute over and above the mandatory 12%, as a voluntary provident fund?
A. Yes, but subject to a total contribution of not more than 100% of the basic salary. However, the employer will not contribute towards such voluntary contributions made by the employee. Furthermore, the said voluntary contribution will be treated as normal contributions and cannot be withdrawn as and when the employee wishes to. The voluntary contribution will be at a fixed percentage of basic and will remain the same throughout the year (Mar-Feb). You can give the mandate for the deduction of voluntary PF at the start of the financial year and can cancel it anytime during the year.
Source: http://sunshineconsultants.co.in/yah....311162455.pdf
However, I think seniors should help us solve this confusion. I shall search for the text at home. If I find one, I shall attach the scanned copy of the text from it.
From India, Mumbai
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Hi All,
This is in response to the above comment by Cite HR members..........
As far as my knowledge is concerned Voluntary Provident Fund (VPF): VPF is a safe option wherein you can contribute more than the PF ceiling of 12% that has been mandated by the government. This additional amount enjoys all the benefits of PF except that the employer is not liable to contribute any extra amount apart from 12%. An added advantage is that the interest rate is equal to the interest rate of PF and the withdrawal is tax free. Please note that the maximum contribution towards VPF is 100% of your Basic. The highest rate of interes makes it a very attractive saving scheme. Because of these advantages many employees chose not to close their PF account even after getting employment else where other than India. Employees also get a major tax break on their entire contribution to the fund (tax rebate under section 88 ).
Note: There is no limit on the percentage that one can choose to opt. And Admin/EDLI Charges are applicable only on the total wages and thus it will not make employer to pay extra charges.
One more thing you can invest well over the Section 80C ceiling, and you won't have to take the trouble to deposit the amount, too: your employer will do it. you may have claimed your insurance premium, children's education, housing loan principal and so on, thus easily exhausting your limit.
Effectively, most of the Section 80C limit would have been used up in claiming expenses you incurred rather than in investing. Even if you did save by investing in bank or company deposits, your interest on it will be taxed.
Procedure of VPF-Investing in VPF is a simple process and just requires you to inform your employer to deduct a certain proportion of your pay (subject to the limit mentioned above) additionally, every month.
Please correct me if this is not correct.
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit
From India, Patna
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This is in response to the above comment by Cite HR members..........
As far as my knowledge is concerned Voluntary Provident Fund (VPF): VPF is a safe option wherein you can contribute more than the PF ceiling of 12% that has been mandated by the government. This additional amount enjoys all the benefits of PF except that the employer is not liable to contribute any extra amount apart from 12%. An added advantage is that the interest rate is equal to the interest rate of PF and the withdrawal is tax free. Please note that the maximum contribution towards VPF is 100% of your Basic. The highest rate of interes makes it a very attractive saving scheme. Because of these advantages many employees chose not to close their PF account even after getting employment else where other than India. Employees also get a major tax break on their entire contribution to the fund (tax rebate under section 88 ).
Note: There is no limit on the percentage that one can choose to opt. And Admin/EDLI Charges are applicable only on the total wages and thus it will not make employer to pay extra charges.
One more thing you can invest well over the Section 80C ceiling, and you won't have to take the trouble to deposit the amount, too: your employer will do it. you may have claimed your insurance premium, children's education, housing loan principal and so on, thus easily exhausting your limit.
Effectively, most of the Section 80C limit would have been used up in claiming expenses you incurred rather than in investing. Even if you did save by investing in bank or company deposits, your interest on it will be taxed.
Procedure of VPF-Investing in VPF is a simple process and just requires you to inform your employer to deduct a certain proportion of your pay (subject to the limit mentioned above) additionally, every month.
Please correct me if this is not correct.
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit
From India, Patna
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Please note that the maximum contribution towards VPF is 100% of your Basic. Total contribution towards PF/VPF is 100% of basic (88% of employee + 12% employer) or 100% of basic of employee only + 12% employer = 112% contribution towards PF.
Regards,
MN KHAN
[Source: https://www.citehr.com/456450-volunt...#ixzz2PfZLZ3Qt]
From India, Delhi
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Regards,
MN KHAN
[Source: https://www.citehr.com/456450-volunt...#ixzz2PfZLZ3Qt]
From India, Delhi
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Dear Pourna ji,
Specific and to-the-point answers to your questions are as follows:
There is no maximum limit for VPF laid down in the Act or any circular or notification to my knowledge. If you deduct 88%, what will remain in the hands of the employee? Also, the provisions of the Payment of Wages Act on deductions from wages should be kept in mind.
Administrative charges are calculated on the PF salary, i.e., on which PF is deducted.
The employee has to give an undertaking as prescribed in this regard.
Answered above at Sr. 1.
From India, Mumbai
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Specific and to-the-point answers to your questions are as follows:
There is no maximum limit for VPF laid down in the Act or any circular or notification to my knowledge. If you deduct 88%, what will remain in the hands of the employee? Also, the provisions of the Payment of Wages Act on deductions from wages should be kept in mind.
Administrative charges are calculated on the PF salary, i.e., on which PF is deducted.
The employee has to give an undertaking as prescribed in this regard.
Answered above at Sr. 1.
From India, Mumbai
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Dear all,
Section 6 of the Employees' Provident Fund & Miscellaneous Provisions Act, 1952 does not lay down any upper limit for the VPF contribution. Since there is no upper limit, an employee can choose to deposit his entire take-home salary left after statutory and other deductions. Many employees nearing their retirement have been depositing almost their entire take-home salary, looking at the attractive returns it is earning.
Thank you.
From India, Bhopal
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Section 6 of the Employees' Provident Fund & Miscellaneous Provisions Act, 1952 does not lay down any upper limit for the VPF contribution. Since there is no upper limit, an employee can choose to deposit his entire take-home salary left after statutory and other deductions. Many employees nearing their retirement have been depositing almost their entire take-home salary, looking at the attractive returns it is earning.
Thank you.
From India, Bhopal
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf
Voluntary PF.doc