Dear All,
My query is: Can salary be adjusted for PF contribution?
The facts are as follows:
1. The basic salary of an employee is Rs. 600,000. Both the employee and the employer are paying a 12% contribution. This has been happening for the past 4 years.
2. Thus, annually, both the employee and the employer are contributing Rs. 8,64,000 each as PF contribution.
3. After the recent amendment to the Income-tax Act, the contribution by the employer exceeding Rs. 750,000 attracts TDS. Hence, the employee is not interested in contributing to or receiving employer contributions exceeding Rs. 750,000. Therefore, he wants to have his salary rationalized.
4. I understand that in such cases, where an employee opts for PF contribution, he can restrict his contribution to Rs. 1800 per month (Rs. 21,600 per year) onwards up to any amount up to the limit of his salary.
5. Can he restrict PF contribution to Rs. 750,000 per year (even though he had been contributing a higher amount earlier)?
6. Please share the provisions of the EPF Act to answer yes or no. If the answer is yes, would there be any implications on the employer?
Thank you.
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My query is: Can salary be adjusted for PF contribution?
The facts are as follows:
1. The basic salary of an employee is Rs. 600,000. Both the employee and the employer are paying a 12% contribution. This has been happening for the past 4 years.
2. Thus, annually, both the employee and the employer are contributing Rs. 8,64,000 each as PF contribution.
3. After the recent amendment to the Income-tax Act, the contribution by the employer exceeding Rs. 750,000 attracts TDS. Hence, the employee is not interested in contributing to or receiving employer contributions exceeding Rs. 750,000. Therefore, he wants to have his salary rationalized.
4. I understand that in such cases, where an employee opts for PF contribution, he can restrict his contribution to Rs. 1800 per month (Rs. 21,600 per year) onwards up to any amount up to the limit of his salary.
5. Can he restrict PF contribution to Rs. 750,000 per year (even though he had been contributing a higher amount earlier)?
6. Please share the provisions of the EPF Act to answer yes or no. If the answer is yes, would there be any implications on the employer?
Thank you.
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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
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1656Section 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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Salary-Note.doc
SALARY SHEET CALCULATION.xls