How PF Calculated from Salary

PF deduction from salary is 12% of basic & dearness allowance also 12% (8.33%-Pension ,3.67%-PF) of your Basic +DA is given by employer. S0 12% you are getting free. Total 24% deposited in EPF account. 15.67% goes to EPF & 8.33% goes to Pension & 1% extra given by employer as Govt. admin charges & EDLI (Employee Depository Linked Insurance).

EPF IS BENIFICIAL IN LONG RUN

EPF Calculation understanding from salary is the fundamental concept came to mind of an employee who draws his\her salary. How PF calculated & how much is EPF contributed by employer, what is the meaning of Salary ,What are the components of EPF etc. In this article you will find all the answer.

Table of Contents

As you will scroll down your question playing in mind will be solved. I have covered how PF calculated in CTC ,EPF calculation rules, EPF calculation formula, how is the interest calculated on PF account, Employee as well as Employer contribution. In addition to that I will show EPF calculation with examples.

What is PF ?

Provident Fund is a social security scheme created by Government of India to secure the retirement of employee where all amount is contributed by both employee and employer. This scheme covers safe & guaranteed retirement fund, Death insurance coverage, Pension after superannuation etc.

An annual compound interest also helps to grow fund and creates a handsome amount at the time of retirement.

What is EPS ?

Employee Pension Scheme is another provision of EPFO where 8.33% of Basic Salary and Dearness allowance is given by employer and the contribution amount is deposited to Pension account.

An employee eligible after serving 10 years of continuous service.

After attaining the age of 58 or after retirement, pension is given to employee on monthly basis. or after death of employee ,his/her family member receive pension.

What is EDLI ?

EDLI is Insurance scheme for the benefits of employee under Provident Fund Organization. Every month some part of basic salary and dearness allowance, particularly 0.5% of from employer contribution is deposited to EDLI.

When an employees died during employment or accident or Occupational diseases then the dependents of the employee will be paid Insurance amount.

How to calculate EDLI is given below,

EPF Calculation rules

Rules of PF is purely statutory and derived from EPF act. According to the statutory provision, it is decided how PF calculated and the EPF amount is contributed by both employee and employer.

The accumulated amount is deposited by employer to EPFO in its portal and the government administration charges is given by employer.

How PF calculated in India, and what are the components ?

Employer contribution to PF is 13% because after 12% (8.33%-Pension ,3.67%-PF) is given to Provident Fund & Pension account and 1% is given for government administration charges(0.5%) & EDLI (0.5%)(Employee depository linked Insurance)

Components of EPF are

Basic,
Dearness allowance,
Retaining allowance,
EDLI,
Pension etc.

Who deposit PF- Employee or Employer?

PF is contributed by both employee and employer however employer has the responsibility to deposit the money in the EPF of account of employee and the government admin charges bear by employer only.

Is employer contribution to PF 12% or 13 %?

Employer contribution to PF is 13% because after 12% (8.33%-Pension ,3.67%-PF) is given to EPF & Pension account 1% is given for government administration charges(0.5%) & EDLI (0.5%)(Employee depository linked Insurance)

How much is EPF contribution by employer ?

Total 13 % of Basic & dearness allowance as EPF contributed by employer. 12 % collectively deposited to Employee Provident Fund & Employee Pension Scheme,1% given for administration charges & Employee depository Linked Insurance Scheme.

How PF impacts CTC ?

Employer contribution is shown in your CTC as retiral benefits which decided based upon your basic salary. So if you understand how PF calculated & able to increase your basic salary during salary negotiation, you can increase your CTC.

How much PF is deducted from basic salary?

12% of basic and dearness allowance is deducted from salary of an employee. Your net income will be after deduction of employee contribution i.e. 12% from your gross salary.

How PF and income tax calculated in India?

If any employees EPF contribution as well as interest exceeds a limit ,then that amount will be taxable. The limit is 2.5 lakhs for Private sector employee & 5 lakhs for Government employee.

It means when our pf amount including PF contribution and interest earned exceeds prescribed limit of tax rule than that exceeded amount is taxable

How to save Income Tax by PF contribution ?

Under Section 80c we can save the annual PF contribution up-to 1.5 lakhs.

Can employer contribution to the provident fund be exempted up to 12% of salary?

No, Employer is mandatorily contribute to EPF as Employer contribution. It can not be exempted in any means.

Where is PF deposited ?

PF deposited by employer to EPFO, an institution of Central government of India by Employer. Many employer have trust, employer deposit money through trust .But the main point is fund is deposited to Employee Provident Fund Organization.

EPF Calculation on basic or gross(How it impacts your CTC)

Provident Fund of Employee is estimated from basic & dearness allowance. In allowance category earlier dearness allowance is considered now special allowance & retaining allowance are covered. Whose basic salary is more than Rs. 15,000/- he/she needs to submit the consent of employer to EPF department for the contribution of EPF.

PF calculation on Salary :

Lets say an employee has Basic Salary is Rs. 30,000, Dearness allowance is Rs. 20,000

PF calculation is as given below,

Employee Contribution= 12%* 50,000=6,000

Employer Contribution = 12%* 50,000=6,000

a) To PF account = 3.67%*50,000=1835

b) Case-I: To Pension Fund = 8.33%*15,000 = 1249.50(If higher pension scheme not opted)

Case-II : To Pension Fund = 8.33%*50,000 = 4165 (If higher pension scheme opted)

Government charges =0.5%*50,000= 250

EDLI Charges= 0.5%*50,000= 250

Percentage of EPF deducted Employee Salary — EPF Calculation for Employee Salary

Can we contribute more than 12% to PF?

Yes, Voluntary Provident Fund (VPF) is a provision who are willing to contribute more than 12%.Here the same interest rate is applicable as applicable in EPF.

EPF Calculation formula monthly basis

Let us pay attention how PF calculated on monthly basis if an employee worked 26 days by taking 4 weekly off in Sunday, PF calculation formula is 12%*(Basic + Dearness Allowance)

Lets Say an Employee get Rs. 500 per day

Month(No. of days worked)= 26 days, excluding Sunday as weekly off

Monthly PF amount=(No. days worked*Per day salary)*12%

Hence, (26*500)*12%=1560

EPF Calculation example

Let say your basic salary is 12,000 and your dearness allowance is 4,000, So now,

Employee Contribution: 12%*(12000+4000)=1920

Employer Contribution: 13%(12000+4000)=2080.00

From Employer contribution

EPF:3.67%*16000=587.20

EPS:8.33%*16000=1332.80

EDLI:0.5%*16000=80.00

Admin Charges:0.5%*16000=80.00

So the sum amount that employee will get in his/her PF account =12%*(16000)+3.67%*16000=2507.20

How PF calculated over 15000 ?

Earlier employer contribution was restricted to 15000 only though basic + DA of employee more than 15000. Now as per supreme court order employer has to contribution based on the higher wages.

How to compute PF amount from Passbook ?

If you check your passbook your detailed contribution to EPF,EPS employee contribution and employer contribution automatically showing. If you want how to check your passbook ,click here to know the process.

EPS calculation Formula:

Monthly Pension = Pensionable Salary * No. of years of total service/70

Pensionable salary is the average salary of last 60(Sixty) months from the date of retirement or death as the case may be.

EPF pension calculator in excel

Go to UAN Portal and check below the registration dialog box in right side bar if the page, you will find Pension calculator in excel.

What is the minimum EPF that has to be contributed for an employee ?

The minimum wages to be followed for calculation of EPF . Per day Basic & DA shall be considered for PF contribution. Generally PF calculation ceiling is 15000 so 12% of 15000 is 1800 is minimum PF contribution.

EDLI Calculation Formula 2023 :

EDLI Claim Amount = (35 X Basic Average Salary or Maximum 15,000) + (50 % of Average Balance in EPF Account or Maximum 1.75 Lakhs)

Average basic salary if last 12 months before the date of death of employee is considered for calculation.

When PF amount received to employee ?

Generally PF amount is received after retirement, however if employee wants to withdraw, money can be withdraw full amount after completion of 3 month of employment .50% amount of PF can be withdrawn before 5 years of superannuation.

Is PF is taxable at the time of withdrawal ?

Yes, Withdrawal PF amount is taxable, Tax will be lived depending upon the tax slab it is coming under. On that basis percentage of tax will be deducted.

Conclusion & Feedback

I hope this article helps you to understand how PF calculated from salary and what are other aspect like contribution rate of employee & employer, Tax saving, Interest rate ,Insurance coverage, Pension fund etc.

If you come to the end of article, please do not forget leave your valuable feedback, For you it is free but for me it matters because it helps to improve and also comment below in which topic you want information.

Some relevant questions helps to understand better

Who are not covered under EPF Act ?

This act does not apply to below cases

Co-operative society employing less than 50 person & working without aid of power.
Any establishment having controlled by Central & state Government, Having their separate scheme.
Apprentices engaged under Apprentice Act 1961
To those employees having salary exceeds Rs.15,000 per month at the time of joining.

Who are included in the definition of of employee under EPF act ?

An employee includes any person who are engaged to do any kind of work in connection to the establishment directly or indirectly by the Principal Employer. Indirectly means engage through the contractor.

Which section of EPF act defines definition of Employee ?

Section-2(f) on Employee Provident Fund Act.

Whether trainees are included in the definition of Employee ?

No, Apprentice under Apprentice act 1961 & Trainee under standing order 1948 are not included in the definition of employee.

Are part time employees are coming in the definition of Employees under EPF act ?

Yes, Part time employees are included in the definition of Employee. EPF has no concern about number of working hour an employee worked. It is only concerned about salary & Employer employee relationship and in both the cases employee definition satisfies and EPF applicable.

Is production incentive can be considered as wages for calculating EPF?

No, because production incentives is paid by the employer for the extra work done by employee in extra time.

Is leave encashment are part of wages for PF calculation ?

No, It is not part of wages, because leave is encased mostly at the time of superannuation or in case of death, so there is no applicability of similarity for employee.

Is employer liable to pay EPF contribution in the period of absent ?

Yes, If employer has paid wages to employee in the period of absent, then employer has to pay epf contribution.

Is employer liable to pay EPF contribution even if salary is not paid ?

Yes, Though salary is not paid ,still EPF contribution to be done by the employer.

Whether employer can deduct his share from employee ?

No, Employer share is given by employer only.

Is employee can contribute to the salary exceeding Rs, 15,000 per month ?

Yes, Employee can contribute of the salary of Rs. 15,000 per month ,if there is a joint declaration form submitted to EPF authority and the employer is agree to submit the administrative amount to the governing body.

How to calculate DA ?

DA means Dearness Allowance. The calculation of DA varies from state to state because it is depend upon standard of living of respective state. After fixation of basic wages by considering three fundamental needs like Food, Shelter, Cloth, State government define dearness allowance for other requirements like Conveyance, Medicine, etc.

What is full form of EDLI ?

Employee depository linked Insurance. It is a insurance scheme in which family members paid Insurance amount after the death of EPF member.