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FAQ's on Provident Fund Contributions

  1. 1. What are the obligations in terms of payments from both the employer and the employee?
    1. A. Within the framework of the scheme, both the employer and the employee are obligated to contribute 12% of the PF wages. Of the employer's share, 8.33% is allocated to the Employees’ Pension Scheme, while the remaining 3.67% is directed to the EPF Scheme. Additionally, the employer is required to allocate 0.50% of the contribution towards the Employees’ Deposit-linked Insurance Scheme, with administrative charges set at 0.50%.
  2. 2. Is it possible for a worker to choose not to participate in the EPF Act schemes?
    1. A. Individuals earning a monthly salary exceeding Rs. 15,000, who have not previously enrolled in the EPF program, possess the option to refrain from participating in the scheme. However, once they enroll, they are obliged to remain part of the scheme without the possibility of opting out.
  1. 3. If an individual starts working at a company with a basic salary below Rs. 15,000, and subsequently, their PF wages rise above this threshold after a certain period, are they eligible to withdraw from their membership under the EPF Act?
    1. A. If an employee's salary rises above Rs. 15,000 while they are still employed, they will be enrolled in the provident fund scheme automatically and cannot opt out thereafter.
  2. 4. Is EPF deducted on stipend?
    1. A. Trainees or interns are not considered employees under the Act. Thus, EPF deductions from their stipends are not required, given they're covered by the Apprenticeship Act, Industrial Employment (Standing Orders) Act, or engaged through recognized institutions for on-job training as part of their curriculum.
  3. 5. Is it permissible for an employer to cap their contribution to the wage ceiling limit of Rs. 15,000?
    1. A. Employers are not mandated to contribute beyond the prescribed PF wage ceiling limit. However, they have the option to make voluntary contributions based on higher wages if they choose to do so.
  4. 6. If an employee transitions from a company governed by the provisions of this Act to one that falls outside its jurisdiction, what becomes of the funds they've accrued during their tenure?
    1. A. In the event of such circumstances arising, the total sum accrued shall be duly relocated to the respective employee's trust fund, or alternatively, to the Provident Fund associated with the organization from which they have departed, within the timeframe stipulated by the Central Government.
  5. 7. Is it permissible for an employer to subtract the employer's portion of the EPF contribution from the salaries of their employees?
    1. A. It is illegal for an employer to subtract the employer's share of contributions to the EPF from the salaries of their employees. As stipulated in Section 14(1A) of the Act, any such deduction constitutes a criminal offense and carries penalties including imprisonment for a period of up to three years, with a minimum sentence of one year, along with a fine of Rs. 10,000.
  6. 8.Can an individual make contributions exceeding the maximum wage threshold?
    1. A.Yes, Employees can contribute beyond Rs. 15,000 wage ceiling, but total cannot exceed Rs. 15,000/month. They can also contribute on higher wages (up to 100% of PF wages) with APFC/RPFC approval. Employers can limit their contributions to statutory rates.
  7. 9. What factors should be taken into account when determining Provident Fund (PF) contributions based on salary?
    1. A. Following the recent ruling by the Supreme Court in the Surya Roshni case, dated 28th February 2019, the calculation of contributions shall now be based on the entirety of monthly earnings, encompassing the following components irrespective of their frequency of payment (daily, weekly, fortnightly, or monthly):
      1. I. Base salary
      2. II. Cost of living allowances
      3. III. Supplementary wages
      4. IV. Transport stipends
      5. V. Miscellaneous allowances
      6. VI. Additional compensation
      7. VII. Travel benefits
      8. VIII. Fixed monetary grants (e.g., management stipend, educational assistance, medical subsidy, telecommunications subsidy, food provision)
      9. IX. Fuel reimbursement (provided without receipts or accompanying documentation proving its official purpose)
      10. X. Urban compensation allowances or any other stipend provided uniformly and universally, lacking a direct correlation to the regular tasks performed by the employee.
  8. 10. What are the elements not factored into the calculation of EPF contributions?
    1. A. These components are excluded while calculating the EPF:
      1. I. Housing stipend (House rent allowance)
      2. II. Leave incentive
      3. III. Shift differential pay
      4. IV. Laundry stipend
      5. V. Transfer compensation
      6. VI. Extra hours compensation
      7. VII. Meal subsidy
      8. VIII. Tailored bonuses for individual employees
      9. IX. Performance-based bonuses or commissions for specific employees
  9. 11. Can an employee join the Pension Scheme independently of their contributions to the EPF?
    1. A. No. An individual can only enroll in the Employees’ Pension Scheme through their affiliation with the EPF membership.

*Refer the FAQs on withdrawals for applicable terms and conditions

FAQ'S on Provident Fund for International Workers FAQ'S on Provident Fund Withdrawals