[caption id="attachment_453" align="alignleft" width="203"] Provident Fund[/caption] EPFO (Employee Provident Fund Organisation) as issued a circular on 30.09.2012. According to Circular, EPF (Employees Provident) should be deducted on total salary. Total Salary for purpose EPF calculation will be
- Basic Salary +
- DA +
- Conveyance Allowance +
- House Rent Allowance+
- Education Allowance+
- Travel Allowance +
- Medical Allowance+
- Night Allowance+
- Uniform Allowance+
- any other allowance, by what so ever name called.
Implication of this Circular: Gains to Employee due increase in PF:
- Saving in your provident fund corpus will increase. This mean you will have more fund for retirement.
- Will help save more income tax. More PF amount will contribute in investment limit of Rs 1,00,000/- under Section 80C of Income Tax Act.
Loss to Employee due increase in PF:
- Take Home Salary will reduce
- Loan eligibility will reduce. As loan eligibility is computed by banks on net take home salary
Example of how new computation of Provident fund will impact you:
|12% on Basic +DA||12% of Basic Salary+ Allowance||Net Increase/ Decrease|
|Total Salary P.M|
|Total Salary pm (A)||112,000||112,000|
|EPF Contribution pm @12% (B)||9,000||13,440||4,440|
|Take home Salary (C=A-B)||103,000||98,560||(4,440)|
|PF corpus for year (D=B*12)||108,000||161,280||53,280|