Increase in Employees Contribution in Provident fund will reduce take home salary

[caption id="attachment_453" align="alignleft" width="203"]Provident_Fund_EPF_rate_takehome_salary 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

Earlier Provident fund was calculated @ 12% on Basic Salary + DA ALSO READ :- E PassBook Service for Employee

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:

Earlier Now
12% on Basic +DA 12% of Basic Salary+ Allowance Net Increase/ Decrease
Total Salary P.M
Basic Salary                       50,000                          50,000
Dearness Allowance                       25,000                          25,000
Conveyance Allowance                         1,000                             1,000
HRA alllowance                       25,000                          25,000
Uniform Allowance                       10,000                          10,000
Night Allowance                         1,000                             1,000
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
  ALSO READ :- E PassBook Service for Employee






One response to “Increase in Employees Contribution in Provident fund will reduce take home salary”

  1. Shardy Avatar

    This is going to be very useful for me thank you very much for posting