[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:
| 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 |
Comments
One response to “Increase in Employees Contribution in Provident fund will reduce take home salary”
This is going to be very useful for me thank you very much for posting