Provident Fund
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.
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
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