As per law, both the employer and the employee need to contribute 12% of their wages towards provident fund. Till March 2020, employer contributions up to 12% enjoyed a tax exemption. Any contributions in excess of 12% were liable to tax.
How is employer/employee PF contribution calculated?
– If you are a man, you must contribute 10% or 12% of your basic salary. – In case you are a new woman employee, it is 8% of your basic salary for the first 3 years. Thereafter, it becomes 10% or 12% of your basic salary. – Your employer has to contribute an amount equal to 10% or 12% of your basic salary towards EPF.
Why PF is deducted twice from salary?
EPF rule says 12% of your basic + allowance will be deducted from your gross salary and employer will match the same amount (which is included in CTC). So basically 24% of your (basic+allowance) deducted and deposited to your EPF account.
Is employer contribution to PF taxable?
As per current law, an employee’s own contribution to the EPF account is not taxable. However, effective from April 1, 2020, onwards, employer’s contribution to the EPF account can become taxable if it exceeds Rs 7.5 lakh in a financial year.
What is formula of PF calculation?
Calculation of EPF Contribution made by the employee equals 12% of his/her Basic Pay plus Dearness Allowance (DA). When the Basic Pay + DA is less than or equal to Rs 15000, the employee contribution is 12% of Basic Pay + DA, whereas the employer contribution is 3.67% of the Basic Pay + DA.
Is employer contribution to PF included in gross salary?
The employer may count his PF contribution to you as your gross salary. But in the EPF, the employer’s contribution is exempt from tax. Only employee’s contribution is included in gross taxable salary and the same is shown as deductions u/s 80C.
How much does the employer contribute to the PF?
Both Employer and Employee Contribute towards PF Employee Contribution to PF 12% of (Basic Salary+ DA) Note:- In case of Private Companies,there is no DA (Dearness Allowance),hence it is 12% of Basic
What do you need to know about EPF contributions?
1 The contribution of an employer towards the employee’s EPF account is 12% of the salary (basic salary+ dearness allowance+ retaining allowance). 2 Similarly, the employee contributes 12% of his salary to the EPF account. 3 However, it should be noted that not all of the employer’s contribution goes to the EPF account.
How is interest accrued on employee PF contribution?
12% of Rs. 15,000 as employee contribution combines with 3.67% of Rs.15, 000 as employee PF contribution. After computing the employee and employer contribution you will have to determine the interests accrued. Interest is computed on the opening balance of each month.
How is employer PF contribution calculated in CTC?
Hello Amanali, Your CTC is 25512 which includes deduction of PF of both Employer and Employee and as you know that PF is calculated on Basic salary (DA,if any) , so PF=12,600*12% which comes Rs1512, this PF contribution is part of you Gross Salary.
