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Ghanshyam ParmarEPF Wages as per Employees' Provident Funds & Miscellaneous Provisions Act 1952


EPF Wages as per Employees' Provident Funds & Miscellaneous Provisions Act, 1952

As per Section 6 of Employees' Provident Funds & Miscellaneous Provisions Act, 1952

Contributions and matters which may be provided for in Scheme. - The contribution which shall be paid by the employer to the fund shall be 4[ten per cent.] of the basic wages, 5[dearness allowance and retaining allowance (if any)] for the time being payable to each of the employees 6[(whether employed by him directly or by or through a contactor)], and the employee’s contribution shall be equal to the contribution payable by the employer in respect of him and may, 7[if any employee so desires, be an amount exceeding 4[ten per cent.] of his basic wages, dearness allowance and retaining allowance (if any), subject to the condition that the employer shall not be under an obligation to pay any contribution over and above his contribution payable under this section]:7[Provided that in its application to any establishment or class of establishments which the Central Government, after making such inquiry as it deems fit, may, by notification in the Official Gazette specify, this section shall be subject to the modification that for the words “4[ten per cent.]”, at both the places where they occur, the words 8[“12 per cent. “] shall be substituted:]

Provided further that where the amount of any contribution payable under this Act involves a fraction of a rupee, the Scheme may provide for rounding off of such fraction to the nearest rupee, half of a rupee, or quarter of a rupee.

Explanation I For the purposes of this 2[section] dearness allowances shall be deemed to include also the cash value of any food concession allowed to the employee.

Explanation II For the purposes of this 2[section], “retaining allowance” means allowance payable for the time being to an employee of any factory or other establishment during any period in which the establishment is not working, for retaining his services.]
The apex court has ruled that employers cannot segregate 'special allowance' from basic wages for purpose of PF deductions. The Supreme Court has passed an order on Provident Fund (PF) calculation that will have far-reaching impact on companies and the salaried class.

A bench of Justices Arun Mishra and Naveen Sinha yesterday ruled that employers cannot segregate 'special allowance' from basic wages for purpose of PF deductions.

The court was hearing a clutch of appeals questioning whether "the special allowances paid by an establishment to its employees would fall within the expression "basic wages" under Section 2(b)(ii) read with Section 6 of the Act for computation of deduction towards Provident Fund".

Note that employers and employees both contribute 12% of wages in EPF. Under Section 2 (b), basic wages refers to all emoluments earned by an employee in accordance with the terms of his/her employment contract but does not include the following:

i) The cash value of any food concession

ii) Any dearness allowance, house rent allowance, overtime allowance, bonus, commission, or any other similar allowance payable to the employee

iii) Any presents made by the employer

The Supreme Court judgment will translate to a higher deduction for PF, which is good in terms of building the nest egg, but not so much for your current lifestyle since it means a lower take-home salary. But not everyone will be impacted by this development. "The order will be applicable to those with a basic salary and allowances up to Rs 15,000 as PF contribution. Beyond that, PF is not mandatory," a former central provident fund commissioner (CPFC) told The Times of India. The court ruling could also result in a higher outgo in case of foreigners working in India

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