Save More in PF, Take Home Less as Salary

Employee Provident Fund Organisation (EPFO) recently issued a circular stating that various allowances paid to the employees, such as educational allowance, food concession, conveyance, medical allowance, special holidays, night shift incentives etc, have to be included in the basic salary and Provident Fund (PF) contribution should be computed against the basic salary. This will result in saving more in PF and taking home less pay.

Issued on November 30, 2012, the circular has been forwarded to Employee Provident Fund offices across the country.

According to the PF officials, from past many years, most companies have been computing PF contribution (at 12% each by the employer and employee) against basic salary and dearness allowance. Most companies split the basic wages into various allowances to reduce the amount of PF contribution. Under section 2(b) of PF Act, these various allowances need to be included in the basic salary while computing the PF contribution of employees.

Source: The Economic Times