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Calculating PF Deduction from Salary: Guidelines and Compliance

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April 27, 2023


What’s Inside

All salaried employees have access to the Employee Provident Fund, sometimes known as PF, which is a retirement savings plan supported by the government and pays set interest. The Employees Provident Fund Organisation (EPFO), a statutory organisation established by the Indian government under the Ministry of Labour and Employment, is responsible for managing the employee provident fund. It was established to manage the required employer and employee contributions to the PF programme.

The PF calculation is done on basic salary. And both the employer and the employee contribute each month to a unique account under the PF plan. Provident funds have a variety of benefits for both contributing parties.

Guidelines and compliances to be followed when making PF deductions

The Employees' Provident Fund and Miscellaneous Provisions Act of 1952 must be complied with to calculate the PF (Provident Fund) deduction from salary. Here are some of these guidelines:


Employers must register with the Employees' Provident Fund Organisation (EPFO) to offer PF benefits to their staff members if they have more than 20 employees.

Contribution Rate

The employee's base salary plus dearness allowance is now subject to a 12% contribution to their pension fund. Employers must make an equal contribution to each employee's PF account.

Salary Calculation

The employee's basic pay and DA should be used to determine the employee's PF contribution. Other benefits like housing rent, transport costs, medical expenses, etc., shouldn't be taken into account when calculating PF.

EFPO submissions

EPFO requires the submission of PF reports monthly by employers, which has crucial data, including contributions by employees, contributions made by the employer and other pertinent information.


EPFO deposits should be made within 15 days of each month, following the practice of withholding employees' salaries every month for PF contributions.

Sanctions against untimely payments

EPF Act sanctions can be enforced if regulations aren't followed. Employers could potentially be forced to pay additional costs if PF payments aren't deposited promptly. Consequences for non-compliance include fines and penalties.

Deductions for employee contribution

Section 80 C of the IT Act permits claimable deductions for employee contributions to the EPF.

To guarantee workers receive their PF payments and employers avoid penalties or fines, it is crucial to adhere to the rules and the requirements of the EPF Act. Staff members should get consistent updates from their employers on their PF contributions and account information

How is the PF deduction calculated?

The workers account for 12% of their basic salary along with the Dearness Allowance monthly to the EPF account.

For instance, if the base monthly income ₹15,000, the worker's contribution is 12% of that amount, or ₹1,800.

Employers must contribute 8.33% of the minimum 12.0 % to the Employee Pension Scheme and the remaining 3.67% to the EPF. 3.67% of ₹15,000 is, therefore ₹550.

Thus, the employee contribution plus the employer contribution, which in this case amounts to ₹2,350/-, will be the total monthly contribution to the EPF account for a person earning ₹15,000.

Currently, there is a ₹15,000 maximum cap on the monthly PF account contributions. This implies that if the employee's basic income plus DA exceeds ₹1,25,000, the amount contributed to the PF account will be computed up to ₹15,000.

Be prepared for your retirement in more ways than one!

The primary focus of PF is to function as a retirement benefit programme that aids employees in accumulating retirement savings. The interest earned on the PF account contributions might assist employees in amassing a sizeable retirement corpus. When an employee retires or is unable to work owing to a disability or for other reasons, the PF programme offers them financial stability. Employees may use their PF balance to pay for their children's education or in the event of an emergency, such as a medical one.

But having a PF isn’t the only way to save for your retirement or be financially independent. Investing a part of your income is also a viable way to prepare for retirement.

As a money management platform, Fi offers several investment options. Be it Short-term or Long-term — it's easy to invest with a simple swipe of your phone's screen. Fi also offers a Peer-to-Peer investment feature called Jump that helps beat inflation! Jump helps you earn up to 9% p.a on your investment. But if you want to save up for a short-term goal & earn interest on it, select the super-flexible Smart Deposit. If you're looking for higher/stable returns, opt for a Fixed Deposit.

Frequently Asked Questions

1. What are the guidelines and compliance requirements for calculating PF (Provident Fund) deduction from salary?

There are many guidelines and compliances you must keep in mind for calculating the PF deduction from your salary.

Registration and timely payments to the EPFO, sanctions against untimely payments and claimable deductions under the IT Act are some of the most pertinent ones.

2. How can I calculate PF deduction from salary in compliance with relevant laws and regulations?

The PF account receives 12% of the base salary and dearness allowance from both the employer and the employee. As a result, the total monthly payment to the EPF is 24%.

3. What are the key components, rates, and rules involved in PF deduction from salary, including employee and employer contributions?

There are many important rules to consider while making PF deductions from salary.

The employee's base salary plus dearness allowance is subject to a 12% contribution to their pension fund. Employers must make an equal contribution to each employee's PF account. Out of their 12%, employers are obligated to contribute 8.33% to the Employee Pension Scheme and the remaining 3.67% to the EPF.

These deposits should be made within the first 15 days of each month.EPF Act sanctions can be enforced if regulations aren't followed. There can be additional fines if PF payments aren't deposited promptly.


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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