Dear All,
Greetings for the day!
I am HR Executive , our employees are interested to contribute towards Voluntary PF Contribution.
Can any one clarify on the below points
1. Max limit of PF contribution towards Voluntary PF Contribution is 88% on Basic
so if employee want to contribute can they contribute less than 88%.
2.How the administration charges will be calculated
3.what is the process to start contributing the voluntary contribution
4. At present 12% employee Contribution so this 88% +12% can they contribute that comes to 100% of there basic.
Please provide the information.
Thanks & Regards,
Pourna.
From India, Hyderabad
1Greetings for the day!
I am HR Executive , our employees are interested to contribute towards Voluntary PF Contribution.
Can any one clarify on the below points
1. Max limit of PF contribution towards Voluntary PF Contribution is 88% on Basic
so if employee want to contribute can they contribute less than 88%.
2.How the administration charges will be calculated
3.what is the process to start contributing the voluntary contribution
4. At present 12% employee Contribution so this 88% +12% can they contribute that comes to 100% of there basic.
Please provide the information.
Thanks & Regards,
Pourna.
From India, Hyderabad
Hi Pourna,
I didnt seem to understand your logic of 88%.
Nonetheless the EPF scheme is as below -
Employer's contribution -
Employer has to contribute 12% of basic + da or 780 (12% of currently prescribed 6500) whichever is less as the contribution.
Out of the 12% of employer's contribution, 8.33% goes to Pension fund (EPS) and remaining 3.67% goes to PF account (EPF)
Above this 12% of contribution towards the PF And Pension Fund, an employer is also expected to bear foll expenses -
a) 0.1% admin charges for PF and Pension accounts
b) 0.05% towards employee insurance scheme
c) 0.01% admin charges for insurance account.
Please note that if the company provides at par or better insurance scheme, they are exempted to contribute (b) and (c)
Employee's contribution -
An employee as well is expected to contribute 12% of basic + da or 780 (12% of currently prescribed 6500), whichever is less as contribution
Employee can voluntarily increase his contribution to the PF account. Max employee contribution allowed as per act is 20% of basic + da (or 20% of currently prescribed 6500 limit) whichever is lower.
The whole contribution made by the employee goes to pf account only.
Also note that when an employee wishes to voluntarily increase the contribution to PF, there ought to be joint declaration provided by the firm and the said employee declaring the percentage of contribution that employee is willing to contribute.
I hope I have answered your query.
From India, Mumbai
I didnt seem to understand your logic of 88%.
Nonetheless the EPF scheme is as below -
Employer's contribution -
Employer has to contribute 12% of basic + da or 780 (12% of currently prescribed 6500) whichever is less as the contribution.
Out of the 12% of employer's contribution, 8.33% goes to Pension fund (EPS) and remaining 3.67% goes to PF account (EPF)
Above this 12% of contribution towards the PF And Pension Fund, an employer is also expected to bear foll expenses -
a) 0.1% admin charges for PF and Pension accounts
b) 0.05% towards employee insurance scheme
c) 0.01% admin charges for insurance account.
Please note that if the company provides at par or better insurance scheme, they are exempted to contribute (b) and (c)
Employee's contribution -
An employee as well is expected to contribute 12% of basic + da or 780 (12% of currently prescribed 6500), whichever is less as contribution
Employee can voluntarily increase his contribution to the PF account. Max employee contribution allowed as per act is 20% of basic + da (or 20% of currently prescribed 6500 limit) whichever is lower.
The whole contribution made by the employee goes to pf account only.
Also note that when an employee wishes to voluntarily increase the contribution to PF, there ought to be joint declaration provided by the firm and the said employee declaring the percentage of contribution that employee is willing to contribute.
I hope I have answered your query.
From India, Mumbai
Hi Pourna
If your PF Contributions is on over and above 6500/- thats Rs. 780/- the remaining amount shall be treated as VPF.
For Example if the wages is 10000/- and if your contribution is 12% on 6500/- ie 780 that is treated as copulsory PF contribution. If you are contributing 12% on 10000/- ie 1200/- then the difference between 1200 & 780 = 420/- is treated as VPF.
As part of VPF you shall contribute upto 20% on the wages.
All the Admin charges of Account 2, 21 & 22 are calculated on maximum of 6500/- only
Hope now it is clear
From India, Bangalore
If your PF Contributions is on over and above 6500/- thats Rs. 780/- the remaining amount shall be treated as VPF.
For Example if the wages is 10000/- and if your contribution is 12% on 6500/- ie 780 that is treated as copulsory PF contribution. If you are contributing 12% on 10000/- ie 1200/- then the difference between 1200 & 780 = 420/- is treated as VPF.
As part of VPF you shall contribute upto 20% on the wages.
All the Admin charges of Account 2, 21 & 22 are calculated on maximum of 6500/- only
Hope now it is clear
From India, Bangalore
Hi,
Just a very tiny correction :
b) 0.05% towards employee insurance scheme
c) 0.01% admin charges for insurance account.
The above is the Employee Deposit Linked Insurance Scheme (EDLIS), contribution for the same is 0.50% and EDLI Admin Charges is 0.01% thus total is 0.51% (EDLI+EDLI Admin).
From India, Pune
Just a very tiny correction :
b) 0.05% towards employee insurance scheme
c) 0.01% admin charges for insurance account.
The above is the Employee Deposit Linked Insurance Scheme (EDLIS), contribution for the same is 0.50% and EDLI Admin Charges is 0.01% thus total is 0.51% (EDLI+EDLI Admin).
From India, Pune
Are u sure there is a limit of 20% as max for voluntary PF ? I know many large companies (mnc mostly) that compute PF on full salary for managers. That would be far above the 6500 limit.
From India, Mumbai
From India, Mumbai
While studying labor laws last year, it was communicated in my text book that an employee's contribution to PF fund is compulsary 12% and can be voluntarily increased to 20%
On doing a search after you asking a doubt, I found this -
attribution https://www.citehr.com/110130-what-v...#ixzz2PemE8bYA
On the contrary I also found -
Can I contribute over and above the mandatory 12%, as voluntary provident fund?
A. Yes but subject to a total contribution of not more than 100% of basic salary. However the employer will not contribute towards such voluntary contribution done by the employee. Further, the said voluntary contribution will be treated as normal contribution and cannot be withdrawn as and when the employee wishes to. The voluntary contribution will be at a fixed percentage of basic and will remain same through out the year (Mar-Feb). You can give the mandate for deduction of voluntary PF at the start of financial year & can cancel it any time during the year.
Source: http://sunshineconsultants.co.in/yah....311162455.pdf
However, I think Seniors should help us solve this confusion. I shall search for the text at home, if I get one, I shall attach the scanned copy of the text from it.
From India, Mumbai
On doing a search after you asking a doubt, I found this -
attribution https://www.citehr.com/110130-what-v...#ixzz2PemE8bYA
On the contrary I also found -
Can I contribute over and above the mandatory 12%, as voluntary provident fund?
A. Yes but subject to a total contribution of not more than 100% of basic salary. However the employer will not contribute towards such voluntary contribution done by the employee. Further, the said voluntary contribution will be treated as normal contribution and cannot be withdrawn as and when the employee wishes to. The voluntary contribution will be at a fixed percentage of basic and will remain same through out the year (Mar-Feb). You can give the mandate for deduction of voluntary PF at the start of financial year & can cancel it any time during the year.
Source: http://sunshineconsultants.co.in/yah....311162455.pdf
However, I think Seniors should help us solve this confusion. I shall search for the text at home, if I get one, I shall attach the scanned copy of the text from it.
From India, Mumbai
Hi All,
This is in response to the above comment by Cite HR members..........
As far as my knowledge is concerned Voluntary Provident Fund (VPF): VPF is a safe option wherein you can contribute more than the PF ceiling of 12% that has been mandated by the government. This additional amount enjoys all the benefits of PF except that the employer is not liable to contribute any extra amount apart from 12%. An added advantage is that the interest rate is equal to the interest rate of PF and the withdrawal is tax free. Please note that the maximum contribution towards VPF is 100% of your Basic. The highest rate of interes makes it a very attractive saving scheme. Because of these advantages many employees chose not to close their PF account even after getting employment else where other than India. Employees also get a major tax break on their entire contribution to the fund (tax rebate under section 88 ).
Note: There is no limit on the percentage that one can choose to opt. And Admin/EDLI Charges are applicable only on the total wages and thus it will not make employer to pay extra charges.
One more thing you can invest well over the Section 80C ceiling, and you won't have to take the trouble to deposit the amount, too: your employer will do it. you may have claimed your insurance premium, children's education, housing loan principal and so on, thus easily exhausting your limit.
Effectively, most of the Section 80C limit would have been used up in claiming expenses you incurred rather than in investing. Even if you did save by investing in bank or company deposits, your interest on it will be taxed.
Procedure of VPF-Investing in VPF is a simple process and just requires you to inform your employer to deduct a certain proportion of your pay (subject to the limit mentioned above) additionally, every month.
Please correct me if this is not correct.
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit
From India, Patna
This is in response to the above comment by Cite HR members..........
As far as my knowledge is concerned Voluntary Provident Fund (VPF): VPF is a safe option wherein you can contribute more than the PF ceiling of 12% that has been mandated by the government. This additional amount enjoys all the benefits of PF except that the employer is not liable to contribute any extra amount apart from 12%. An added advantage is that the interest rate is equal to the interest rate of PF and the withdrawal is tax free. Please note that the maximum contribution towards VPF is 100% of your Basic. The highest rate of interes makes it a very attractive saving scheme. Because of these advantages many employees chose not to close their PF account even after getting employment else where other than India. Employees also get a major tax break on their entire contribution to the fund (tax rebate under section 88 ).
Note: There is no limit on the percentage that one can choose to opt. And Admin/EDLI Charges are applicable only on the total wages and thus it will not make employer to pay extra charges.
One more thing you can invest well over the Section 80C ceiling, and you won't have to take the trouble to deposit the amount, too: your employer will do it. you may have claimed your insurance premium, children's education, housing loan principal and so on, thus easily exhausting your limit.
Effectively, most of the Section 80C limit would have been used up in claiming expenses you incurred rather than in investing. Even if you did save by investing in bank or company deposits, your interest on it will be taxed.
Procedure of VPF-Investing in VPF is a simple process and just requires you to inform your employer to deduct a certain proportion of your pay (subject to the limit mentioned above) additionally, every month.
Please correct me if this is not correct.
Regards
Ankita
Executive HR
“A candle loses nothing by lighting another candle.” In other words, be willing to help others and
share your knowledge and insights with others who may benefit
From India, Patna
Please help me to understand,
Total contribution towards PF/VPF is 100% of basic (88% of employee + 12% employer)
or
100% of basic of employee only + 12% employer = 112% contribution towards to PF
Regards,
MN KHAN
From India, Delhi
Total contribution towards PF/VPF is 100% of basic (88% of employee + 12% employer)
or
100% of basic of employee only + 12% employer = 112% contribution towards to PF
Regards,
MN KHAN
From India, Delhi
Dear Pourna ji,
Specific and to the point answers to your questions are as under:
There is no maximum limit for VPF is laid down in Act or any circular or notification to my knowledge. If you deduct 88% what will remain in hands of employee? Also the provision of Payment of Wages Act on deductions from wages is to be kept in mind.
Administrative charges are calculated on PF salary i.e. on which PF is deducted.
The employee has to give undertaking in prescribe in this regard.
Answered above at Sr. 1.
From India, Mumbai
Specific and to the point answers to your questions are as under:
There is no maximum limit for VPF is laid down in Act or any circular or notification to my knowledge. If you deduct 88% what will remain in hands of employee? Also the provision of Payment of Wages Act on deductions from wages is to be kept in mind.
Administrative charges are calculated on PF salary i.e. on which PF is deducted.
The employee has to give undertaking in prescribe in this regard.
Answered above at Sr. 1.
From India, Mumbai
Dear all, Section 6 of the Employees Provident Fund & Miscellaneous Provisions Act 1952 does not lay down any upper limit for the VPF contribution. Since there is no upper limit, an employee can choose to deposit his entire take home salary left after statutory and other deductions. Many employees nearing their retirement has been depositing almost their entire take home salary looking to the attractive returns it is earning.
From India, Bhopal
From India, Bhopal
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PF Contribution on Leave Encashment - Clarification by EPFO.pdf
Voluntary PF.doc