# What is PF Deduction?

Posted on 24th Jul 2018 | 1273 views

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## PF Deduction from Salary

PF deduction is an integral part Employees Provident Fund or EPF is a compulsory scheme for employees working in any establishment of government or private are required to register with equal contribution from their company. EPF scheme is social security measure by the government of India to enable a citizens to save certain amount at their retirement phase.EPF scheme is introduced by EPFO employee provident fund organisation and it also administers employees pension payment in their retirement .

Deductions from salary

Certain deductions are made from the employee salary/wage such as

Income tax

Provident fund deduction

Medical insurance ESI to get medicines at low rates

Cafeteria deduction

Deduction for facilities provide under transport

Leave deductions these are called unpaid leaves

Professional tax

In above all PF deduction is the major deduction

Interest Rate calculation for EPF

Current interest rate is 8.65% EPF contributions made by the employer and the employee. The calculation of interest relay on the salary of employee and on the share of employer’s PF contribution towards EPF.

To calculate the interest on EPF, let us first look into the EPF contribution structure for better understanding of EPF

Contribution of employee is 12% from basic salary it also called as EE amount

Contribution of employer is also 12 % but it is divided to contribute towards not only EPF but also for the other schemes it is also called as ER amount below are the ratio in which employers ER ratio is calculated only 3.67% which is lower land employee share toward the EPF scheme

Employee’s Provident Fund (EPF) – 3.67%

Employee’s Pension Scheme (EPS) – 8.33%

Employee’s Deposit Link Insurance Scheme (EDLIS) 0.50%

For example if an employee basic pay is 15000 below are the EE amount and ER amount calculations

Method 1

EE amount (employee contribution) = 12% basic pay + DA

ER amount (employer contribution) = 12% basic pay- 8.33% of 15000rs

PF deduction=Adding EE amount + ER amount

Method 2

EE amount (employee contribution) = 12% basic pay + DA

ER amount (employer contribution) = 3.67% of 15000rs

PF deduction=Adding EE amount + ER amount

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