What is PF Deduction?
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%
EPF Admin Charges – 1.10%
EDLIS Admin Charges – 0.01%
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
Posted on: 10th Dec 2019
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