Hi Everyone! I saw a couple of posts on this topic but I am still confused.
In my organisation (manufacturing industry) of about 100 odd employees (workers as well as staff, managers, etc.) we have opted for ceiling of deduction i.e. contribution is limited to basic of 6,500/- Recently we have appointed two directors whose basic salary is more than 6,500/- and company wishes to contribute more than 12% of 6,500/- only for the two directors, leaving rest of the employees in the ceiling limit.
On the PF webiste, there is mention of voluntary contribution and also in the Act, however, I have received contradictory advise from the concerned officers. When I call the PRO, he says "appoint me as your consultant" and gives vague replies. I am confused:confused:
Can the seniors help me with a concrete advise?
Thanks in advance.
Kalpana Iyer
From India, Pune
10In my organisation (manufacturing industry) of about 100 odd employees (workers as well as staff, managers, etc.) we have opted for ceiling of deduction i.e. contribution is limited to basic of 6,500/- Recently we have appointed two directors whose basic salary is more than 6,500/- and company wishes to contribute more than 12% of 6,500/- only for the two directors, leaving rest of the employees in the ceiling limit.
On the PF webiste, there is mention of voluntary contribution and also in the Act, however, I have received contradictory advise from the concerned officers. When I call the PRO, he says "appoint me as your consultant" and gives vague replies. I am confused:confused:
Can the seniors help me with a concrete advise?
Thanks in advance.
Kalpana Iyer
From India, Pune
Hi
Kalpana
The VPF is the employee thing and he can contribute more than 12% upto 15% and there is no provision that management will have to pay the same and above 12%.
Even though the employee contributes more than 12% the company will pay only 12%.
hope clarifies ur ambiguity.
rgds
Suraj Varma
From India, Hyderabad
Kalpana
The VPF is the employee thing and he can contribute more than 12% upto 15% and there is no provision that management will have to pay the same and above 12%.
Even though the employee contributes more than 12% the company will pay only 12%.
hope clarifies ur ambiguity.
rgds
Suraj Varma
From India, Hyderabad
employer has to pay the statutory limit of 12%. if the management can afford to contribute more than 12% they can . there is no upper ceiling
From India, Dehra Dun
From India, Dehra Dun
Thanks, but again contradiction in both replies. Suraj says company (employer) will pay only 12%; but Arun says Management (employer) can pay more than 12%! Any seniors can clarify please?
From India, Pune
From India, Pune
to my inference, employer can contribute to a max of 12%. Its on the employee's side, he can contribute 12% or opt for more than 12% upto 15%., that is the vpf (voluntary provident fund)
hope this is in order.
kb
From India, Madras
hope this is in order.
kb
From India, Madras
Hi Kalpana,
You are missing the point made in the statement by Arun. What he says is that, and I Quote: "Management (employer) can pay more than 12%".
The word to focus here is "can", which means if the Employer so wishes, it can choose to contribute more than the statutory requirement of a minimum of 12% of Basic.
But your initial query was:
The problem is with the flaw in your question: company wishes to contribute more than 12% of 6,500/-
What you probably meant was: company wishes to contribute 12% of their actual Basic (which is more than 6500/-).
If my interpretation is correct, then the answer is:
1. You can go ahead with the company decision and the employer contribution can remain 12% of their Basic.
2. It does not affect any of the existing employees (i.e. other than the 2 Directors) as their Basic is anyway less than 6500/-
A point to remember however is that: should any other empoyees' Basic go above 6500/- in the future, that employees contribution too should be 12% of that increased Basic.
Regards,
Neeraj K. Singh
From India, Mumbai
You are missing the point made in the statement by Arun. What he says is that, and I Quote: "Management (employer) can pay more than 12%".
The word to focus here is "can", which means if the Employer so wishes, it can choose to contribute more than the statutory requirement of a minimum of 12% of Basic.
But your initial query was:
The problem is with the flaw in your question: company wishes to contribute more than 12% of 6,500/-
What you probably meant was: company wishes to contribute 12% of their actual Basic (which is more than 6500/-).
If my interpretation is correct, then the answer is:
1. You can go ahead with the company decision and the employer contribution can remain 12% of their Basic.
2. It does not affect any of the existing employees (i.e. other than the 2 Directors) as their Basic is anyway less than 6500/-
A point to remember however is that: should any other empoyees' Basic go above 6500/- in the future, that employees contribution too should be 12% of that increased Basic.
Regards,
Neeraj K. Singh
From India, Mumbai
dear kalpna
in my organisation many employees deduction is done as VPF.
company pays 12 % as employer share of 6500 where as
employee pays 12 % as PF and another 12% as vpf of 6500.
however legally if indivdual wand he can pay 12 % of full basic as PF and 12% as vpf.
regards
j s malik
From India, Delhi
in my organisation many employees deduction is done as VPF.
company pays 12 % as employer share of 6500 where as
employee pays 12 % as PF and another 12% as vpf of 6500.
however legally if indivdual wand he can pay 12 % of full basic as PF and 12% as vpf.
regards
j s malik
From India, Delhi
Dear Kalpana,
There are two things in your query 1. Celing limit 6500.00 and 2. VPF.
Your company wish to contribute above the ceiling limit for your Directors. Here I would like to mention one thing that whatever the Basic Wages employer and employee both has to contribute equally i.e. 12%. whether it is 6500.00 or less or more than 6500.00
(VPF)
Moreover if an employee wish to contribute voluntarily more than the prescribed precentage (12%) he can contribute up to the maximum limit 27% of his / her basic (as prescribed under Income Tax Act) but employer is not boud to contribute at such higher precentage rather employer can fix 12% of his/ her basic.
Principally ceiling limit is prescribed for employer not for employee i.e. an employer has to give coverage to an employee up to the Rs. 6500.00 as Basic Wages and membership will continued even after increase in the basic wages. On increase employer can fix contribution on 6500.00 or can contribute more than 6500.00, In both the cases precentage of contribution will be equal i.e. 12%.
On the other hand, VPF is the wish of an employee to contribute more than statutory precentage, there is nothing like wage cieling 6500.00 or more.
Example :
If A's basic salary is 10000.00 and employer wish to contribute on 6500.00 than A has to contribute on 6500.00. In this case if A wish for VPF (say 5% more than statutory precentage), then He/she can do so but calculation of A's contribution (12%+5%)will be on 6500.00 not on 10000.00
There fore it should be clear in your mind that Basic wages can not be different for employer and employee for calculating the contribution, rather it should be same whether Rs. 6500.00 or Rs. 10000.00 .
Actually VPF is the share of contribution of an employee over and above the prescribed precentage. but Basic Wages on which contribution has to be calculated shall be same for employer / employee / vpf contribution.
VPF contribution can not be more than 15%. Since as per Income Tax Act both the contribution Statutory + VPF should not be more than 27%. i.e. (12%+15%) = 27%
There are two things in your query 1. Celing limit 6500.00 and 2. VPF.
Your company wish to contribute above the ceiling limit for your Directors. Here I would like to mention one thing that whatever the Basic Wages employer and employee both has to contribute equally i.e. 12%. whether it is 6500.00 or less or more than 6500.00
(VPF)
Moreover if an employee wish to contribute voluntarily more than the prescribed precentage (12%) he can contribute up to the maximum limit 27% of his / her basic (as prescribed under Income Tax Act) but employer is not boud to contribute at such higher precentage rather employer can fix 12% of his/ her basic.
Principally ceiling limit is prescribed for employer not for employee i.e. an employer has to give coverage to an employee up to the Rs. 6500.00 as Basic Wages and membership will continued even after increase in the basic wages. On increase employer can fix contribution on 6500.00 or can contribute more than 6500.00, In both the cases precentage of contribution will be equal i.e. 12%.
On the other hand, VPF is the wish of an employee to contribute more than statutory precentage, there is nothing like wage cieling 6500.00 or more.
Example :
If A's basic salary is 10000.00 and employer wish to contribute on 6500.00 than A has to contribute on 6500.00. In this case if A wish for VPF (say 5% more than statutory precentage), then He/she can do so but calculation of A's contribution (12%+5%)will be on 6500.00 not on 10000.00
There fore it should be clear in your mind that Basic wages can not be different for employer and employee for calculating the contribution, rather it should be same whether Rs. 6500.00 or Rs. 10000.00 .
Actually VPF is the share of contribution of an employee over and above the prescribed precentage. but Basic Wages on which contribution has to be calculated shall be same for employer / employee / vpf contribution.
VPF contribution can not be more than 15%. Since as per Income Tax Act both the contribution Statutory + VPF should not be more than 27%. i.e. (12%+15%) = 27%
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