Calculation of EPF

[Pradeep Kaushik]

Respected All,

 

I have a doubt about Arrear Calculations for PF. Pls. clarify the proper method of deduction in following case where PF Basic Salary restricted To Rs. 6500.00 -
1) In the month of Sept 2010 Employee Basic Salary - 6000.00
2) Employee PF Deducted In Sept 2010 - Rs. 720.00
3) In The Month Of Oct 2010 Basic Salary Revised w.e.f. Sept 2010 - Rs. 8000.00

In The above given case what would be the deduction amount towards PF -
Basic Salary in Oct 2010 - Rs. 8000.00
Basic Salary Arrear in Oct 2010 - Rs. 2000.00
1) Minimum of (Basic Salary+Basic Salary Arrears, 6500) *12%
= min((8000+2000),6500)*12%
= min(10000,6500)*12%
= 6500*12%
= Rs. 780.00

2) (min(Basic Salary For Oct 2010 Month,6500)*12%)+(min(Revised Basic Salary for Sept 2010,6500)*12% - PF Already Deducted in Sept 2010)
=(min(8000,6500)*12%)+(min(8000,6500)*12%-720)
= (6500*12%)+((6500*12%)-720)
= 780+(780-720)
= 780+60
= 840.00
Which one is the correct method?

 

Pl. Suggest.

 

Regards.

 

Pradeep Kaushik

[KRISHNAN SURYANARAYANAN]

The second set of calculations is correct.

AI Summary

Provident Fund deduction calculation: current month cap plus arrear adjustment based on capped prior-month liability. When a basic salary is revised retrospectively, compute the current-month PF contribution as min(current basic, salary cap) x contribution rate; compute the arrear adjustment as min(revised prior-month basic, salary cap) x contribution rate minus PF already deducted for that prior month; then add the arrear adjustment to the current-month contribution, thereby respecting the monthly salary cap while reconciling retroactive liabilities.