![]() ![]() ![]() But indirectly you are investing higher amount, which is good for your future. More contribution of Rs.1,920, but less take home from now onward.įrom above example you may see a cut in your take home pay. Contribution to EPF will be, 12% of Rs.46,000 which is Rs.5,520. ![]() So your total salary from above example will be Rs.46,000. But from now onwards it includes Basic+DA+Allowances. Previously as the meaning of salary was only Basic+DA, so 12% of Rs.30,000=Rs.3,600 was considered for EPF payout from your end and equally from your employer end too. Suppose below are the few salary components then what is your current contribution and what will be your future contribution.ġ) Basic-Rs.30,000 2) Conveyance Allowance-Rs.8,000 3) Medical Allowance-Rs.4,000 and 4) Night Shift Allowance-Rs.4,000 . Take a look at it’s effect on your salary with one example. But from above circular we may conclude that from now onwards allowance also be part of salary for your contribution of EPF. (ii) any dearness allowance that is to say, all cash payments by whatever name called paid to an employee on account of a rise in the cost of living, house-rent allowance, overtime allowance, bonus, commission or any other similar allowance payable to the employee in respect of his employment or of work done in such employment Įventhough it looks from the recent circular that allowances need to be added to the salary to calculate contribution of EPF, but still exhaustive list of allowance not available. (i) the cash value of any food concession (b) “basic wages” means all emoluments which are earned by an employee while on duty or on leave or on holidays with wages in either case in accordance with the terms of the contract of employment and which are paid or payable in cash to him, but does not include. Now let us look at EPF Act 1952 Section 2(b) ii Thus “basic wages” is subject to exclusions expressly referred to in the above definition and no other.” The expression “commission or any other similar allowance payable to the employee” is one continuous term meaning commission or any other “commission” like allowance by whatever nomenclature referred. The confusion in definition of wages (and hence the issue of splitting of wages) primarily arises from the expression commission or any other similar allowance payable to the employee” in Section 2(b) (ii) of the Act as “commission” and “any other similar allowance” are read as two separate expressions and hence “any other allowance” is read as an omnibus exclusion, thereby encouraging the subterfuge of splitting of wages to exclude the PF liabilities. All such allowances which are ordinarily, necessarily and uniformly paid to the employees are to be treated as part of the basic wages. “Basic wages by its own definition encompasses all the payments except the specified exclusions. Below is the November 30th 2012 circular regarding the above said issue. ![]()
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