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EPF Discrepancy: Wage Shown as 15,000, Contribution on Actual Salary of 60,000?

Ramalingam Kalirajan |8332 Answers |Ask -Follow

Mutual Funds, Financial Planning Expert - Answered on Aug 19, 2024

Ramalingam Kalirajan has over 23 years of experience in mutual funds and financial planning.
He has an MBA in finance from the University of Madras and is a certified financial planner.
He is the director and chief financial planner at Holistic Investment, a Chennai-based firm that offers financial planning and wealth management advice.... more

Asked by Anonymous - Aug 19, 2024Hindi

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Sir/ Madam this is a query on provident fund. I have joined a company where my basic salary is say 60,000 per month. But In my EPF Passbook Wage is shown as 15,000 per month. My own and employer's contribution is calculated on 15,000/- per month which is 1800/- each from last 12 months. Within this 12 months for 6 months a VPF contribution of 17,000 PM is also made (that is PF 1,800 + VPF 17,000 = 18,500 (Total Employee contribution) for 6 months) which is more than 15,000 per month Wage shown in Passbook. Is this a non-compliance of provisions of EPF Act. If yes how to resolve this.

Ans: EPF Wage and Contributions
Basic Salary and EPF Wage:

Your basic salary is Rs. 60,000 per month. However, the EPF contributions are being calculated on Rs. 15,000 per month as shown in your EPF passbook.
As per EPF regulations, Rs. 15,000 is the statutory wage ceiling for mandatory EPF contributions. Companies often limit their contribution to this statutory wage ceiling unless they voluntarily decide to contribute on the actual basic salary.
EPF Contributions:

Both your and your employer's contributions of Rs. 1,800 each per month are correctly based on the wage ceiling of Rs. 15,000.
Voluntary Provident Fund (VPF) Contributions
VPF Contributions:

You have made a VPF contribution of Rs. 17,000 per month for 6 months. VPF is an additional contribution over and above the mandatory EPF. It is purely voluntary and can be higher than the statutory wage ceiling.
No Non-Compliance:

Your VPF contribution exceeding Rs. 15,000 is not a violation. The statutory limit applies only to mandatory EPF contributions, not to voluntary contributions like VPF. Hence, there is no non-compliance with the provisions of the EPF Act.
Resolving Your Concern
Employer’s Approach:

Your employer’s contribution on Rs. 15,000 is in line with the EPF guidelines, and there is no requirement for them to contribute on your actual basic salary unless specified in the employment contract.
Voluntary Contributions:

Your VPF contributions are in compliance with the rules and are perfectly fine as long as you are comfortable with the amount being deducted.
Action Steps:

If you wish to have EPF contributions based on your full basic salary of Rs. 60,000, you may need to discuss this with your employer. However, most employers follow the statutory ceiling unless otherwise agreed upon.

Continue your VPF contributions as per your financial planning needs. VPF is a good tool for building a larger retirement corpus, offering the same benefits as the EPF.

Final Insights
There is no non-compliance in your case. The contributions are aligned with EPF rules. You are free to continue with your VPF contributions as they provide a significant boost to your retirement savings.

Best Regards,

K. Ramalingam, MBA, CFP

Chief Financial Planner

www.holisticinvestment.in

Asked on - Aug 21, 2024 | Answered on Aug 21, 2024

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Thank you sir. This is helpful

Ans: You're welcome! If you have any more questions or need further assistance, feel free to ask. Best wishes on your financial journey!

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

DISCLAIMER: The content of this post by the expert is the personal view of the rediffGURU. Users are advised to pursue the information provided by the rediffGURU only as a source of information to be as a point of reference and to rely on their own judgement when making a decision.

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