Rules for ESI and PF Deduction to Calculate Employee & Employer Contribution
Rules for ESI and PF Deduction

This document describes the rules for ESI and PF Deduction where ESI is Employee State Insurance (ESI) and PF is Provident Fund (PF). These are two social security schemes available to employees working in India.

We have often found that Payroll administrators face challenges in identifying the most updated standards in these 2 areas – leading to wrong deductions and deposits, queries from government departments, the dreaded scrutiny and even fines.

There is significant information available on the web and even on the government websites, but that is often contradictory, confusing, poorly written or sometimes even wrong or misleading.

This blog explains both schemes and describes the Rules of ESI and PF Deduction in detail, is updated whenever there are changes, and helps you implement Best Practices of Payroll Processing in your Organization.

Employees’ State Insurance (ESI) Scheme

ESI is a contributory fund that enables Indian employees to participate in a self-financed, healthcare insurance fund with contributions from both the employee and their employer.

The scheme is managed by Employees’ State Insurance Corporation, a government entity, that is a self-financing, social security, and labor welfare organization.

The entity administers and regulates ESI scheme as per the rules mentioned in the Indian ESI Act of 1948.

ESI is one of the most popular integrated need-based social insurance schemes among employees. The scheme protects employee interest in uncertain events such as temporary or permanent physical disability, sickness, maternity, injury during employment, and more. The scheme provides both cash benefits and healthcare benefits.

Eligibility for ESI

ESI scheme applies to all types of establishments, including corporates, factories, restaurants, cinema theatres, offices, medical and other institutions. Such units are called Covered Units.

What is the criteria for Covered Units

  • All units that are covered under Factory Act and Shops and Establishment act are eligible for ESI.
  • Where 10 or more people are employed irrespective of their monthly earnings.
    Note: Some states (such as Gujarat and Punjab) have upper limits on the number of employees for eligibility of the ESI scheme.
  • Units which are located in the scheme-implemented areas. The government plans to implement ESI across the entire country by 2022 so all units will be considered as Covered Units.

How to identify eligible employees?

All employees of a covered unit, whose monthly incomes (excluding overtime, bonus, leave encashment) does not exceed Rs. 21,000 per month, are eligible to avail benefits under the Scheme.

Employees earning daily average wage up to Rs.176 are exempted from ESIC contribution.

However, employers will contribute their share for these employees.

What salary components are applicable to ESI deductions?

ESI contributions (from the employee and employer) are calculated on the employee’s gross monthly salary.

Most people face challenges in understanding ESI deduction rules because they aren’t clear about the concept of Gross Salary. So let us explain this concept first.

Gross salary is described as the total income earned by the employee, while working in their job, before any deductions are made for health insurance, social security and state and federal taxes.

For ESI calculation, the salary comprises of all the monthly payable amounts such as

  • Basic pay,
  • Dearness allowance,
  • City compensatory allowance,
  • House Rent Allowance (HRA),
  • Incentives (including sales commissions),
  • Attendance and overtime payments,
  • Meal allowance,
  • Uniform allowance and
  • Any other special allowances.

The gross monthly salary, however, does not include Annual bonus (such as Diwali bonus), Retrenchment compensation, and Encashment of leave and gratuity.

Collection of ESI Contribution

It is the employers responsibility to contribute to the ESI fund by deducting the employees’ contribution from wages and combining it with their own contribution.

An employer is expected to deposit the combined contributions within 15 days of the last day of the Calendar month. The payments can be made online or to authorized designated branches of the State Bank of India and some other banks.

ESI Calculations

The rates of contribution, as a percentage of gross wages payable to the employees, is explained in the table below

Percentage of Gross Pay Example Gross Salary Contributions
Employee Deduction 0.75% Rs 15,000 15,000 * 0.75% = 112.50
Employer Contribution 3.25% 15,000 * 3.25% = 487.50
Total Contributions for this employee 112.50 + 487.50 = Rs 600.00

In case, the gross salary of the employee exceeds Rs. 21,000 during the contribution period (explained next), the ESI contributions would be calculated on the new salary and not Rs 21,000.

For example, if the salary of an employee increases to Rs. 22,000 per month, then the ESI would be calculated on Rs. 22,000 instead of Rs. 21,000 during the contribution period.

Contribution Period and Benefit Period

Payroll administrators often face confusion when employees salaries change – especially when the monthly salary exceeds the ESI limits of Rs 21,000.

To handle this situation, ESI has a concept of contribution periods during which the ESI contributions have to continue, even when the salary exceeds the maximum limits.

There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration.

Contribution Period Cash Benefit Period
1st April to 30th September 1st January of the following year to 30th June
1st October to 31st March of the following year 1st July to 31st December

After the commencement of a contribution period, even if the gross salary of an employee exceeds Rs. 21,000 monthly, the employee continues to be covered under ESI scheme till the end of that contribution period.

The contribution is deducted on the new salary. Let us look at an example to understand this better.

If an employee’s gross salary increases in June from Rs. 18,000 (within ESI limit) to Rs. 22,000 (above ESI limit), the deductions for ESI will continue to happen till the end of the ESI contribution period i.e. September.

And the deduction amount for both the employee and employer will be calculated on the increased gross salary of Rs. 22,000.

At the end of the contribution period, if the employee salary is more than the ESI limit, no further deductions and contributions are required. The employee will still be covered under ESI till 30th June of the following year.

Similar rules apply when an employees salary increases in the 2nd contribution period.

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Rules related to Employee Provident Fund (EPF)

Just like the ESI scheme, the Employees Provident Fund (EPF) is a Contributory fund with contributions from both the employee and their employers.

While the focus of the ESI scheme is healthcare, Provident Fund is focused towards post Retirement Income and Benefits.

EPF is a compulsory and contributory fund for Indian organizations under “The Employees’ Provident Fund and Miscellaneous Provisions Act 1952”.

Employee and Employer Contributions to the Employee Provident Fund (EPF)

For EPF, both the employee and the employer contribute an equal amount of 12% of the monthly salary of the employee.

Employees can contribute more than 12% of their salary voluntarily, however the employer is not bound to match the extra contribution of the employee.

For PF contribution, the salary comprises of fewer components:

  • Basic wages,
  • Dearness Allowances (DA),
  • Conveyance allowance and
  • Special allowance.

The employers monthly contribution is restricted to a maximum amount of Rs 1,800. Even if the employee’s salary exceeds Rs 15,000, the employer is liable to contribute only Rs 1,800 (12% of Rs 15,000).

Details of EPF

The statutory compliance associated with PF contribution has some lesser known facts associated with it.

The contributions by the employee and employer are divided into two separate funds:

  • EPF (Employee Provident Fund) and
  • EPS (Employee Pension Scheme).

The breakup happens as follows:

Employee Employer>
Total contribution 12% of monthly salary 12% of monthly salary (subject to a maximum of Rs 1,800)
Employee Pension Scheme (EPS) 0 8.33% (of the 12%)
Employee Provident Fund (EPF) Full amount 3.67% (of the 12%)
Example Monthly Salary: Rs 12,000
Total Contribution 12,000 * 12% = Rs 1,440 12,000 * 12% = Rs 1,440
EPS 0 12,000 * 8.33% = Rs 999.60
EPF Rs 1,440 12,000 * 3.67% = Rs 440.40

How an Automated Payroll Software helps implement Rules for ESI and PF Deduction

Manual computation of statutory compliances involves lot of paperwork and filling in of challans and forms on paper and submitting them to banks. This makes the process time-consuming, can introduce inaccuracies and can often lead to mistakes.

Both the ESI and PF departments encourage online filing and payments.

It is advisable to use automated payroll processing tools to calculate ESI, PF and income tax deductions.

A good payroll management software puts an end to increased complexities of payroll processing and offers following benefits:

  • Accuracy in PF, ESI and other statutory calculations
  • Increased transparency in payroll processing
  • Reduced number of queries from employees
  • Higher compliance
  • Lower load on payroll administrators

Note: The post has been updated to incorporate latest ESIC rules as of 1st July 2019.

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174 Comments

  1. my salary 15000
    basic is 30% 4500
    pf deduction is 12%
    basic which is 540 PF AMT
    is this right deduction are going from company because i worked in ATUL PROJECTS INDIA PRIVATE LIMTED

    1. In this case, ESIC deduction will be effective from the month of Jul or whenever the salary comes under the ESIC range.

  2. It is truly a great and useful piece of info. I am glad that you simply shared this useful information with us.
    Please keep us informed like this. Thanks for sharing.

  3. Hi Sir, i am working with a company where we have PF contribution options as below for new joiners,

    NO- no PF will be deducted from salary
    Fixed- 1800 will be deducted as Employee contribution and another 1800 will be deducted as employer contribution.
    Yes- they will apply 12% of my basic pay for both employee and employer contribution,

    my basic pay is 40000, initially when i joined 3 years ago i have opted PF option as YES, so now they are deducting straight 12% of my basic which is 4800 as employee contribution and another 4800 as employer contribution. so this 9600 makes my take home lesser.

    Now when i asked my employer to convert my PF Option from YES to FIXED, they are not allowing me to do. i don’t see any PF rules saying employee can not reduce PF contribution. i think PF rules are saying i should contribute a min of 1800 per month.

    Can you please help me on this…are there any rules supporting that employee can change their PF contribution option?

  4. Hi, An employee salary is Rs 22000/- till Jun effective from Jul the employee salary is reduced to Rs 20000/-.
    The employee was not part of ESI to date since his salary is reduced below the esi ceiling, should the ESI deduction happen from Jul onwards or from the next cycle of Oct.
    Please clarify.

  5. what happened , When gross salary of a person is in this manner.
    april – 25000, may – 23000, june – 21000, july – 18500, august – 25000 so on
    So, Is he eligible for ESIC

    1. As per the shared information, June month’s gross salary of employee is 21000/- which is under the ESIC limit. Hence the ESIC deduction will start deducting from the month of June and this will continue till the ESIC contribution period.

  6. Hey, Can anyone please help me with the below query:-

    There is employee in my organization, his basic salary is 15000 and there is special allowances also of 6800 but we were deducting PF of 12% of basic salary but this month employee was on leave for around half month due to which his basic salary come around 7500 so My question is should I deduct PF on Basic salary or should I change my calculation and deduct pf on Basic + Special allowances?

    1. Ideally you should deduct the PF as per the earlier logic i.e on monthly payable basic salary. If you wish to give the advantage to the employee, you can include the special allowance limiting it up to the 15000/-

  7. If a employees salary 25000 in a month,but employer has not deduct any pf and esi because this is a partnership firm and his employee is less than 10,so the employee can harass for any kind of loan taken from bank?

  8. Dear sir,
    My basic salary is Rs: 689/- and my da & other allowance is Rs:143/-
    our company works for 26 days per month.
    If calculated:
    Basic 689 *26 = 17914
    DA & Other allowance: 3718
    Total =21632
    im i eligible for ESI ?? iF YES then How?

    1. As you said that you are getting a monthly fixed salary of 21632 which is more than the ESIC current limit i.e 21000/- per month. Hence you are not eligible for ESIC deduction. If there is an increase in the salary in between the ESIC contribution periods (Apr-Sep and Oct-Mar) then your ESIC deduction will continue till the last month of contribution period.

        1. You can ask your HR to share your complete salary breakup. As per the given information your CTC is 273000/- with this your monthly gross salary 273000/12= 22750/-. Please note that Net salary calculation always depends on the salary component payable and deductions in a month.

  9. Sir,
    My Salary as given below
    Gross Salary 20560/-
    i asked to cut my pf
    our company was deduction the PF Contribution Rs. 4500/-
    how it is happen sir. please explain me.

    1. There are three options for PF deduction. 1) 12% of Basic salary 2) 12% of basic salary with 1800 cap 3) 12% of gross salary – HRA with 1800 cap. Please check your PF deduction based on these rules. For any further doubt, you may contact the HR department of your company.

    2. i think your compony cutting your PF [ employer 12 % + employee 12% ] from your payment
      ………….lmao……….

  10. One Employee was getting Rs. 20000 til May 21, his salary has increase to Rs. 22000 in June 21.
    Consultant says that there is capping on ESIC Deduction of Rs. 158 which is 0.75% of Rs. 21000.

    Pls confirm.

    1. ESIC will be deducted on total monthly salary till the month of September, as it is the ESIC return cycle.

    2. No capping on ESIC Deduction. If your employees salary exceeded Rs. 22000/- due to wage revision then you have to deduct ESI from their salary till the contribution period ends ie. till September-2021 and respective person and his family eligible for medical benefit under ESIC till June-2022

  11. SIR WITH REQUEST I ASK YOU AN EMPLOYEE HIS SALARY IS 19500/ IN MARCH -2021 HIS DEDUCTION ESI BUT IN MAY HIS SALARY IS 22000/- THEN I DEDUCTED HIS ESI PLEASE TELL ME SIR

    1. There are two cycles of ESIC return. Cycle-1 start from Apr-Sep and cycle-2 start Oct-Mar. For example: If any employee’s salary changes more than ESIC limit in any month of define ESIC cycle then the ESIC will deduct till end of the ESIC cycle. In your case it will deduct till September.

    1. Make sure you formally communicate to your employees that ESI Act 1948 is applicable to every organization with minimum employee strength as 20. According to the Act, ESI deduction is mandatory for all employees earning Rs 21,000 or less monthly. There is no choice given, and the rule has to be obeyed.
      Explain the long term benefits of ESI deduction to your employees. Each employee is eligible to avail medical care for self and family members from ESI Hospitals/Dispensaries by showing the ESI card.
      In case, if an employee still wants to opt out from ESI deduction, then the individual needs to provide proof/ document for a personal medical health policy. It is important to have medical insurance or similar policy in which the person has already invested in.
      There is a special case under which the employer is not bound to deduct ESI. If no ESI owned hospital or dispensary is found within a distance of 10 kilometers from the workplace, then the employer can specify this reason for not deducting ESI amount.
      Hope this information helps you.

        1. No, the provisions of Indian employment laws are against dual employment. You can take both the benefits from one company only.

  12. If my salary is exceeding the limit on which PF is deductible, say Rs 2 Lakh a month, Employer is deducting and contributing @12% and deducting Rs 24,000 a month. Can i ask employer to restrict deduction and matching contribution to rs 15000 a month only

  13. EPFS, 1952 clearly states in Chapter V that “Employer’s share not to be deducted from the members” , is there any similar provision/rule in ESIC?

  14. What is the standard Basic pay % on CTC. Is PF mandatory even IF it is registered with the EPF.
    What are the minimum labor wages of Employee as per Law.

    1. There is no standard rule for basic allocation on CTC so far. It depends on the company how they are defining your salary structure. You can check with your HR to know more about your salary breakup. PF is mandatory if the company is registered under EPF. There are minimum wage state wise rules applicable to all employees based on certain categories like skilled, semi-skilled, unskilled. You can contact your HR to know more about your minimum wages.

  15. Dear sir,
    My salary is 12500/month
    Now our company as gaving only 9000.
    When we enquiry about this; they said other money are cutting for PFand ESI.
    Now my request is, what is the accurate price of my month PF and ESI from 12500.like how to government rules

    1. You can ask your HR for complete breakup of your salary i.e 12500/-. PF deduction would be 12% as employee contribution and 12% for company contribution from your basic salary. ESIC deduction would be 0.75% for employee contribution and 3.25% for company contribution.

      1. My company’s salary calculation:-

        Salary – 13000
        May 21 salary payble – 12581
        Epf 25% 2201
        Esic 4% on total salary 503
        Net salary 9875

        Plz explain why employer’s contribution part is also deducting from my salary.

        1. This depends on your company policy and the offer made to you. You can check with your HR department to understand the complete salary breakup.

  16. Hi, For employees who are covered under ESIC for maternity leave Benifit, do employer needs to pay ESIC and PF contribution monthly on their 26 weeks of maternity leave entitlement as ESIC shall pay them their monthly Salary! If employer has to pay monthly ESIC and PF contribution then can we recover employers contribution (12% for PF and 3.25% for ESIC) from employee

    1. ESIC contribution will be based on salary paid to employees and employer bears their ESIC/PF contributions as usual.

    2. No, Employer do not need to pay ESI and PF contributions, since the women employee is being paid by ESIC as a form of benefit, it is not salary. So Employer has to file Zero days in working column and Zero Wages in Wages column while filing ESIC Returns and similarly has to file Zero wages and Zero deduction in PF Returns also

  17. Sir,
    My Salary as given below
    Baisc – 11200/-
    HRA – 4700/-
    City Compensation Allowance – 4800/-
    Special Allowance – 1800/-
    Education Allowance – 1000/-
    Gross – 23500/-
    our company was deduction the PF Contribution Rs. 1488/-
    how it is happen sir. please explain me.

    1. Generally companies deduct employee’s PF as per pf rules i.e. 1) 12% of basic+DA 2) 12% of basic+DA with 1800 Maximum capping. 3) 12% of Gross-HRA with 1800 Maximum capping. But here it seems that your company has deducted admin charges from your salary. You can cross check this with HR department.

    2. From last two years we crossed the salary level 15000/month and from 2018 our PF deduction was stopped. Presently we are paid by around 26000/month and we are interested for PF deduction so what should we do ? Do we eligible for PF ?

  18. Hi , I have query I joined in one of the partnership firm here at the time of joining they done mistake in salary break up when I got salary in the first that time I seen my in hand was less and of is also more than limit. These people was not aware about maximum we can deduct 1800 and they given me my exact in hand in the next month but still they are deducting PF 2k from both side . I also said them this is not right but they told me we can change , can you give me the solution on it or is it fine. Please reply.

    1. Your PF will be based on an opted option. PF rules are: 1) 12% of basic+DA 2) 12% of basic+DA with 1800 Maximum capping. 3) 12% of Gross-HRA with 1800 maximum capping

  19. In case of Retrenchment of any staff member working for 1.5 yrs to 2 yrs. Can company deduct ESI & PF Contribution from compensation wages paid to the staff. Pls reply.

  20. please guide, one of emplyee gatting salary more than 1 lac monthly, working last 8 month, he request for EPF, can we deduct the epf of him and from which month it will be applicable, joing month or current month

    1. As of now, you do not need to register in ESIC and PF. For ESIC, you have to register under ESIC when you are paying a salary less than 21K to at least one employee. Regarding PF, you have to register under EPF scheme when your employees count reaches 20.

  21. In this month (Nov 2020)

    10th employee has joined my Partnership firm…. All the employee has minimum salary as Rs 22000

    # Do I need to register for ESI…as all employee are getting 22K+ salary

    # Do I need to register for PF now ??

    #, My Employees doesn’t want PF even we will become a team of 20. what solution we can opt ?? They want salary on hand and then invest as per their need. Do need to register for PF if Employees don’t want and ready to give a declaration.

    1. As of now, you do not need to register in ESIC and PF. For ESIC, you have to register under ESIC when you are paying a salary less than 21K to at least one employee. Regarding PF, you have to register under EPF scheme when your employees count reaches 20.

  22. Dear Sir,
    Our company have 35+ Employees if my one employee
    Gross Salary – 14000
    OT – 3000
    14000+3000=17000 Total Salary. What is the Calculation Amount for ESI and PF
    Please Reply sir

    1. ESIC would be deducted on gross salary i.e 17000/- @ 0.75% and PF will be charged as your our PF option opted. It may differ with different PF rules as there are three PF rules 1) 12% of basic+DA 2) 12% of basic+DA with 1800 Maximum capping. 3) 12% of Gross-HRA with 1800 Maximum capping.

      1. My total sellary is 12500 ctc
        Basic is 8398
        HRA 2561
        Gross 10959

        Pf dedution 1008
        Esic -83 ru.
        P tex-150
        Total deduction 1248

        My on hand sellary -9718

        So my qestion is is this correct net on hand sallary….ctc me dono side ka desuction emplyoee k sallary se hi cut jayega kya

  23. Hey, i have a query regarding pf,
    Do an employer need to bifurcate the salary to reduce the pf liablity as pf is only liable on basic+DA.
    since i am paying salary to employee with a basic of 14000.
    Should i bifurcate the salary in BASIC & HRA and other allowances to reduce the liablity of pf?

    If it is yes, can i bifuecate it during the year?

    1. It depends on your company policy makers how they want to design their salary breakups. If you wish to bifurcate the salary in Basic, HRA, other allowance etc, you can do that as and when you want.

  24. Hi Sir,

    I have joined in a company, its been 4 months currently, my mother has to undergo a operation. so i wanted to check the eligibility where i will be able to claim the bill and also i had a discussion with the dispensary people in my hometown they told that you have to work for a year after that only you will be able to claim. So kindly let me know whether is it compulsory to complete one year inorder to get eligibility for ESI

    1. You are eligible for ESIC treatment from your ESIC first contribution that has been deposited. But there are some critical diseases covered after certain periods that ESIC officials/doctors may guide you better.

  25. In my firm number of employees are more than 50 and 26 of them salary are more than 21000 per month balance 24 employees are below 21K per month. Now only we are going to register ESI, for registration we have show only 24 employees or total employee?
    Kindly Reply..

    1. For ESIC registration, you need to show total number of employees along with their gross salaries in the company at the time of registration.

  26. in my central govt organisation , we float a tender for manpower supply. The service provider has not paid the wages to the employee hired by him(working in our organisation). Now my organisation has founded a committee who recommend to pay the wages to employee from employer(my organisation). Can we deduct EPF, ESI of the employee ? If yes, then how can we deposit the amount in the middle of the month ?
    If no , then is it legal ?
    please clarify

    1. If you are paying wages to employees as an employer then you have to apply for ESIC and PF registration as that is mandatory for more than 10 employees. You have to pay PF/ESIC on a monthly basis before 15th of every following month.

      1. Under which rules the ESIC AND EPF Contribution of employees challan can be shown to factory where our security guards deployed

        1. Employers who are paying salary to the employee are liable to deduct ESIC/PF as per their eligibility. You have to show/submit those PF and ESIC challans to the factory.

  27. i want to know if my gross salary is 21000. My ESI will be deducted or not and am eligible for esi benefits for the previous deductions. My PF deduction is 1800 and i want to know more about PF rules .

    1. ESIC is an application for employees whose gross salary is 21000 or less per month. Regarding PF rules, there are three pf rules: 1) 12% of basic 2) 12% basic with 1800 maximum cap. 3) 12% gross-HRA with 1800 maximum cap.

  28. Dear Sir,

    I would like to ask that there is any money limit in esic treatment,? or we get full health cover by ESIC. and what about the family member’s treatment. my mother has a disease named “Ascites”, I have to admit her in hospital every month, Kindly Tell me the briefly answer so that i can feel better without any confusion

    1. ESIC has framed/laid down some conditions in respect of super specialty treatments and long term serious diseases. It will be better, if you can visit ESIC local office or hospital to know more about the treatment or your eligibility.

  29. Does PF deduction %/Amount differ from state to state and employee type (like consolidated/confirmed/grade pay) or is it uniform deduction across all states/employee types? Many companies seem to deduct different PF amount based on either full earned income or just the addition of Basic+GradePay+DA and that too it differs between state to state if they have multiple branches. Please advice.

    1. statutory rate of PF is 12% across all states.
      The employers monthly contribution is restricted to a maximum amount of Rs 1,800. Even if the employee’s salary exceeds Rs 15,000, the employer is liable to contribute only Rs 1,800 (12% of Rs 15,000).

    2. PF deduction percentage @12 is the same for across all states. Regarding the PF deduction amount, it may differ with different PF rules as there are three PF rules- 1.12% of basic + DA, 2.12% of basic + DA with 1800 Maximum capping and 3.12% of Gross-HRA with 1800 Maximum capping.

  30. Hi,
    Due to current scenario our company has agreed to pay the transportation cost to employees whose salaries are less than 21000.(This is temporary setup for 3-4 months) so do we need to add this compensation for PF and ESIC calculation. Plz Advice

    1. For ESIC, yes you need to add this compensation in ESIC calculation. Regarding PF, this compensation will be considered for all employees whose PF is deducted on Gross-HRA rule.

  31. Sir my wife is working in a private school and her salary is around 9000 per month and me her husband is a government employee. Is she is eligible for ESI facility and my salary is 45000 per month.

    1. our wife is not eligible for ESIC. ESIC Act is not applicable to the Government employees and their dependents who are availing government medical benefits.

    1. All cash payments 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.

  32. I Have doubt regarding PF i have joined in the company salary of Rs.15000 they have deducted pf in my salary after 6 month the company have hiked my salary of 20000 as per new rule above 15000/- need not to pay pf form 11 to be submitted . but the company said we will deduct pf but i no need what todo please help

    1. There is a rule to avoid PF deduction at the time of joining the company if employee monthly salary is less than 15 thousand. If an employee is already a member of the EPFO, the employer has to continue his/her PF obligations.

  33. Hello sir/madam,

    please help me with the solution.

    if gross salary is 18000. then the calculation will be 18000*12%=2160…..
    please give me the correct solution at the earliest

    1. There are three rules for PF calculations
      1) 12% of your basic salary
      2) 12% of your basic salary and capped at 1800/-
      3) 12% of PF your gross-HRA and capped at 1800/-
      Please check your PF calculations as per above rules to get correct PF amount

  34. It is really a very helpful blog.
    I have a query regarding my PF
    Basic salary – 21500
    HRA-. 7200
    Transport Allowance – 1500
    Gross salary -31200
    Company pf contribute – 1800
    Company esi contribute – 0
    Total CTC -33000

    So I am ask you sir/mam what will be my PF deduction as per rule. And how many pf cut in total CTC.
    Please help .
    Thank you

    1. Your gross salary is not matching with shared values i.e 21500+7200+1500= 30200/- please check your gross salary. Your PF deduction is correct as per PF capping rule and generally company PF contribution is a part of employee CTC.

  35. It is really a very helpful blog. Thanks a lot.
    I have a query regarding my PF
    Basic salary – 8800
    HRA-. 7700
    Special Allowance – 5500
    Total gross salary – 22000
    So my question is what will be my PF deduction as per new statutory rules ?
    Please help .
    Thank you

    1. Your PF deduction would depend on your company policy. If the company’s contribution is 12% of actual basic then your pf would be 8800*12%= 1056. If your company is considering revised PF rules then Gross salary-HRA i.e 22000-7700=14300, your pf would be 14300*12% = 1716

  36. For Esi, If Gross Salary more than 21000 then Esi Will not deductable,

    For Pf, If Basic Salary is more than 15000 then PF will be restricted upto 1800.

    I think this will be helpful to you.

  37. in my firm number of employees are more than 40 and all of them salary are more than 25000 per month
    simultaneously we are registered under both PF and ESI act but we contribute only for 18 employees PF and ESI.
    legally this is okay or not?

    1. Legally you should contribute PF for all the employees and ESIC for those whose monthly salary is less than 21000/- if any.

  38. if the wages of an employee exceeds Rs. 21,000 from the month July, and from the month of august she avails maternity leave in this case her maternity daily wage for 6 months will be calculated on what basis?

    1. As per the law, maternity leave is paid leave and she will get full month salary till next six months.

  39. hello sir
    my monthly salary is 12000/-
    my office management deduct pf and esi both side of my salary.
    so i can deduct only esi on my salary. because i don’t need pf duduction.
    it is possible or not.
    please explain CTC and Gross Salary.
    because my appointment letter disclosed CTC Salary
    thanks sir

    1. Gross salary is the fixed salary for the month and CTC is the Cost to Company and ideally CTC includes both the company contributions (PF and ESIC). If the company is deducting PF then you have no choice to avoid PF deduction.

  40. my basic salary is 15678 so what amount should deducted from my salary for employees EPF ?????? is that correct 15678*12 %= 1881

    1. Either you can opt 12% of actual basic salary as per your current PF deduction or you can also opt capping option of PF deduction to 1800/- Max, if you want to increase your take home salary. PF Capping option can be opted if basic salary is more than 15000/- per month

  41. My gross salary is Rs.22000/- my pf deducted Rs.1800/- But my company offer letter showing company pf 13% mean per month my pf balance (My 1800+Company 1950=3750) Rs.3750/- is correct or not

    1. There is an admin charge 1.15% on PF amount which is borne by the employer. You can talk to your HR person regarding this, if they are charging these charges from you.

      1. MY G SALARY 21005 BASIC 10000 HRA 5000 CONV. 2100 MED ALLOWANCE 3905 PF DEDUCTION 1200 IT IS RIGHT OR NOT

  42. what is the difference between the contribution deposited on monthly basis by the employer in case of PF/ESI and a separate return twice in case of ESI

    1. Employers deduct ESIC/PF amount from employee’s monthly salary as per their eligibility and deposit in government account by 15th of next month. As per the Government guideline every employer has to submit ESIC return as per defined cycle Mar and Sept every year. Return is the consolidation of esic paid data.

  43. Is it important to give EPS to the employees? If an employee leaves 6 month or 1 or 2 year will that employee be getting the pension amount? If NO, then will the employer get the Pension deposited against the employee back with interest?

  44. If the work order is issued to a firm only for one month period, is it mandatory for the firm to deposit EPF & ESI. The factory act is applicable on the firm where the work order was issued.

    1. Yes, ESIC and PF deduction are mandatory for the principal employer, subject to firm’s eligibility i.e. having at least 10 employees.

  45. Sir.. my regular Gross salary is Rs. 23000/-( ESIC not applied in my case ).. due to on leave i get salary Rs. 17000/-.. in my next month.. so ESIC applicable in my this salary?? ( This month my salary is below 21000/- )

    1. ESIC will not be applicable as your regular monthly gross salary is more than the ESIC limit i.e Rs. 21000/-. Please note that the ESIC limit will always be checked with your fixed monthly gross salary.

      1. And sir as u said if employee gross salary is more than 21000 they will not applicable for esic scheme.. ND if the person has 35000 per month salary then which scheme will applicable to them? Is there any different scheme for high salaried people . Please tell me.. I’m so confused

        1. ESIC is the medical benefits for lower salaried workforce and currently the monthly salary limit is 21000/- or less. Generally companies provide group medical insurance facilities to their employees who are getting more than 21000/- per month. You can check for the same with your HR or you can buy your own medical insurance policy provided by different insurance companies.

  46. MY COMPANY DEDUCT THE PF AND ESI AMOUNT FOR THE MONTH OF APRIL, 2020 ON 5TH MAY, 2020. BUT THE PF ESI REGISTRATION HAS BEEN COMPLETED ON 7TH MAY, 2020. SO, MY QUESTION IS “CAN THEY PAY THE AMOUNT IN THE PORTAL FOR THE MONTH OF APRIL, 20???”

    1. Check with your Payroll team whether your company has submitted your PF deduction or not. Ideally company deposits employee’s PF amount on the PF portal on or before 15th for previous month’s PF deductions. During this lockdown period, the last date has been extended to 31st July for all past months PF contributions.

    1. It is not mandatory but if you fill 15G and 15H forms, you can save your Tax based on below conditions:

      Form 15H is a self-declaration form which helps individuals above 60 years of age save Tax Deducted at Source (TDS) on the interest income earned by him on his fixed deposits. The assessee is supposed to submit a declaration form to his banker to apply for no deduction or lower deduction for fixed deposits made by him

      Form 15G needs to be submitted for no TDS deduction. For EPF withdrawal if your contribution to EPF is less than 5 years and amount is more than 50,000 then TDS at the rate of 10% will be deducted. Remember EPF withdrawal before 5 years is taxable.

  47. Whats the minimum amount has to contributed toPF deduction by both the side contribution added together, if my Basic is 30000/-

    1. If there is a capping for PF deduction i.e. 1800/- for employee and employer then your PF contributions would be 3600/- per month i.e. 1800/- from employee and 1800/- from employer contribution. If there is no limit and it is 12% of basic salary then your PF contributions will be 7200/- per month i.e. 3600/- from employee and 3600/- from employer contribution. In addition to these you can voluntary contribute as employee contribute over and above of fixed or 12% of basic salary and employer will contribute only capped amount.

    1. Your ESIC deduction i.e. employee contribution, would be 0.75% of your gross salary i.e. 85.51/-, it will be upper round and final value would be 86/-. The employer contribution would be 3.25%, i.e. 370.56/-,it will be upper round and final value would be 371/-.

  48. My Basic is 15,000
    Gross is 28,003
    PF 1800
    PT 200
    Gratuity 722
    CTC 30,525

    This is the calculation given by my company to me
    Can you please help me with the in-hand salary that I am supposed to receive.

  49. Hi, can you help me with the clarification of PF calculation, as you said PF is calculated as per revised PF rules, if the employee’s basic salary is less than 15000/- then pf deduction will be calculated @12% on monthly gross salary excluding HRA/Food Allowance. I need more details, it excluding HRA / FOOD ALLOWANCE / MEDICAL ALLOWANCE/ CONVENCY ALLOWANCE AS WELL.
    Apart From above is there any way if we change the Head instead of “Special allowance” into “Travel – Projected Allowance” than its excluded from PF calculation.

    1. For revised PF rules, formal notification still awaited about deduction of PF on gross salary if salary is less than 15000/-. Till final notification, you can deduct PF only on Basic component of a salary structure.

    1. There are two ESIC contributions, employee ESIC contribution will be @0.75% i.e. Rs. 94 and company ESIC contribution will be @ 3.25% i.e Rs. 407. If 12500 is inclusive of both contributions i.e. company and employee, then both the contributions will deduct from your salary otherwise only employee contribution will deduct from your salary.

  50. Gross per month is 40000, employer capped the same @15000 for employer contribution. Suppose he worked for 15 days. What will be the Gross for PF 15000/26*15 or 20000 or 15000??

      1. Than you for your reply..
        Can you please be specific.
        What is appropriate method as per relevant rules in these regard?
        can you please advice/quote the relevant section/case-law?
        Is it mentioned as discretionary to the choice of employer?

  51. Thanks for sharing this article with us. It’s very easy to read and understand. I hope you will publish more article on ESI

  52. My wages now more then 22000 now esic not cut from my salary. employer esic 1075 and employee esic is 396 so total amount 1471 that is also part of my ctc. so which amount will credit in my ctc total amount 1471 or just only 396 employee amount. please reply me.

    1. It totally depends on your CTC breakup. If CTC breakup consists of employer ESIC contribution then both the ESIC contributions will get added in your monthly salary. In case employer contribution is outside from CTC breakup then your ESIC contribution will be added in your monthly salary and net payment will increase accordingly. There is an ESIC rule that any ESIC contribution can be stopped post Half Yearly return submission. ESIC return periods are Apr-Sep and Oct-Mar every year.

    1. Under the current rules, it is mandatory for company employing 20 or more employees to provide EPF benefits to workers . I have replied to a similar query on 09th Sep 2019, Please refer to same for further clarifications.

    1. You may ask your HR about your complete CTC breakup. They can only tell how they have calculated your salary.

  53. Hello Sir,
    I have a doubt regarding the way the EASI scheme is implemented. The employee and employer contribution has been reduced (1.75% to 0.75%) and (4.75% to 3.25%) respectively. This will be in effect from 01/07/2019. Does that mean the salary that will be credited to the employer on 01/07/2019 will be calculated using the revised rates? Or will the revised rates will be used for calculation from the month after that??

    1. It is effective from 1st July 2019. It should reflect in your July salary which is usually payable in month of August.

  54. Hello Sir. Can you please tell me PF contribution of Employees from salary. From April 2019, my PF amount is deducted 12% of gross salary less HRA payable means (basic payable+DA payable+CCA payable+Special Allowance+ Local conveyance+ tiffin allow payable). Before it, only 12% of Basic payable +DA payable. So please help me to figure out correct calculation for PF contribution of Employees. Thanks in advance.

    1. As per revised PF rules, if employee’s basic salary is less than 15000/- then pf deduction will be calculated @12% on monthly gross salary excluding HRA/Food Allowance. It is applicable for contributions made by company and employee both.

  55. Salary increased to 30k + pm and before it was under the esi scheme. So the amount we contributed before can that be reimbursed???

    And as per the current salary can we get any esi type deduction or there is no medical benefits from company side.

    One of my fried is getting 6L + pa and he did his fathers operation <> and he told will be reimbursed as medical benefit from company. How????

    1. As per ESIC rule, if any employee falls out of ESIC deduction due to increase in salary, then employee is suppose to contribute till the ESIC half yearly return period i.e. April – Sept and Oct – Mar. Once the ESIC Half Yearly period is complete ESIC deduction deduction will stop. There will not be any reimbursement of ESIC paid contribution. Regarding Medical benefits : This depend upon the company policy.

  56. Employer’s contributions will go to following A/Cs.

    1) A/C No. 1 (PF Contribution ac.) – Employee-12%; Employer-3.67%
    2) A/C No. 2 (PF Admin ac.) – Employer-0.85%
    3) A/C No. 10 (EPS ac.) – Employer-8.33%
    4) A/C No. 21 (EDLI ac.) – Employer-0.50%
    5) A/C No. 22 (EDLI Admin charges ac.) – Employer-0.01%

    The above calculation is continuing or changed. If changed kindly provide the update calculation.

    1. There are some changes.
      1) A/C No. 1 (PF Contribution ac.) – Employee-12%; Employer-3.67%
      2) A/C No. 2 (PF Admin ac.) – Employer-0.50%
      3) A/C No. 10 (EPS ac.) – Employer-8.33%
      4) A/C No. 21 (EDLI ac.) – Employer-0.50%
      5) A/C No. 22 (EDLI Admin charges ac.) – Employer-0.0%
      6) In case company is exempted under PF Scheme, Inspection charges @ 0.18%, minimum Rs5/- is payable in place of Admin charges. In case the company is exempted under EDLI Scheme, Inspection charges @ 0.005%, minimum Re 1/- is payable in place of Admin charges.

  57. how s calculated on esi deduction from employer and employee share
    on which basis
    CTC OR GROSS SALARY
    WHICH ONE IS CORRECT – CTC OR GROSS SALARY
    OUR COMPANY ESI CONTRICBUTION OF EMPLOYER SHARE DEDUCTED BY EMPLOYEE SALARY
    IS IT CORRECT

    1. Ideally CTC includes Company ESIC/PF contributions. ESIC deduction is on the basis of employee’s monthly gross salary.

    1. Please find below PF and ESIC rules for companies.

      PF Rule
      According to the EPF rules, any Firm which has a minimum of 20 employees has to be registered with the Employees’ Provident Fund and Miscellaneous Provisions Act. It is up to the Firm to implement it as capping per month as 1800 i.e. 12% of minimum PF wages i.e. 15000/- or 12% of employee wages.

      ESIC Rule
      Any organization having 10 or more employees, drawing the wages of up to Rs.21,000 per month are required to be registered for ESIC under the ESIC Act 1948.

  58. Hi Sir,
    if employee new joins in the organisation and his salary excluding variable allowances and HRA is more than 15000 then we have to pay PF or we can exclude him from EPF.

    1. Hello,

      if the employee joins the organisation with the salary of more than 15000 and he/she joined as fresher the he/she has an option to become exclude from Pf Deduction. But, if any employee joins salary <15000 with the experience (having old UAN) and he/has withdrawal the PF/EPS amount form his/her last employer then he/she is also treated as Exclude member from PF with the permission of the employee.

      thanks.

    2. It is not compulsory for every employee to pay Provident Fund. Employees having basic salary+DA more than 15,000 have an option to opt out of PF at the time of joining the company. But once you opted for PF you cannot again opt out of it. If your basic salary+DA is less than 15,000 in a month, then you have no option to opt out the PF.

  59. Hi, i have one query regarding ESIC deduction i.e ” the employer can deduct employer’s share of contribution from the wages of employees? if you can resolve my query this it will be very helpfull for me. Thanks

    1. Rajesh, this is dependent on how your salary was setup and communicated to you. Typically many companies in their offer letters offer CTC – which means total cost to company. This includes the contributions of the company to ESIC, PF, gratuity etc. You will need to check your offer letter as also discuss with your HR about this.

  60. Aditya, well explained!

    here, I would like to add bifurcation of PF deductions from Employer’s side (13.36%) , as from employee’s side it is fixed i.e., of 12% monthly on basic salary.

    Employer’s contributions will go to following A/Cs.

    1) A/C No. 1 (PF Contribution ac.) – Employee-12%; Employer-3.67%
    2) A/C No. 2 (PF Admin ac.) – Employer-0.85%
    3) A/C No. 10 (EPS ac.) – Employer-8.33%
    4) A/C No. 21 (EDLI ac.) – Employer-0.50%
    5) A/C No. 22 (EDLI Admin charges ac.) – Employer-0.01%

    1. dear mam
      my pf deduction 12%,3.67%,8.33%
      total deduction is 3600 (basic salary 15000)
      but my 200 deduction and not show in my passbook
      why ?
      this money is return when job region

      1. Ideally your total PF amount i.e. Rs 3600/-, would update in your EPF account and bifurcation would be (1800+550=2350) goes to your PF fund and 8.33% i.e. Rs 1250/- will go to your pension fund. Regarding the short deduction of Rs. 200/- you need to check with your HR team.

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