Many Employees’ Provident Fund (EPF) subscribers found themselves in a dilemma while choosing their monthly PF contribution. If they choose a low amount, they get a high in-hand salary, but it may come with high tax on salary and less EPF retirement corpus. If they pick a high EPF contribution, they may gather a larger corpus, but a low in-hand salary may leave them with short of money for their immediate needs or other investments.
For employees earning less than Rs 15,000 of monthly basic pay and dearness allowance (DA), PF contributions from the employee and employer’s sides are mandatory. For employees earning more than Rs 15,000 as basic pay, Employees’ Provident Fund Organisation (EPFO) rules, however, allow contributions to be restricted to the statutory wage ceiling of Rs 15,000 per month. So the mandatory employee contribution becomes 12% × Rs 15,000 = Rs 1,800 per month. Contributions above this are voluntary or based on employer policy.
