The top court dismissed a petition regarding PF deduction on the basic salary sans the allowances.The Supreme Court Friday ruled that special allowances paid to an employee as part of the total salary will come under “basic wage”. The top court said the contribution to Employee Provident Fund will be deducted on the total amount (including the allowances) and not just on the basic salary.
Hearing a clutch of petitions, the the top court said, “Whatever is payable by all concerns or earned by all permanent employees had to be included in basic wage for the purpose of deduction under Section 6 of the Act.”
“The authority under the Act held that the allowances had to be taken into account as basic wage for deduction (for PF contribution),” the judgment read.
The Employees’ Provident Fund is a retirement benefit scheme that was structured to provide financial security to employees of factories and other establishments.
While 12 per cent of the basic salary and dearness allowance have to be contributed by all employees earning up to Rs 15,000 per month (not mandatory for others), the employer component (12%) has to be contributed mandatorily in case of all employees. The employer’s component is split into EPF (3.67%) and the Employees’ Pension Scheme (8.33%).
Last week, EPFO increased the interest rate on PF deposits from 8.55 per cent to 8.65 per cent for the 2018-19 fiscal year to its 6 crore subscribers
