When you see deductions in your salary labelled “PF”, it helps to know exactly what these numbers mean. The contribution towards the Employees’ Provident Fund Organisation (EPFO) is made by both the employee and the employer. In this article we will explain in very simple language: how much the employee contributes, how much the employer contributes, how the employer’s contribution is split, and what special cases you should know.

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Basic rule: 12% each from employee and employer

Under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952, for most eligible salaried employees the standard contribution rate is 12% of basic salary + dearness allowance (DA) by the employee and 12% by the employer.
The employee’s contribution of 12% is entirely deposited into the EPF account.
However, the employer’s 12% is split into parts some goes into EPF, some into pension scheme (EPS), and some into insurance (EDLI).
Note: In special cases (small organisations, periods of loss, specific industries) the rate may be 10% instead of 12%.

Employee contribution breakdown

Here’s what you as an employee pay:

You pay 12% of your basic salary + DA each month.
That entire amount goes into your EPF account (it does not go into EPS or EDLI).
Example: If your basic salary + DA is ₹25,000, your monthly contribution would be 12% of ₹25,000 = ₹3,000. (Just and example)

Employer contribution breakdown

The employer contributes the same percentage (12%) but distributes it:

Component

Approximate rate

Where it goes

EPF (employer part)

3.67%

Goes into the employee’s EPF account.

EPS (Employee Pension Scheme)

8.33%

Goes into the pension fund for the employee.

EDLI (Employee Deposit-Linked Insurance)

0.5%

For life insurance cover under EPFO.

Key details:

The EPS contribution is subject to a wage ceiling (e.g., basic + DA up to ₹15,000) in many cases.
On salaries above the ceiling, additional employer contribution may go wholly into EPF.
Additionally, the employer pays administrative/insurance/other charges over and above this contribution, which are not deducted from your pay.

How to calculate your PF contribution (simple example)

Let’s say your basic salary + DA = ₹30,000 per month.

Employee’s PF contribution = 12% of ₹30,000 = ₹3,600.
Employer’s contribution = 12% of ₹30,000 = ₹3,600, which will be split approx as:
- EPF part ~3.67% of ₹30,000 = ~₹1,101
- EPS part ~8.33% of ₹15,000 (ceiling) = ~₹1,249 (if ceiling applies)
- Remaining goes to EPF.

So total monthly PF contribution credited (employee + employer) ~ ₹3,600 + ₹3,600 = ₹7,200 (plus EDLI/others as applicable).

Why this matters for you

Knowing your PF contribution helps you track your retirement savings and ensure correct entries are made.
If you spot missing months or incorrect employer contribution splits, you can raise the issue early.
For salary negotiations or CTC discussions, it’s useful to understand how much of cost is PF.
If you change jobs, you’ll want to ensure that your EPF account is transferred and contributions continue without gaps.

Things to watch out for

Verify that your employer is depositing the right amount each month (12% of basic + DA).
Check whether your basic salary + DA includes any allowances that should be part of “basic wage”. Some allowances may or may not be included depending on the company/industry.
If your employer is making you contribute more than 12% (voluntary contribution) that is allowed (via VPF) but employer is not required to increase their share.
Ensure your UAN is active and linked so you can check your passbook for these contributions.
Understand that while your “employee part” contributes fully to EPF, the “employer part” has multiple components (EPF + EPS + EDLI).

Conclusion

The PF contribution system in India is designed to let both you and your employer build a saving for your retirement. You contribute ~12% of your basic wage, which goes entirely into your EPF account. Your employer also contributes about 12%, but their part is shared across EPF, pension (EPS), and insurance (EDLI). Understanding this breakdown helps you stay informed, monitor your savings, and raise issues if required. Keep an eye on your monthly payslip and your EPF passbook to ensure your future savings are safe.

Frequently Asked Questions (FAQs)

What percent of salary do I contribute to PF?

Typically 12% of your basic salary + DA each month.

What percent does my employer contribute?

Also around 12% of your basic salary + DA.

Does my employer’s contribution go entirely into my EPF account?

No. The employer’s contribution is split around 3.67% to EPF, 8.33% to pension (EPS) and 0.5% towards insurance (EDLI).

Can the employee contribution be less than 12%?

Yes, in special situations (small organisations, industry-specific rules) it may be 10%.

Is the salary cap relevant for PF contributions?

Yes, for pension (EPS) calculations there is a ceiling (e.g., basic + DA up to ₹15,000) in many cases.

Can I contribute more than 12% from my side?

Yes, via Voluntary Provident Fund (VPF), you can contribute more than 12%. But employer’s share remains the same.

What happens if my employer doesn’t deposit their PF contribution?

That’s a compliance violation and it can impact your ability to withdraw or transfer your EPF later.

Does my PF contribution count for tax deduction?

Yes, your own contribution to EPF qualifies for deduction under Section 80C (within limits).

Is the employer’s contribution taxable for me?

The employer’s contribution up to certain limits is exempt from tax, but if it exceeds limits it may attract tax.

What is EDLI and why do I see a small extra amount?

EDLI is “Employees Deposit Linked Insurance”. Your employer contributes a small percentage (~0.5%) towards life-insurance cover under PF scheme; this is over and above your and their standard PF contribution.

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