If you are a salaried employee in India, you’ve probably heard the term “PF contribution” or Provident Fund contribution more than once. But have you ever wondered how much PF contribution is deducted per month from your salary? Knowing this can help you understand your monthly savings, plan your finances better, and build a secure retirement fund. In this article, we’ll break down everything about PF monthly contributions in simple terms.
Understanding Monthly PF Contribution
Your monthly PF contribution is usually set at 12% of your basic salary plus dearness allowance (DA). Think of it like a small piece of your monthly paycheck that you are saving for the future. For example, if your basic salary plus DA is ₹25,000, then your PF contribution will be 12% of that amount, which is ₹3,000 deducted from your salary every month. This is your part of the savings going directly into your Provident Fund account.
The Employer’s Role in PF Contribution
Here is something important: your employer also contributes an equal amount of 12% of your basic salary plus DA each month. But unlike your full 12% going to the Provident Fund account, the employer’s contribution is split into two parts. Out of their 12%, 8.33% goes toward the Employee Pension Scheme (EPS), which provides pension benefits later, and the remaining 3.67% goes to your Provident Fund. So, if your salary is ₹25,000, the employer contributes about ₹2,083 to EPS and ₹917 to your PF account.
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The Salary Limit for PF Contributions
You might wonder, does everyone’s PF contribution get calculated on their total salary? The answer is no. There is a salary cap for calculating PF contributions, currently set at ₹15,000 per month. Meaning, even if your basic salary plus DA is higher than ₹15,000, PF contribution will only be calculated on ₹15,000. So, the maximum amount deducted from your monthly salary toward PF is 12% of ₹15,000, which equals ₹1,800. Your employer’s contribution also follows this cap accordingly.
Why Is PF Contribution Important?
Every month, the PF contribution deducted from your salary, combined with your employer’s part, goes into your EPF account. The best part: this amount earns interest set by the government, usually around 8.15% to 8.25% per annum. Over time, this creates a substantial retirement fund without you having to do much other than regularly contributing through your salary deductions.
