PF / ESI
Calculator
Employer + Employee · EPS · EDLI · CTC Impact

A new employee joining with Basic+DA above ₹15,000 per month can opt out of PF at the time of joining by submitting a declaration. However, once an employee becomes a PF member (Basic+DA was below ₹15,000 at some point), they cannot opt out even if salary increases beyond ₹15,000 later. PF contributions continue on the actual salary if the employee is an existing PF member, or on ₹15,000 ceiling if the employer limits it to the statutory minimum. The employer can choose to cap contributions at ₹15,000 for all employees regardless of actual salary — this is the most common approach for cost management.

PF is calculated on Basic + Dearness Allowance only — not on HRA, LTA, conveyance, medical allowance, bonus, overtime, or other allowances. This is the statutory definition under the EPF Act. However, if an employer structures salary with an artificially low basic (e.g., ₹5,000 basic + ₹45,000 "special allowance") to reduce PF liability, the EPFO may challenge this and deem special allowance as part of basic wages. Supreme Court (Surya Roshni case, 2019) and subsequent orders have held that allowances paid universally across all employees should be included in basic wages for PF. TAXAJ advises on compliant salary structuring that balances PF cost management with legal safety.

ESIC works on a 6-month contribution period system: April to September (Period 1) and October to March (Period 2). If an employee's gross salary exceeds ₹21,000 during a contribution period, they continue to be covered for the entire current period (including the benefit period that follows). ESI coverage stops from the beginning of the next contribution period when the salary continues to be above ₹21,000. Example: Employee salary goes above ₹21,000 in June 2025. They remain covered for the April to September 2025 period and the corresponding benefit period (October 2025 to March 2026). ESI stops from April 2026 onwards. TAXAJ tracks contribution period transitions for all ESI employees.

All three are parts of the EPFO framework: EPF (Employee Provident Fund): Savings fund — employee gets the full accumulated amount (principal + interest) at retirement or withdrawal. Current interest rate: 8.25% p.a. (FY 2024-25). Employee 12% + Employer 3.67% goes here. EPS (Employee Pension Scheme): Pension fund — employer's 8.33% goes here. At retirement (58 years) with 10+ years of service, employee gets a monthly pension. Lump sum is not available from EPS (only pension). EDLI (Employees Deposit Linked Insurance): Life insurance — if an active PF member dies while in service, their nominee gets a lump sum (max ₹7 lakh). Funded entirely by employer at 0.5% of wages. No employee contribution. No separate registration needed — automatically applicable when EPF is registered.