Quick answer: PF deduction = 12% of PF wages (Basic + DA + retaining allowance, at least 50% of gross). On ₹25,000 PF wages you pay ₹3,000; your employer pays ₹3,000 more, of which ₹2,083 goes to EPS (pension) and ₹917 to your EPF account. Since 17 September 2026 the ceiling is ₹25,000, so a capped deduction is at most ₹3,000 a month.
PF deduction from salary is 12% of your PF wages each month, and your employer adds another 12%, of which up to ₹2,083 goes to the pension scheme. Since 17 September 2026 the PF wage ceiling is ₹25,000, so the compulsory deduction is at most ₹3,000 a month, and under the new Labour Codes PF wages cannot be less than half your gross pay. This guide explains the calculation step by step, with a deduction table, a payslip example, employer cost, tax, and how to check your deduction is right.
So on ₹25,000 PF wages, ₹3,917 a month goes into your EPF account. Check your own figures with the PF calculator, or see how the 50% rule changes PF and take-home pay together in the new labour code salary calculator.
Step 1: work out your PF wages
PF is not calculated on gross salary. It is calculated on wages as defined in Section 2(88) of the Code on Social Security, 2020: basic pay, dearness allowance and retaining allowance. HRA, conveyance, overtime, bonus, commission and similar payments are left out, but if the left-out items are more than half of total pay, the excess is added back.
| Gross salary | Basic + DA | 50% of gross | PF wages |
|---|---|---|---|
| ₹40,000 | ₹25,000 | ₹20,000 | ₹25,000 (Basic + DA is higher) |
| ₹60,000 | ₹24,000 | ₹30,000 | ₹30,000 (₹6,000 added back) |
| ₹30,000 | ₹12,000 | ₹15,000 | ₹15,000 (₹3,000 added back) |
Step 2: apply the ₹25,000 ceiling
The PF wage ceiling rose from ₹15,000 to ₹25,000 by notification S.O. 5109(E) dated 17 September 2026. Under paragraph 18 of the EPF Scheme, 2026, compulsory contributions are limited to the ceiling. Employees can contribute on wages above it, and many employers pay PF on full PF wages as a policy. Your payslip shows which applies: a PF deduction of exactly ₹3,000 with Basic + DA above ₹25,000 means PF is capped. See PF wage ceiling ₹25,000 for how September 2026 was split.
Step 3: split the employer's 12%
| Contribution | Rate | Paid by | Goes to |
|---|---|---|---|
| Employee PF | 12% of PF wages | Deducted from your salary | Your EPF account |
| EPS (pension) | 8.33% of wages up to ₹25,000 (max ₹2,083) | Employer | Pension fund; no interest |
| Employer EPF | 12% minus the EPS amount | Employer | Your EPF account |
| EDLI | 0.5% of wages up to ₹25,000 (max ₹125) | Employer | Life insurance cover, up to ₹7 lakh |
| Admin charges | 0.5% of PF wages (minimum ₹500 a month per establishment) | Employer | EPFO |
Where the employer's ₹3,000 goes on ₹25,000 PF wages
Employer's 12% split between the pension scheme and your EPF account, ₹ a month
Source: EPF and EPS Schemes, 2026; S.O. 5109(E); HR Calcy calculation
The rates were notified under the EPF, EPS and EDLI Schemes, 2026 on 1 July 2026 (SCC Online). If you are not an EPS member, all of the employer's 12% goes to EPF.
PF deduction table (from 17 September 2026)
Assuming Basic + DA is 50% of gross:
| Gross salary | PF wages | Your PF deduction | Employer EPS | Employer EPF | Into your EPF |
|---|---|---|---|---|---|
| ₹20,000 | ₹10,000 | ₹1,200 | ₹833 | ₹367 | ₹1,567 |
| ₹30,000 | ₹15,000 | ₹1,800 | ₹1,250 | ₹550 | ₹2,350 |
| ₹40,000 | ₹20,000 | ₹2,400 | ₹1,666 | ₹734 | ₹3,134 |
| ₹50,000 | ₹25,000 | ₹3,000 | ₹2,083 | ₹917 | ₹3,917 |
| ₹60,000 (capped) | ₹25,000 | ₹3,000 | ₹2,083 | ₹917 | ₹3,917 |
| ₹60,000 (actual) | ₹30,000 | ₹3,600 | ₹2,083 | ₹1,517 | ₹5,117 |
| ₹1,00,000 (actual) | ₹50,000 | ₹6,000 | ₹2,083 | ₹3,917 | ₹9,917 |
PF on a payslip: worked example
| Payslip line | Amount |
|---|---|
| Basic + DA | ₹25,000 |
| HRA | ₹10,000 |
| Special allowance | ₹5,000 |
| Gross | ₹40,000 |
| Employee PF (12% of ₹25,000) | − ₹3,000 |
| Professional tax | − ₹200 |
| Net pay | ₹36,800 |
On top of salary, the employer pays ₹2,083 (EPS) + ₹917 (EPF) + ₹125 (EDLI) + ₹125 (admin) = ₹3,250. In a CTC structure the employer's PF is usually part of your CTC, which is why CTC is higher than gross. See Salary Slip Explained for every other line on the payslip.
PF when you have loss of pay or join mid-month
PF is calculated on the wages actually earned in the month. If ₹25,000 Basic + DA is earned for 20 of 30 days, PF wages are ₹16,667 and the deduction is ₹2,000. The monthly salary calculator works out the prorated pay first.
Who must pay PF
- Establishments: those employing 20 or more people are covered; an establishment stays covered even if headcount later falls. Smaller ones can join voluntarily.
- Employees: those with PF wages up to ₹25,000 must be members. Existing members stay covered when their pay rises.
- Excluded employees: someone whose wages are above the ceiling when they would first become a member is not covered compulsorily (paragraph 2(f) of the EPF Scheme, 2026).
- Reduced 10% rate: applies only to establishments under an approved insolvency resolution or repayment plan, and to jute, beedi, brick, guar gum and coir (other than spinning) units. Everyone else pays 12%.
When PF must be deposited
The employer deducts your 12% from salary and must deposit both shares, with admin charges, within 15 days after the end of the month, through the electronic challan-cum-return (ECR). A deduction that appears on your payslip but not in your passbook is a serious lapse: raise it with HR, then on the EPFO grievance portal.
Tax on PF deduction
| Item | Tax treatment |
|---|---|
| Your 12% (and VPF) | Deduction within ₹1.5 lakh under Section 123 of the Income-tax Act, 2025 (old Section 80C), old regime only |
| Employer's contribution | Not taxed, unless employer contributions to PF, NPS and superannuation together exceed ₹7.5 lakh a year |
| Interest | Tax-free on your contributions up to ₹2.5 lakh a year; interest on the excess is taxable |
| Withdrawal after 5 years of continuous service | Tax-free |
| Withdrawal before 5 years | Taxable; TDS at 10% if ₹50,000 or more and PAN is given |
Interest and withdrawals
EPF earns 8.25% for 2025-26 (ratified by the government in June 2026), worked out monthly on the running balance and credited once a year. Under the EPF Scheme, 2026 (notified 29 June 2026), partial withdrawals fall under three heads (essential needs, housing, special circumstances) after 12 months of membership, keeping 25% as a minimum balance. To project your balance, use the EPF calculator; for extra savings, the VPF calculator; for pension, the EPF pension calculator.
How to check your PF deduction is right
- 1. Check PF wagesBasic + DA on your payslip should be at least 50% of gross, or PF should be worked out on the higher figure.
- 2. Check the cap₹3,000 if capped; 12% of full PF wages if your employer pays on actual wages.
- 3. Check the passbookOn the EPFO member passbook, each month should show your share and the employer's EPF share; EPS appears separately.
- 4. Check the monthA deduction in a month's payslip should appear in that wage month's credit.
- 5. Check after a job changeKeep the same UAN and transfer the old balance so service stays continuous.
Running PF in payroll? The free course on salary calculation under the new Labour Codes works through PF wages, the 50% rule and the ceiling step by step. For the full monthly cycle, the Complete Indian Payroll Excel Workbook has PF and ESI ECR working sheets. Test yourself with the Labour Codes quiz.
Frequently asked questions
How much PF is deducted from salary?
12% of PF wages (Basic + DA + retaining allowance, at least 50% of gross). If your employer caps PF at the ₹25,000 ceiling, the maximum is ₹3,000 a month.
Is PF calculated on gross salary or basic salary?
On PF wages: basic pay, DA and retaining allowance. If allowances left out are more than half of total pay, the excess is added back, so PF wages are at least 50% of gross.
What is the PF deduction on ₹25,000 salary?
If PF wages are ₹25,000, you pay ₹3,000 and the employer pays ₹3,000 (₹2,083 to EPS and ₹917 to EPF). If ₹25,000 is your gross with Basic + DA of ₹12,500, PF wages are ₹12,500 and the deduction is ₹1,500.
What is the PF wage ceiling in 2026?
₹25,000 a month from 17 September 2026, raised from ₹15,000 by notification S.O. 5109(E).
How much does the employer contribute to PF?
12% of PF wages: up to ₹2,083 to EPS and the balance to EPF. The employer also pays EDLI at 0.5% (up to ₹125) and admin charges at 0.5%.
Is PF deduction mandatory?
Yes, in establishments with 20 or more employees, for employees with PF wages up to ₹25,000 and for all existing members. Employees whose wages were above the ceiling when they first joined, and who were never members, are not covered compulsorily.
Can PF be deducted at 10% instead of 12%?
Only in establishments under an approved insolvency resolution or repayment plan, and in jute, beedi, brick, guar gum and coir (other than spinning) units. Elsewhere the rate is 12%.
Is PF deducted on leave without pay?
PF is deducted on wages actually earned. If loss of pay reduces Basic + DA for the month, PF falls in proportion.
By when must the employer deposit PF?
Within 15 days after the end of the month, both the employee's and employer's shares, through the ECR on the EPFO portal.
Is PF deduction tax-free?
Your 12% qualifies for the ₹1.5 lakh deduction under Section 123 (old 80C) in the old regime only. Interest is tax-free on your contributions up to ₹2.5 lakh a year, and withdrawal is tax-free after 5 years of continuous service.
Position as of 30 October 2026. Based on the Code on Social Security, 2020, notification S.O. 5109(E) of 17 September 2026 and the EPF, EPS and EDLI Schemes, 2026. General information, not legal or tax advice.