SC ruling on PF contribution likely to dent your take-home salary

According to the EPFO's regulations, the contribution of employer and employee to EPF has to be equal - 12 per cent of basic salary

The Supreme Court (SC) recently upheld what the Employees’ Provident Fund Organisation (EPFO) has been maintaining regarding the definition of the term ‘basic salary’ for calculating Employee Provident Fund (EPF) contribution. The apex court ruled that some other allowances that an employee receives, such as special allowance, will be considered as part of basic salary. The clubbing of allowances means an employee’s basic salary will now be higher, and consequently both the employee and the employer’s contribution to EPF will rise in tandem.

But the SC’s ruling will not impact all salaried class persons. “Two categories of employees will be