Provident Fund and Pension Scheme
Provident fund consists of Employee contribution as well as Employer Contribution. Employee contribution goes entirely into PF fund while the Employer Contribution is split into PF component as well as pension component.
12 % of the Basic Salary given will be the normal employee contribution to provident fund, which will be tax exempted too if not withdrawn before 5 years of service. (This amount is seen as deducted in your monthly payslips towards PF)
For example, If your Basic Salary is Rs. 10,000, Rs 1200 will be the employee contribution to PF each month.
An equal amount of contribution from the employee is also required as per the scheme.
Out of the 12% of employer contribution, a maximum of (8.33% or 541/-), is contributed towards pension scheme.
This means that employee contribution towards PF might be 3.66% or more.
To explain with the same example, if If your Basic Salary is Rs. 10,000, Rs 1200 will be the employer’s contribution to PF each month, out of which Rs. 541 is the maximum amount which can go to the pension fund/ month. So the rest of the amount, ie Rs.659 will be contributed as the net amount towards the PF fund.