There have been several controversies surrounding the
calculation of Provident Fund ("PF").
The Supreme Court, in the case of "The Regional
Provident Fund Commissioner (II) West Bengal v. Vivekananda
Vidyamandir and Others", has laid to rest these
controversies by shedding light on which components of an
employee's salary can be considered as basic wages for the
purpose of PF calculations.
Before we examine the outcome of the judgment, it's
important to take a look at the meaning of 'basic wages'.
The term 'basic wages' has been defined by sections 2 (b)
(ii) and 6 of the Employees' Provident Fund and Miscellaneous
Provisions Act, 1952 ("PF Act") to mean
"all emoluments which are earned by the employees
while on duty or on leave or on holiday with wages in accordance
with the terms of their employment contract (and is payable in
cash) and includes dearness allowance, retaining
allowance1, and the cash value of food concession, but
does not include allowances such
