gireeshthampi Started The Discussion:

I have some doubts to clear regarding the ESI limit and contribution.
If an employee's salary is 15000/- and because of declaration of LTA or
other deduction, his salary is coming down to less than 10000/- in any of
the month, is it required to deduct ESI ?

If once ESI deducted, is it compulsory to deduct 6 months ,though his
salary limit enhance above 10000/-?

If it is to be deducted to what extent tobe deducted ( whether for Rs.
10000/- or if he is drawing 15000/- forRs. 15000/- we have to deduct ?

Please clarify


Gireesh Thampi.S
Dear Gireesh,

To my knowledge,

If an employee's gross salary exceeds Rs. 10,000/- he will not be in purview of ESI act.

As you have stated, due to other deduction if his salary is less than Rs. 10000/-, again from that month onwards he will be falling under ESI. The amount for calculation purpose will be his gross salary, (whatever may be his gross amount), up to completion of half yearly returns.


S. Achuthananda
Hi Achuthananad,

If the gross salary is less than Rs.10000/- or equal to Rs.10000/- and after deduction of LTA and other allowances it is not necessary to pay ESI because it is for the gross salary and not for the net salary.

pls correct me if I'm wrong.

Thanks & Regards,
Sivaranjani Sriram
Dear Giresh, To my knowledge, For deduction of ESI, we have to take all components i.e, gross salary except washing allowance. Regards S. Achuthananda
Dear All,

The calculation is done as follows:

CTC-Employers Contribution to PF = Gross Salary

4.75% of Gross Salary would be Employers contribution to ESI
1.75% of Gross Salary would be Employees contribution to ESI

Hope this clarifies.

Hi Girish,

As per my knowledge ESI is deducted on amount equal to or less than 10,000. The gross salary should be made in such manner that it does not come below 10,000 in that case if total salary is 15,000, ESI once deducted is deducted for a period of six months that is half yearly.


Hi to all, ESI is deudcted on gross salary after all deudction whether it is LTA or anything. So employee gets below 10000 gross salary we have to deudct ESI on it. Regards Prashant Patil
Dear Achuthananda

What I know that ESI is calculated on Gross salary EXCEPT conveyance and different allowances and one allowances mentioned by you.

Please go thru the (wages section written in yellow boxes). this site is beneficial for all of us.

and share your information on it.


To my knowledge,

For deduction of ESI, we have to take all components i.e, gross salary except washing allowance.


S. Achuthananda[/quote]
Dear Gireesh,

As per ESI Act, If the Gross Salary is Less than or Equal to Rs. 10,000 the act applies. In your case the employee is getting Rs. 15,000 as Gross so, definitely the employee will not come under the preview of ESI Act. Whether his salary goes below Rs, 10,000/- in any one of the month (on the deduction of LOP, LTA and any other deductions) ESI act will not apply.

One the ESI Contribution has been done for the particular employee, it is compulsory to deduct 6 months ,though his salary limit enhance above 10000/-

The deduction should be limited only upto Rs. 10,000 for the particular contribution period.

If the particular employee contribution is not paid to the ESI account we can refund the same to the employee.

Saravanakumar B
Hi achutanand,

Good answer. I agree with your point. To add to it, according to the new ammendment passed in Oct'2006 ESI ded is calculated on the CTC which is 10,000 or less than that. But previously it was applicable on <=7500 gross salary. The rate of ESI ded is 4.75% of Basic salary.



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