Partner - Risk Management
Sovik Bhattachaerjee
Md- S.s Enterprise
Gm (hr)
Executive Hr
+1 Other

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Dear all
can anyone suggest me if my company strength more than 20 or all employee basic is above 6500. and company not under any PF/ESIC act so can we show the PF & gratuity in CTC bt not deducted to total gross paid to employe .for future can we face the problem for the same.
Can show the PF & gratuity on CTC although its totally paid to employee.
Pls suggest!

From India, Delhi
PF or anyother govt.funds may only be deducted if company if registered for the same.

From India, Hyderabad
CTC is an internal computation that has nothing to do with any government department.
As long as you are not deducting from gross pay (note, I am saying gross pay, not CTC), then it is not a problem.
However, when you do register, you are going to face a problem.
Currently you are paying a higher amount to the employee by giving the entire pf amount (employee and employer contribution shown in CTC) with the salary. When you register and are required to pay this to the government, at that time, you have to deduct only employee portion from salary and pay employer part on your own. There is a specific section in the PF act that says that you are not allowed to reduce salary for paying pf.

From India, Mumbai


Hope you are doing well. I am surprised to see your post, there are a few reason. I am saying this because I have a small firm, beside worked with MNC's. Although I have completed MBA with HR & Finance, these days I spent maximum time in Balance sheets & all as compared to HR. As said by Saswata Banarjee , CTC is an internal subject (as said) but one have to follow legal structure associated with it & any corporate/firm is bound to follow INDIAN GAAP, else if someone challenge legally challenged then Corporate/Firm cant defend in court of law.

Now in case, your company is not registered under PF/ESIC, but still you are deducting PF/ESIC from salary( at least showing the same as per CTC break down), this is 1st offence- Forgery with PF/ESIC Dept & employee. Legally you can show the same only if you are registered, and its a mandate for corporate deducting PF/ESIC to have a ledger for the same if registered, reason being if such corporate is challenged under law then verification/ investigation can be made by concern department or law enforcement machinery.

If you are not maintaining the ledger, and deducting PF/ESIC (showing in CTC slab/payslip), then you cant defend yourself if questions are raised with regards to financial status of your corporate /firm. Eg: No ledger, so cant show the a/c details in Balance Sheet, however deduction is made. Where this amount is going? To whom?. Now if you claim you are paying the money to employees( means showing deduction in CTC slab/pay slip, but not deducting actually). It is equivalent to showing debit in statement / employees salary a/c or Journal, but not debiting. So from some hypothetical a/c this money must come (Credit) to pay the amount deducted, which a/c? How you are showing this in Balance sheets?

If you maintain a ledger, and if investigation happen due to any reason, then the above question's will be there, with no answer to defend & at the same time, it will be validated that you are associated with some kind of forgery or malpractice .

So, if any employee suit your firm & say you have deducted money for PF/ESIC and but not paid the same (although you paid), how you are going to defend? In CTC breakup , you have shown a deduction, so same will be there in pay slip. If you are paying the same amount to employees that you have deducted for PF/ESIC, then officially this amount should come from an a/c( not equal PF/ESIC a/c ),in simple words you have to show on payslip why that amount is paid, you cant show PF/ESIC(reason being if you show PF/ESIC is reimbursed, then what is the use of deducting money for PF/ESIC on 1st hand on pay slip& why it is shown in CTC?), you can show as 'Special Allowance'/HRA etc. Now, question is legally there is a debit statement for PF/ESIC , so you are legally deducting money for PF/ESIC and are not able to show legally that you are actually paying this money to employee, so if employee charge against you, that you have not provided him PF/ESIC no, deducted money for PF/ESIC & have not paid the same how you are going to defend yourself?

Say , your competitor went to IT dept/ Corporate affairs dept and complained against you that you are not following corporate rules & regulation along with labor laws, how you will defend? You mixed a/c details will first go against you, hardly matters the efficiency of your CA-who manage your a/c & your corporate HR's. If during investigation, they found that in your CTC there is a PF/ESIP matrix while you are not registered to PF/ESIC, will they spare you? Will PF/ESIC department remain quiet! ESIC provide emergency medical facilities to employees during needs, so if any accident occur with any of your employees, & they cant avail ESIC facility, although they have evidence that in their CTC there is a deduction for ESIC, will common people spare you or the family members or Law enforcement agencies?

No, one will believe that although there is a debit for PF/ESIC in payslip/CTC/Legal instruments, but you have not made a debit, if you cant show officially that you have reimburse same amount from PF/ESIC a/c. If you can show it officially, then question will be what was your intension to show PF/ESIC in CTC on 1st hand & 2nd making deduction for the same in payslip, then reimbursing it?


Sovik B

Managing Director



From India, Mumbai
As you said you have not taken ESI and PF code is violation of the law.if you have 20 or more employee than you are required to take PF code.if all employees are getting more than 6500 basic than also there is no just deposit rs7/- per month as inspection fee but you have to take the PF code.
as the case of ESI ,if you have 10 eligible employee than you are required to take ESIC code.
Showing on CTC OR not is your internal matter please

From India, Delhi

J S Malik,

What you have said is absolutely correct...What Pooja is saying its illegal not only from HR prospective but also from Financial Prospective. It hardly matters basic salary of an employee is more then INR 6500, as per PF rules & regulation if employee wish, then he can made arrangement for deduction of PF even if basic is higher then INR 6500. This is permissible. Similarly, basic guidelines show for PF, employees contribution should be 12% & employers: 8.33% pension +3.67% PF+.5% EDLI, if any employee wish he can make arrangement for more deduction then 12%.This reduce Income Tax for employee too.

On 1st hand, establishment have more then 20employees,still not registered to PF/ESIC....Its Illegal. 2nd fetal error, without getting registered to PF/ESIC dept, showing PF/ESIC in CTC. Because it means deduction/debit for PF/ESIC in salary statement or payslip( as per CTC's Structure),now officially Pooja cant show, that this amount is getting reimbursed. If she can show, then question is why PF/ESIC deduction is there on 1st hand ,when it is getting reimbursed ? why shown in CTC? .Indirectly providing wrong information to IT Dept too!

Basic problem is half of the HR's in India don't know the fact that it is mandate for an establishment to have PF code if number of employees are equal to or more then 20 but for including PF in CTC the mandate/must criteria slightly differs (In this case- No of employees should be equal to or more then 20 & basic salary + DA should be less then or equal INR 6500). If establishment is registered with PF/ESI dept, (means they have PF code & all) & basic+DA is above INR 6500 for employees then its totally establishments Internal Matter to show PF/ESIC in CTC or not, provided employee have no objection i.e don't wish to opt for PF & ESIC facilities irrespective of fact that their CTC is above INR 6500.

Corporate Affairs Dept/ PF/ESIC Dept/ SEBI / Income Tax dept /Other corporate Legal machinery , will definitely take actions if such incidents continue for too long & get reported.

Thanks & Regards

Sovik B

MBA- HR & Finance

Managing Director


PH: 08130901897.

From India, Mumbai
I just re-read your post and realised I had not seen it correctly the first time.
In addition to my earlier post, I would like to add the following :
- you need to register both for PF and ESIC
- if all employees are exempt, you still need to register and pay rs. 7 per month for admin charges
- exempt employees must have STARTING SALARY of rs. 6500 per month or higher when they first joined your organisation. Current salary being above that amount is immaterial. Further, the basic + da must be above 6500. Again, they must not have any existing of account from any previous organisation.
- the salary limit is ₹ 15000 per month gross salary for esic deductions. So you need to ensure all employees are having salary above that amount.

From India, Mumbai
If thge Company is not registered with PF Organisation, they are not supposed to deduct any contributions towards PF nor they can show a part of the CTC as PF component
From India, Namakkal
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