Respected Seniors, I need an advice from you all. Please let me know whether Statutory deductions like Income Tax, PF asnd ESI are applicable on Closure Compensation. Do we need to deduct Income Tax, PF and ESI on the amount payable to workmen?
Awaiting your learned response.
From India, Kolkata
3Awaiting your learned response.
From India, Kolkata
PROFESSIONALS AND BUSINESSES PARTICIPATING IN DISCUSSION
no need to recover ESI and EPF from closure compensation or voluntary retirement compensation. But IT is applicable if their amount crosses Rs.10 lakh.
From India, New Delhi
From India, New Delhi
Thank you sir for your advice. But one small clarification, contacted PF authorities and they said that this is Retention Allowance and PF will be applicable to the extent of Rs.15,000/-. Can you please clear this confusion.
Amit Sarkar
From India, Kolkata
Amit Sarkar
From India, Kolkata
this is the big story going on with PF. You need to cover all allowances except HRA to calculate for Basic. Hence you need to pay PF for (Gross - HRA) salary, if <15000/- if > 15000, you can restrict your PF contn to 15000 salary only.
From India, New Delhi
From India, New Delhi
Closure compensation is different from retention allowance. Closure compensation refers to retrenchment compensation which is paid when the employment is terminated due to closure of the organisation. This will not attract PF because it is not earned by working or remaining in the service of the organisation. On the other hand, retaining allowance is an amount paid to some specially talented people during a temporary closure of the organisation just to retain their service with the company. This is an amount paid monthly even though there is no work but is paid to retain them with the company, failing which they may go and the company may not get their service when it starts production. This amount is like salary paid and therefore, will attract PF. In your case it is not retaining allowance because it is a one time payment and it is paid to sever the employee employer relationship. Therefore, there is no question of paying contribution on this amount.
Madhu.T.K
From India, Kannur
Madhu.T.K
From India, Kannur
When you are closing down and paying compensation how can it be called as Retention Allowance. R A is paidd to retain people during temporary closure and the recipient worker is obliged to Report for work when called by the employer
From India, Chennai
From India, Chennai
Dear Sarkaramit,
Subject to fulfilling certain conditions, if this is retrenchment under ID Act, due to closure of Estt. you can avail exemption both on gratuity and retrenchment compensation to the extent provided u/s.10 (10 B) of the IT Act. If you'll indicate the exact conditions of your separation I can examine further.
From India, Bangalore
Subject to fulfilling certain conditions, if this is retrenchment under ID Act, due to closure of Estt. you can avail exemption both on gratuity and retrenchment compensation to the extent provided u/s.10 (10 B) of the IT Act. If you'll indicate the exact conditions of your separation I can examine further.
From India, Bangalore
Circular No 1-2018 Processing of income-tax returns under section 143(1) of the Income-tax Act .pdf
Income Tax Calculator.xls