We are remitting contributions to EPF/ESIC based on gross wages now, without segregation into Basic/DA/HRA and allowances. We intend to provide a lump sum amount equivalent to 5% of wages as a Special Allowance. Are EPF and ESIC contributions required for this amount?
From India, Chennai
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From India, Chennai
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Dear Friend,
I wish to clarify here that EPF and ESIC are not part of remittance; they are deductions.
The second point to consider is in relation to Special Allowance. You can refer to your state gazette for the details on SA, as it varies according to the segment/industry.
I am not sure which industry you are working in. Therefore, please proceed accordingly.
Rgds
From India, Mumbai
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19I wish to clarify here that EPF and ESIC are not part of remittance; they are deductions.
The second point to consider is in relation to Special Allowance. You can refer to your state gazette for the details on SA, as it varies according to the segment/industry.
I am not sure which industry you are working in. Therefore, please proceed accordingly.
Rgds
From India, Mumbai
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Special Allowance
Firstly, you should know the basic concept of Special Allowance. Special allowance differs from company to company. In some companies, it constitutes any allowance or benefit granted to employees to meet specific expenses towards efficient performance of duties in an office or employment of profit (as laid down in the IT Rules, 1962). If it is specifically granted to employees, it is exempt to the extent of actual expenditure incurred. However, in pay slips given to employees by some companies, any number by the name of 'special allowance' is usually the leftover component of the salary, after allocations are divided into basic, LTA, transport allowance, HRA, and so forth. Special allowance is, therefore, money which does not fit into any other head in a salary slip or the residual factor. After all the different components of a salary slip, including benefits, are allocated, the remaining sum of money which makes up the annual CTC forms part of the special allowance.
Categories of Special Allowance
Special allowances are paid on a monthly basis and are taxable. Special allowance can be divided into two categories, namely:
1. Personal allowances
2. Official allowances
Various types of personal allowances include the following:
- Children Education Allowance: The maximum exemption is Rs.100 per month per child for two children, while excess is taxable.
- Hostel Allowance: The maximum exemption is Rs.300 per month per child for two children. Excess is taxable.
- Transport Allowance: The maximum exemption is Rs.1600 per month. Excess is taxable. The maximum is Rs.3200 per month in case of handicapped employees. Excess is taxable.
- Underground Allowance: Granted to employees working in underground mines. The maximum exemption is Rs.800 per month, while excess is taxable.
- Tribal Area Allowance: Special allowance for residents living in hilly areas, scheduled areas, and agency areas. Available in Madhya Pradesh, Uttar Pradesh, Karnataka, Odisha, Assam, Tamil Nadu, and Tripura. The maximum exemption is Rs.200 per month. Excess is taxable.
- Outstation Allowance: Allowance paid by railways, roadways, and airways to their employees in lieu of daily allowance. Exempt to the least of 70% of allowance, Rs.10,000 per month. Taxable = received - exempt.
- Island Duty Allowance: Granted to members of armed forces for performance of duties in Andaman and Nicobar Islands and Lakshadweep Group of Islands. The maximum exemption is Rs.3250 per month.
Various types of official allowances include the following:
- Travelling Allowance: Includes the cost of travel during a tour or on transfer of duty. This allowance is exempt from Income Tax while saving is taxable.
- Daily Allowance: Includes daily charges incurred by an employee while on a tour. This allowance is exempt from Income Tax while saving is taxable.
- Conveyance Allowance: Includes expenditure incurred on conveyance during performance of duties of an employment of profit or office. This allowance is exempt from Income Tax while saving is taxable.
- Uniform Allowance: Includes expenditure on purchase and maintenance of uniform worn during performance of duties of an office or employment of profit. This allowance is exempt from Income Tax while saving is taxable.
- Academic/Research Allowance: Granted for encouraging academic research and training pursuits in research institutions. This allowance is exempt from Income Tax while saving is taxable.
- Helper Allowance: Provided to cover expenditure incurred on a helper hired for performance of duties of an office or employment of profit. This allowance is exempt from Income Tax while saving is taxable.
Please note that the contribution of EPF is on the monthly Basic Salary and Dearness Allowance or Various Dearness Allowance (whichever is applicable), and the contribution of ESIC is on the monthly Gross salary. As per the ESIC Act, contribution is payable on Special Allowance because special allowance comes under Total Remuneration. Based on the above, you can decide which types of special allowance are applicable in your organization, and then you can find your question's answer.
Regards,
Amit
From India, Surat
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Firstly, you should know the basic concept of Special Allowance. Special allowance differs from company to company. In some companies, it constitutes any allowance or benefit granted to employees to meet specific expenses towards efficient performance of duties in an office or employment of profit (as laid down in the IT Rules, 1962). If it is specifically granted to employees, it is exempt to the extent of actual expenditure incurred. However, in pay slips given to employees by some companies, any number by the name of 'special allowance' is usually the leftover component of the salary, after allocations are divided into basic, LTA, transport allowance, HRA, and so forth. Special allowance is, therefore, money which does not fit into any other head in a salary slip or the residual factor. After all the different components of a salary slip, including benefits, are allocated, the remaining sum of money which makes up the annual CTC forms part of the special allowance.
Categories of Special Allowance
Special allowances are paid on a monthly basis and are taxable. Special allowance can be divided into two categories, namely:
1. Personal allowances
2. Official allowances
Various types of personal allowances include the following:
- Children Education Allowance: The maximum exemption is Rs.100 per month per child for two children, while excess is taxable.
- Hostel Allowance: The maximum exemption is Rs.300 per month per child for two children. Excess is taxable.
- Transport Allowance: The maximum exemption is Rs.1600 per month. Excess is taxable. The maximum is Rs.3200 per month in case of handicapped employees. Excess is taxable.
- Underground Allowance: Granted to employees working in underground mines. The maximum exemption is Rs.800 per month, while excess is taxable.
- Tribal Area Allowance: Special allowance for residents living in hilly areas, scheduled areas, and agency areas. Available in Madhya Pradesh, Uttar Pradesh, Karnataka, Odisha, Assam, Tamil Nadu, and Tripura. The maximum exemption is Rs.200 per month. Excess is taxable.
- Outstation Allowance: Allowance paid by railways, roadways, and airways to their employees in lieu of daily allowance. Exempt to the least of 70% of allowance, Rs.10,000 per month. Taxable = received - exempt.
- Island Duty Allowance: Granted to members of armed forces for performance of duties in Andaman and Nicobar Islands and Lakshadweep Group of Islands. The maximum exemption is Rs.3250 per month.
Various types of official allowances include the following:
- Travelling Allowance: Includes the cost of travel during a tour or on transfer of duty. This allowance is exempt from Income Tax while saving is taxable.
- Daily Allowance: Includes daily charges incurred by an employee while on a tour. This allowance is exempt from Income Tax while saving is taxable.
- Conveyance Allowance: Includes expenditure incurred on conveyance during performance of duties of an employment of profit or office. This allowance is exempt from Income Tax while saving is taxable.
- Uniform Allowance: Includes expenditure on purchase and maintenance of uniform worn during performance of duties of an office or employment of profit. This allowance is exempt from Income Tax while saving is taxable.
- Academic/Research Allowance: Granted for encouraging academic research and training pursuits in research institutions. This allowance is exempt from Income Tax while saving is taxable.
- Helper Allowance: Provided to cover expenditure incurred on a helper hired for performance of duties of an office or employment of profit. This allowance is exempt from Income Tax while saving is taxable.
Please note that the contribution of EPF is on the monthly Basic Salary and Dearness Allowance or Various Dearness Allowance (whichever is applicable), and the contribution of ESIC is on the monthly Gross salary. As per the ESIC Act, contribution is payable on Special Allowance because special allowance comes under Total Remuneration. Based on the above, you can decide which types of special allowance are applicable in your organization, and then you can find your question's answer.
Regards,
Amit
From India, Surat
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Maharashtra Special allowance Notification July 14 to Dec 14.pdf