Statutory Compliance - How to get started - I am a HR Fresher - CiteHR
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Onkar Pimple
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Dear Seniors, I am a fresher as an HR. I do not have any idea about statutory compliance. Kindly help as I need to work on compliance in my company.
Thanks and Regards,
Anangsha
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Please give some inputs on what exactly do you want to comply.
For Labour Contractor I need to file statutory compliance.
Dear Anangsha,
Please refer the below.
The Statutory Compliances Required for Indian Payroll
The common Statutory requirements that companies have to follow for their payroll management in India are:
Statutory requirements for Minimum wages
This act provides for fixing minimum rates of wages for skilled and unskilled laborers. It not only guarantees money for bare minimum survival requirements of workers but also takes care of education, medical requirements, and some level of comfort of workers.
The Minimum Wages Act being a state subject, the statutory compliance of a centralized Payroll management is to cater for the payment of minimum wages to an organization’s workers spread out across different states. Empxtrack Payroll has the provision to map this complex requirement.
Payment of ‘Overtime’ wages to workers is also a statutory requirement as per the Factory Act & Payment of Wages Act. It affects sectors like manufacturing & construction.
TDS deduction
Every employer who is paying salary to employees has to deduct TDS under section 192 of the Income tax Act, 1961, if the salary is more than maximum amount exempt from tax. The employers also need to generate Form 24Q and Form 16 in time. Some of the salary components that impact TDS deduction are: HRA, Special allowance, Leave travel allowance, Children education allowance, Medical allowance, Investments.
Statutory compliances for ESI fund and PF deduction
ESI fund, maintained by ESIC is applicable to employees’ earning Rs 15,000 or less per month to provide the cash and medical benefits to them and their families.
PF is a compulsory contributory fund for the future of employees after their retirement or for their dependents in case of their early death.
Professional taxes
Professional tax or employment tax is a state-based tax. It is one of the statutory deductions from the gross income before computing the tax.
Gratuity
Gratuity is the amount given to employees by employer when they leave the job after completing five years in service. Gratuity is calculated as Basic + DA divided by 26 * No of years of service *15.
EDLI
The EDLI (Employees’ Deposit Linked Insurance Scheme) provides assurance benefit (death insurance cover) to employees along with PF benefit. The employees do not contribute anything towards EDLI. The employers contribute 0.5% of the total wages of employees subject to a maximum of Rs 6500/-. EDLI applies to all the organizations where EPF Scheme applies.
The Empxtrack Payroll Software takes care of all the above given compliance requirements and statutory deductions required in India. It allows you to manage your PF and ESI preferences, manage professional tax, select the salary heads applicable to you, manage TDS through investment declarations and automatically calculate salaries after TDS deduction while processing payroll. In addition, it allows you to capture Challans and generate form 16 and form 24Q to manage all your statutory compliances with ease and efficiency.
Statutory compliance: While processing the payroll you need to consider statutory deductions. EPF, ESI, and TDS are some deductions done in this process. After deductions are done, the company remits the deducted amount to the relevant government agencies. The payment frequency depends on the due type. Dues are paid through challans. Once they are paid, it’s important to file a return.
ESI – Employees` state insurance deduction is done on the gross pay of the employees. The gross salary is the total income without deductions, that is earned by the employees while doing the job.
EPF – Employee Provident Fund is a retirement benefit and is available for all employees. The EPF deduction is done from a monthly salary and is saved in EPF account.
With these inputs, the employee’s tax liability is computed and TDS is calculated.
TDS – Tax Deducted At Source is a method of direct taxation and is applicable for various income groups. It’s deducted from the employee salary when the salary exceeds the maximum limit exempt from taxes. Some components that also affect the TDS deduction include allowances such as HRA, travel, leave travel, children education, and medical, etc. The net pay of employees is affected due to other deductions like taking care of handicapped children and parents, and interest on house loans.
HRA – House Rent Allowance is applicable for tax exemption depending on the location of the employee. They can claim tax exemption if the HRA is received from employer and pay rent for a rented house.
Travel – Travel payment up to INR 800 per month is tax-free.
Leave Travel- Tax exemption up to is available for two journeys done in a block of four calendar years.
Education- Exemption is given up to INR 100 per month per child and for up to two children of the employee.
Most of these payroll benefits impact the payroll calculations and you need to consider them for TDS deductions. Below are the current rates of each allowance and deductions in percentage:
PF (Provident Fund) Contributions from both employer & employee:
1. Contribution by an employee: Contribution towards EPF is deducted from employee’s salary i.e., 12% of basic salary and standard allowance of the employee
2. Contribution by an employer: The contribution made by an employer is 13% of the basic salary and standard allowance of the employee. However this 13% is further subdivided into:
• 3.67% of contribution towards Employees’ Provident Fund.
• 0.5% of contribution towards EPF Administration Charges.
• 0.5% of contribution towards EDLI Administration Charges.
• 8.33% of contribution towards Employees’ Pension Scheme.
Provident Fund scheme will be calculated up to ₹15,000 of the basic salary and standard allowance. If the Basic is above ₹15,000 PF will be constant. The employee with a monthly salary less than or equal to ₹15,000 will have to contribute mandatory towards EPF.
ESI Employees’ State Insurance Contributions from both employer & employee:
• Employee Contribution: 0.75 %
• Employer Contribution: 3.25 %
Employees’ State Insurance Scheme will be calculated on the gross salary upto ₹21,000. If Gross is above ₹21,000 ESI will be constant.
The statutory compliance referred to the such information based on which Govt. may assess whether your organization is adhering to the norms under the Act and Rules.
Govt. have so many specific rules and acts based on the operation and business pattern of the organization and without keeping close vigil to the each and every organization, it's work on information declared by you. However, appropriate Govt. may intersect with the organization at any level if required.
Therefore, you have to know first the what statutory complaisance are required to be comply based on the business of your organization.
TalentPro can manage all your compliance activities. Compliance activities are complex and high in detail. Doing it inhouse is cumbersome. Outsourcing your compliance needs to an external compliance vendor can help your company adhere to laws and regulations.
Here is our service highlights: https://www.talentproindia.com/servi...ory-compliance, Contact us 04442123497
Team,
TalentPro
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