Is Conveyance Allowance Included in ESI Deductions? Seeking Clarity and Advice

:confused:Dear Friends,


Would like to know from you all whether Conveyance allowance is not taken into consideration for coverage purpose in ESI i.e if employee X draws a gross salary of Rs. 10,150/- per month which also includes a conveyance allowance of Rs. 200/- as such whether since we exclude Rs. 200/- (Conveyance from Gross) it is Rs. 9950/- hence ESI is deducted.

But whether on Conveyance allowance is ESI deducted or excluded? I am confused… I hope I could convey my query to you'all.

Pls help me … I need ur opinions / advice on the above.

Pls respond…

Jagdish

Travelling or conveyance allowance will not form part of the salary for the purpose of coverage and also for the purpose of contribution. Therefore, if the employee is getting less than Rs 10,000 after eliminating the traveling allowance, he will be covered, and his contribution will be calculated on the salary excluding such traveling allowance.

Regards,
Madhu.T.K

T. All is wages since it is a payment arising out of the contract of employment. But traveling reimbursement of the actual expenses is not wages. There is clarification from ESI based on court judgments.

I subscribe to the following view from ESI based on court judgments that Travelling/Conveyance is considered wages since it is a payment arising out of the contract of employment. However, traveling reimbursement of the actual expenses is not considered wages.

essceeca

Dear Mr. Madhu,

As Mr. Madhu rightly said, conveyance allowance paid fixed every month will not attract contributions towards ESI. If your salary is less than 10,000 after leaving conveyance, then you are covered under ESI, and contributions need to be paid towards ESI.

Thank you,
J. S. Malik

Dear all,

Another question... What if the conveyance allowance is a part of CTC? It's not a reimbursement, but a fixed component in the CTC.

Dear Riya,

If it is a part of CTC and not reimbursed, then ESI is also not deducted on conveyance. It's a court decision, and after that, ESIC Corporation has issued a circular. Earlier, conveyance was considered part of wages under ESI, but after a court decision, it has been excluded.

Thanks,
J.S. Malik

Dear Mr. Mallik,

I think you are right. I agree with you. Can you tell me the citation of the case or provide me with the reference for further clarification?

Thanks.

Regards,
Ady
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As part of CTC and it is part of wages, it will be considered in covering an employee in ESI scheme. Whether his gross salary (including CTC) is above 10,000/-, he is exempted from ESI.

There is no need for any clarification in this regard. The definition of wages u/s 2 (22) is reproduced below.

"wages" means all remuneration paid or payable, in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorized leave, lockout, strike which is not illegal or lay-off, and other additional remuneration, if any, paid at intervals not exceeding two months, but does not include: (a) any contribution paid by the employer to any pension fund or provident fund, or under this Act; (b) any traveling allowance or the value of any traveling concession; (c) any sum paid to the person employed to defray special expenses entailed on him by the nature of his employment; or (d) any gratuity payable on discharge.

Regards,

Madhu.T.K

There may be different interpretations on a subject, but these depend on different situations. The interpretation of a term may not align with the same term used in a different situation. Therefore, unless an amendment to the basic Act is made, whatever is mentioned in the Act shall be considered applicable.

Regards,
Madhu.T.K

Hi,

As per ESIC Notification effective from 1/4/2002, Fixed Conveyance allowance would be treated as wages both for coverage and compliance.

Regards,
Patrick Ryan