Understanding ESI and PF: Which Allowances Can Be Deducted and Which Cannot?

Hi,

I want to know which allowances we cannot deduct from ESIC and which allowances should be deductible. The same goes for PF. Also, I want to know whether the Medical allowance can be deducted from ESI or not.

Dear Friend,

The ESIC is deducted from the entire gross salary. Apart from Washing Allowance and Fatigue Allowance, all allowances attract ESI. Additionally, every monthly payment such as incentives or other payments also attracts ESI. For P.F., it is calculated based on the salary.

For further clarification, please refer to the PF & ESI Act.

Regards,
SIDMAN

Dear Sir,

Thank you for the information. Can you tell me if ESI is deducted from other payments such as bonus, incentives, monthly rewards, overtime, etc.?

I also want to know what the consequences are if a person earning a gross salary of Rs. 14,000/- also earns Rs. 1,500 as overtime. Would ESI be deducted from the overtime amount? The total, gross salary + overtime, exceeds Rs. 15,000, which means the individual may be above the ESIC limit.

Thank you.

Hi PHHREADY,

ESIC is deducted from the entire monthly gross salary. "Gross" means (basic + DA + allowance + incentive + overtime). In your case mentioned above, the ESIC limit is calculated based on the gross salary of the individual, and for deduction purposes, gross + overtime are considered.

Hope you understood.

Siddharth

ESI Exemption for Performance-Linked Incentives

A component payable at intervals exceeding two months is exempt from ESI liability. However, if a company pays a performance-linked incentive in June and then in September, is it still exempt from ESI? Suppose it is exempt, but what if the company also pays in November? What happens then?

Regards,

Understanding ESI and PF Contributions

For the calculation of ESI, the gross salary is taken into consideration, which includes Basic + DA + all allowances + OT, except conveyance allowance, up to a maximum of Rs. 15,000/-. Employees' contribution is 1.75%, and employers' contribution is 4.75%.

For the calculation of PF, 12% of Basic + DA + RA + cash value of food concessions, up to a maximum of Rs. 6,500/-, is considered. Employers' contribution is 13.61% of the salary.

Regards

Sorry, my question was: "Is a component payable at intervals greater than two months exempted from ESI liability? What if a company pays a performance-linked incentive in June and then in September? Is it exempted from ESI? Suppose it is exempted, but if the company also pays in November, then what?"