Understanding ESI Applicability, Employee Benefits, and Tax Deduction in Different States

For eligibility of ESI in the organization, the number of employees should be 20. Please help clarify whether if the organization has offices in different states, then the number of employees will be total in the organization or 20 in one state.

Thanks

Hi,

I want to know about the following query: Suppose if any employee submits his investment details at the start of the financial year. Now, at this time, he does not have any investments as such. But suppose he makes investments in, say, insurance, securities, etc., after 3 months, how will his TDS be processed? Also, I want to know if the submitted statement of income can be changed in between the financial year at any time.

Kindly assist me in understanding the above query.

Regards, Mandar Pande Mumbai

Dear Manisha,

As you are aware, the purpose of ESI is to provide benefits to employees in case of sickness and other medical problems through dispensaries and hospitals. The eligibility (number of employees) for ESI will depend on the office location and the number of employees in different locations.

Bharat Kumar

Dear Mr. Maunder Pandy,

In general practice, an employee submits his investment plan at the beginning of the financial year. However, he can change his plan during the financial year, and TADS will be calculated and deducted on a proportionate basis.

Bharat Kumar

Hi Manisha,

I saw your mail. The first part of your query is correct, and the second part has already been answered by Bharat Kumar. Please note that an employee to fall under the purview of the ESI should have a salary bracket of Rs. 7500/- per month (basic + allowances). Above this amount, the employee will not be covered by ESI.

Hope this is clear!

Regards,
Sadashiv Rao 8)

Dear Manisha,

This is in reference to your query on the applicability of ESI in an organization.

It is true that the Employees' State Insurance Act, 1948, and the scheme framed thereunder. For its applicability, employment strength should be more than 20 if the manufacturing process/work is performed without the help of power. If the manufacturing process is carried out with the help of power, then the required employment strength for coverage under the ESI Act is 10 employees.

Under the act, the establishment includes all its branches, whether they are within the state or outside the state.

The reason for this is that this act is a central act and not a state subject.

For arriving at a figure of 20 employees, employees employed/engaged at all the branches will be clubbed together for applicability and coverage under the act.

For the purposes of contribution, only employees whose monthly salary (excluding overtime payment) is less than Rs. 7,500.00 are eligible under the scheme.

The rate of contribution by the employee is 1.75% of the salary and 4.75% of the salary by the employer.

The scheme is applicable only in the notified area. If your organization/branch falls under the notified area, then this scheme is applicable, and contributions are required to be deposited with the Account Regional Director ESI.

In case any of your branches fall under the area in which the scheme has not been notified/implemented, you do not have to deduct and deposit the contribution in respect of those employees but have to maintain and produce records before the inspecting authority for compliance under the act.

Regards,

Anil Anand