Demystifying PF, ESI, and PT Calculations: What HR Professionals Need to Know

How to Calculate PF, ESI, and PT

To calculate PF (Provident Fund), you typically need to consider a percentage of an employee's basic salary and dearness allowance. Employers and employees both contribute to the PF fund. The PF amount is deducted from the employee's salary, and the employer also makes a matching contribution.

Understanding ESIC Contributions

ESIC (Employee State Insurance Corporation) is a social security and health insurance scheme for Indian workers. The ESI contribution is calculated as a percentage of the employee's gross salary, with a portion contributed by the employer and the rest by the employee.

Calculating Professional Tax (PT)

PT (Professional Tax) is a tax levied by state governments on the income earned by individuals. The calculation of PT varies from state to state and is based on the individual's income slab.

If you have any specific questions or need further details on calculating these components, feel free to ask.

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PF is deducted on the basic salary, i.e., Basic + DA is Rs. 6500/-.

1. Employee – 12% (of Basic + DA & Food concession allowance & retaining allowance, if any)
2. Employer – 13.61% (of Basic + DA & Food concession allowance & retaining allowance, if any)

[13.61% = 3.67% PF + 8.33% Pension Scheme + 1.10% Admin. Charges of PF + 0.5% EDLI + 0.01% Admin Charges of EDLI]

EDLI - Employee Deposit Linked Insurance

EPF Calculation

Here, this PF is normally deducted from the basic & DA (dearness allowance) such that Basic salary is 35% and DA is 15% out of the gross salary.

For example, if the gross salary of a person is Rs. 9000/- p.m:
- Basic - 35% of 9000 = 3150
- DA - 15% of 9000 = 1350
- Total = 4500

Such that the total amount would be deducted at 12% (i.e., PF - 540/-). The maximum ceiling limit of PF is Rs. 6500/-. If the basic + DA exceeds 6500/-, then the contributions are optional. Some companies may have their own policies.

Provident fund is calculated towards the employer's contribution at 13.61%:
1. Employer's Contribution
2. EPF A/c No.1 - 3.67%
3. EPF - Admin Charges - 1.1%
4. Pension Fund A/c No.10 - 8.33%
5. EDLI A/c No.21 - 0.5%
6. EDLI - Admin Charges - 0.01%

ESIC Calculation

In ESIC, it includes the medical benefit for both the employee and employer. It is calculated on the basis of gross pay per month, and the maximum limit is up to Rs. 15000/- p.m.

- Employee side - 1.75%
- Employer side - 4.75%

So, if the gross of an employee is 8000/- p.m, his contribution would be 8000 * 1.75% = 140/-. Employer's contribution would be 8000 * 4.75% = 380/-. Therefore, Net pay = Gross pay - Total deductions.

1. Those who are getting 15000/- gross per month will not be applicable under the ESIC act.
2. 20 eligible employees are required to get registered in ESIC.
3. Eligible employees mean those who are getting gross pay up to 15000/-.

ESIC is applicable up to a Gross Salary of ₹15,000 per month. It will also apply to a salary of ₹15,000 per month, not more than that. I am just clarifying it a little more.

Regards,

Also, I would like to add that if there is a provision for a washing allowance in the salary structure, then the washing allowance will be deducted for calculating ESIC.

I want to know how to prepare the PF and ESI challan. You can visit the official website of EPF and ESIC to prepare the PF and ESIC challan and learn how to generate the challan.

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