Salary Deductions For Pf And Esi Is It Mandatory For A Small Company Which Is Having A Strength Of 30 Members

Greetings,

I am working in a small company, and I am responsible for payroll. Currently, we have 30 employees, and we are planning to increase our workforce through recruitment. With 30 employees currently, I would like to know if it is mandatory to include PF and ESI deductions in the pay slip. Additionally, please advise if there are any deductions apart from HRA, Medical Allowance, Special Allowance, and Dearness Allowance.

Regards,
SYED

ESI is applicable to 10 members, and EPF is applicable to 20 members. Therefore, you need to show both deductions on the payslip.

Dear Syed,

ESI and PF are called social security acts. You have to compulsorily go for it. Please visit the EPFO website; it may shed light on all your queries.

However, regarding ESI, if an employee's salary is less than or equal to 15,000, then it is mandatory. So, please check your payroll. If the total number of employees in an organization under the ESI margin crosses 10, then it is mandatory to get registered. If not, please obtain a code with ESI and make nil returns until you meet the threshold.

The above-mentioned requirement does not apply to PF. It is based on the number of employees only.

You need to show ESI & PF on the payslip. All components that are part of the salary are to be considered for ESI.

Hi Syed,

Vivek is correct. PF and ESIC are mandatory for a company employing 20 and 10 employees, respectively. However, there are ways to minimize the PF and ESIC liabilities as per the Acts. Also, the ESIC limit will be increased from 15000/- to 25000/-. The decision in this regard has already been taken. Only the notification is awaited. If you require any assistance on PF and ESIC, you can contact us.

Regards,
Kapil
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Dear Syed,

Yes, PF and ESI come under the Social Security Act, and these are mandatory for all organizations where 10 or more ESI and 20 or more PF employees are working. It should be mentioned in the Salary Slip.

The most important component of the Salary is the Basic Salary, i.e., (Actual Basic + VDA). Along with the Basic Salary, you can add any kind of Allowance according to your Management's views to make up the Gross amount.

One of the allowances you should provide to your employees is Conveyance Allowance. To some extent, this amount is allowed to be non-taxable if any of the employees fall in the taxable bracket.

Please let me know if you need further assistance or have any questions.

Dear Abhay,

I believe there is a distinction between Conveyance and Allowance. I have not come across any Salary Slip where Conveyance is listed as an Allowance. If there is any specific provision regarding this, please forward it to me.

Thank you.

Of course, Conveyance can be one of the allowances in a Salary Slip and can be made non-taxable to a certain amount if the employee gives a declaration as per IT rules. There is a specific provision in IT related to this. HRA is also made non-taxable if an employee provides a declaration and proof that he is residing in a rented house. These are some of the titles that are usually given in Salary bifurcation so that one can get tax benefits legally. I am not knowledgeable in Taxation, but any member who is well aware of tax rules is requested to comment.

Also, after Basic, DA, HRA, salary titles can be anything, like Education Allowance, Medical Allowance, Travel Allowance, Fuel Allowance, Newspaper Allowance, etc. There are many discussions on this site itself. One such discussion I have come across is:

https://www.citehr.com/259425-conveyance-allowance-tax-exemption-salary-slip.html