Is It Right to Exclude Conveyance from Gross Salary for ESI Contributions?

Dear All,

I would like to inquire whether conveyance should be included in ESI or not. For ESI, is conveyance exempted from the gross salary? We deduct ESI contributions based on the gross salary but exclude conveyance. Is this approach correct?

Regards,
Lalit Papnoi

Dear Lalit,

City Conveyance allowance is also a part of one's gross salary, so it will also be included in the ESI calculation, as ESI depends on Gross salary. Generally, most companies fix it at Rs. 800/- only, which is exempted from taxes as well.

Regards,
Amit Seth.

Dear all,

Under the ESI Act, wages do not include conveyance/transport/petrol/fuel allowance. Both the employer and employee can exclude this from their gross wages (Gross Pay) to calculate their respective monthly contributions of 4.75% and 1.75%, respectively.

If a company intends to offer a monthly gross salary of Rs.10005 or more to circumvent the ESI Act stipulated limit of Rs.10000/- per month, they can appoint someone in the salary range of around Rs.9500/- gross salary to avoid paying approximately Rs.452/- as employer contribution and around Rs.152/- by the employee.

However, when splitting that salary, if conveyance/transport/petrol/fuel allowance is included in the gross amount of Rs.10005/-, according to the ESI Act, any amount given for conveyance/transport/petrol/fuel will not be considered part of wages. Consequently, the actual Rs.10005 will fall below the Rs.10000 limit. It is advisable to label that allowance differently, such as special allowance or supervisory allowance.

Regards,

S. Kumarasubramanian

Hi,

That's the old story now. But today, conveyance allowance comes under the definition of wages in the ESI Act. Transport/Conveyance allowance is exempted in such a case when an employee claims it as a reimbursement. For example, suppose I go to a place for official use using my own vehicle and claim for conveyance or transport, such expenses are out of the purview of the ESI. However, if the Conveyance allowance is a part of your CTC, it's mandatory to contribute towards ESI. You may also refer to the local ESI office in your city.

Warm regards,
Umesh Chaudhary
(welcomeumesh@yahoo.com)