Understanding PF and ESI Deductions in Tamil Nadu: Are You Calculating Correctly?

Applicability of PF and ESI on Salary in Tamil Nadu

Please let me know the applicability of PF and ESI on salary in Tamil Nadu. Our CTC components are Basic, HRA, Special Allowance, Conveyance Allowance, and Medical Allowance. I exclude the CA, MA, and HRA while calculating PF and ESI (Basic wages). Is this correct? In the recent PF inspection, we found that Conveyance Allowance and Medical Allowance were also part of PF Basic wages. Please share the updates on this clearly.

Regards,

1. Sir, all allowances, such as HRA, special allowance, conveyance allowance, and medical allowance, if paid monthly in salary, are part of "wages" as far as the ESI Act, 1948 is concerned, and contribution is payable on such components of wages.

2. For further details, you can see the definition of "wages" in the above Act.

PF and ESIC Deductions

PF is deducted from the Basic Amount.

ESIC is deducted on Gross income.

PF Contributions

- PF = 12% on basic + DA
- Employee = 12% on basic + DA
- EDLI = 0.5%
- Admin charges: 1.10% towards provident fund and for EDLI = 0.01%

ESI Contributions

- ESI = 4.75%
- Employee = 1.75%

Hi Aneel, I used to follow the same method of calculating 12% on Basic since we have no DA. However, during the recent inspection, the Inspector mentioned that it should be calculated from Basic, Special Allowance, and Conveyance Allowance. Please review and adjust accordingly. Thank you.