Running a Small Web Firm: Do I Need to Worry About PF, ESI, and TDS Deductions?

I run a small web development firm. My firm is a sole proprietorship with 4-5 employees. My yearly turnover is less than 20 lakhs.

I have the following questions, please answer them:

1. What is PF, ESI, etc.? Are they applicable to my firm? If yes, how should I proceed?
2. I have 3 programmers whose gross salary is 20k per month each. Do I have to deduct TDS? If yes, what should I do if an employee is not interested in TDS deduction?
3. While hiring new employees, do I have to check their previous employers' documents like Form 16, etc.?

Thanks

Your firm is not applicable under PF & ESI Act.

For PF (Minimum employees = 20) and for ESI (When 20 employees' gross salary is less than 10000).

For TDS, kindly consult your C.A.

For new employees, please verify their experience letters, certificates, etc.

Please provide me with your name and location via email at amitkumargautam1982@gmail.com.

Hi,

EPF is applicable if your firm has more than 20 employees. ESIC is applicable if your firm has more than 10 employees. The Labour Welfare Fund is applicable if you have 5 or more employees. Most people are not aware of this, so you do not need to worry about this as well. TDS is deducted only if your firm is coming under audit (i.e., if your firm has a turnover of more than 40 lakhs). As a sole proprietor, you can show the income tax department that you have more employees, each earning a salary of around Rs. 10,000.

Regarding all the above, you do not need to worry and can concentrate on your core activities. However, if you are hiring anybody, Form 16 will give a clear picture of the salary the candidate was drawing. Background checks, such as photographs, degree/school certificates, photo ID, proof of residence, etc., are needed when you hire any employee.

I hope this information will help you.

Siva

Yes, really good discussion. I have worked in proprietorship and agree on concentrating on core activities. TDS, etc., can be cleared in Form 16 at the end of the year.

Myself running my own boutique. My annual turnover is below 20 lacs, and the number of workers is 15. Please help me with the registration of my boutique name under sole proprietorship.

Very good discussion has taken place here. In fact, the information provided by Mr. Siva regarding Shrey's question is absolutely correct.

I would like to add that a proprietorship concern does not need to deduct Tax at Source (TDS) if the payment is being made to another individual. It is a fact that all employees are individuals. Therefore, no TDS is applicable.

Regards,
YR Rao
8-6-10

I have started my own proprietor firm, and the total number of employees is 4. However, my problem is that I will pay 1 lakh salary to 1 employee, and the remaining three will receive just 40,000. Could you please advise me on how to prepare a salary slip for these employees and how to handle TDS for this employee?

What amount of TDS do I have to deduct when processing the salary?