Navigating Tax and Compliance for Retired Employees Rejoining as Contractors: What Are the Key Considerations?

Hi,

1. If highly skilled retired employees rejoin the same office where they are now receiving a monthly consolidated payment, what would be the TDS and service tax compliance?
2. Can we account for such payments as salary payments?
3. If the above employees are from the IV class, i.e., peon, where they receive payments of less than 15000, what would be the PF compliance? Is there any age bar for PF contributions?

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

Retired employees, when reengaged by the same employer, must deduct TDS as applicable and may choose to pay service tax, provided that the employee has a TIN number. EPF and ESI shall not be applicable upon completion of 58 years of age.

Regards,
V. Murali

Tax and Compliance for Rehired Retired Employees

TDS is applicable as per the IT Act. Service tax is not applicable since they are not service providers, so the question of TIN does not arise.

ESI Applicability

ESI is applicable provided the monthly gross emoluments are below the coverage limit of Rs 21,000/- PM. The same ESI insurance number is to be used.

PF Compliance for Rehired Employees

With regard to PF, obtain Form 11 (New) Declaration Form. Ensure that they have withdrawn their EPF accumulations and are drawing an EPS pension, if eligible. In such a scenario, you need not cover them under PF on the grounds that the employee has attained the age of retirement of 58 years at the time of rejoining and, having been a member of EPF earlier, has withdrawn PF accumulations.