Understanding Monthly Incentive Impact on ESIC and TDS: Insights on Salary Components and Taxation

Dear all,

We have a monthly incentive scheme. Should I have to declare this on the salary slip? If an employee is covered under the ESIC act, then will the monthly incentive amount affect ESIC? How does TDS work on the monthly incentive? If an employee receives more than the ESIC limit, do we have to cover them under ESIC?

Thanks,
Nisha
Gujarat

Does every employee get a monthly incentive? If yes, then the incentive has to be part of the ESIC and Salary Slip portion too. TDS has to cover the incentive part paid to employee/s.

Dear Nisha,

Greetings of the day!

As per my suggestion: Incentive amount with a gap of 90 days will not attract ESIC, so give quarterly incentives instead of monthly. The incentive amount will attract TDS, and no options are available to avoid it.

If the gross salary reaches 25000, including 5000rs of incentive amount for ESIC members (20000rs fixed gross), then you will have to deduct ESIC on 25000rs, NOT ON 21000RS.

Employee covered under ESI during the Contribution Period i.e. April to Sep or Oct-Mar will continue to be covered, even if their Gross Salary is more than Rs21,000, until the completion of the respective Contribution period. ESI Deduction on Gross earnings in the Month.

But what to do when employees are not on our payroll? We are paying them but receiving the total amount paid to the individuals who work for someone without any deductions or additions. We are not an HR agency or in the hiring business. If we need to deduct TDS on a monthly basis, what will be the rate?