Understanding Commission for Salespersons: Does It Affect ESI, EPF, or TDS?

We provide commission to our salespersons except salary. I have a doubt whether it will come under ESI, EPF, or TDS. Kindly guide me.

Dear Anony,

Any kind of commission or incentive falls under the purview of tax; hence, you would have to consider these earnings as taxable income. PF is calculated on Basic (+DA), while ESI is calculated on gross; hence, any earnings in the form of commission or incentive will not affect the ESI or PF deductions.

Regards,

Rahul Chhabra

Dear Rahul sir,

It will surely hamper ESIC if it is included in the salary. Since it will be a part of the gross salary, the ESIC contribution is calculated based on the gross amount.

Dear Aniket,

Please treat incentives/commissions or reimbursements separately from gross for the computation of ESI. This is a wrong practice. This will push some of the eligible ESI members to be out of ESI for the months they earn an incentive, etc.

Regards,
Rahul Chhabra

Dear Rahul Sir, no, that will not happen as in common practice you don't consider the eligibility of ESIC on commission or incentive, but you have to pay the contribution on the actual gross.

Example of ESIC Calculation

For example, if a person has a gross salary of 20,000/- in the normal course, and in a month he gets a commission of, say, 10,000, then the gross salary calculates to be 30,000/-. In such a case, ESIC must be deducted on 30,000/-. Just because an employee got a commission in one month doesn't mean that you should opt that employee out of ESIC.