Employee Loan Deductions: Is It Fair to Deduct from On-Hand or Gross Salary?

Hi all,

In our organization, we sometimes provide interest-free loans to a few employees. The total amount is settled on a monthly basis through deductions of 1000, 2000, or 500 rupees.

Please advise if it is acceptable to deduct the above-mentioned amounts from either the employee's on-hand salary or gross salary.

Thank you.

Dear friend,

Please note the following:

(Gross salary) - (statutory deductions + other deductions like staff cafe, housing charges, etc.) - (loan amount) = net salary. The net salary is also called "Take Home Salary."

A loan deduction can be done while processing the salary. However, please make sure that you have completed proper documentation before the loan disbursement. Secondly, ensure that after all deductions, the take-home salary does not go below 50% of the gross salary.

Thanks,

Dinesh Divekar

Loan deductions need to be approved by the Inspector of Factories. Deductions such as fines, loans, and cooperative society loan recoveries also require approval from the Inspector of Factories.

Loans, salary advances, etc., could be deducted from the gross salary of employees. Net salary is, as our colleague perfectly defined it, take-home salary only.

Thank you.

You should deduct the loan amount from their salary to easily track the loan balances at any time. However, ensure that the deduction does not exceed 50% of their Gross Salary if there is no society.