Understanding Employer and Employee Contributions: Labour Welfare Fund, Professional Tax, PF, and Gratuity Explained

I have some questions:
1. What is the contribution in the Labour Welfare Fund from the employer and employee? When, where, and how does the contribution have to be submitted?
2. What are the slabs of Professional Tax?
3. What is the total contribution of the employer in PF?
4. What is the exact formula for Gratuity?

Dear Mr. Nitin,

Good morning.

For your query, I can answer for 2 only:

1. The percentage of employer contribution of PF is 12% of the basic ceiling wages @ Rs. 6500/- p.m.
2. For gratuity calculation, the formula is: Basic/26 * 15 * number of years served.

With best wishes,
R Shanti

Hi,

Please find below the updated tax slabs:

0 to 5000 - 0/-
5001 to 6000 - 60/-
6001 to 10000 - 80/-
10001 to 15000 - 100/-
15001 to 20000 - 150/-
Above 20001 - 200/-

Regards,
Janardhan

Labour Welfare Fund and Profession Tax

Labour Welfare Fund and Profession Tax are state subjects and, therefore, they may vary from state to state. In the case of the Labour Welfare Fund, there are various welfare funds, and the rates applicable to each fund, depending on the industry, will change.

Calculation of EPF Contribution

For the calculation of EPF contribution, not only the basic salary but also the dearness allowance should be taken into account. Similarly, gratuity is calculated based on the last drawn salary, which should include the dearness allowance paid. No amount should be deducted from the salary payable to an employee towards gratuity since it is a payment solely by the employer.

Regards,
Madhu.T.K

Dear Mr. Nitin,

Hello,

An employee's contribution is 12% in the PF of basic salary, which is Rs. 6500. The last basic of the employee is calculated as (basic/26)*15*number of years served. This is the formula for gratuity.

Thanks,
RDS
Dinesh

As per your email request, PT slabs differ from state to state. PF is set at 12% on a basic of 6500. After this, PF is optional, and Gratuity is calculated based on the existing BASIC at the time of leaving (basic/26*15*number of years). ESI rates are Employer 4.75% and Employee 1.75%.

Regards,
Raghu

I want to know what benefits are to be received by an employee through LWF. If LWF is deducted from my salary every month, can it be returned?

Benefits of Professional Tax

I want to know:

1. What are the benefits of Professional Tax?

Professional Tax Applicability

2. Is Professional Tax applicable where there is LWF (Labour Welfare Fund)?

Regards

Difference Between Profession Tax and Labour Welfare Fund

Profession Tax and Labour Welfare Fund are two different things. The former is a tax on income/revenue that an employee or professional should pay to the local administration (Panchayat/Municipality/Corporation). Being a tax, we cannot expect any direct benefit from it besides the development activities that the local administration undertakes for the area and the direct deduction of the amount of profession tax paid from the income of the employee/professional when computing their income tax.

On the other hand, a welfare fund is a contribution towards a fund for the benefit of workers who contribute to it. Since the contribution is a small amount, the benefits will also be limited. However, there are schemes for scholarships for children of the members, medical aid, and in some funds like the Kerala Shops and Commercial Establishment Workers Welfare Fund, provisions for pension payments, maternity benefits, and more are also included.

Regards,
Madhu.T.K

Professional Tax Slabs in Andhra Pradesh

The Professional Tax (PT) slabs were changed by the Government of Andhra Pradesh in April 2013. The revised PT rates for different income brackets are as follows:

1. ₹15,000 to ₹20,000 - ₹150
2. ₹20,001 and above - ₹200

Thank you.

Regards,

2 pt slab

0-999 = 0

10000-14999 = 150

15000 and above = 200

Different states have different rates and methods of collection.

---