Statutory Compliance in Payroll
Overview of Compliance Requirements Statutory compliance in payroll involves adhering to various legal regulations and laws governing employee payments and benefits. Compliance ensures that employers meet their legal obligations and avoid penalties.
Provident Fund (PF)
- EPF Contributions: Both employees and employers contribute 12% of the employee’s basic salary and dearness allowance towards the Employees’ Provident Fund (EPF).
- PF Calculations: The contributions are calculated as a percentage of the employee’s basic pay and dearness allowance.
- PF Returns: Monthly returns need to be filed through the Electronic Challan-cum-Return (ECR) system, detailing the contributions.
Employee State Insurance (ESI)
- ESI Applicability: Applicable to employees earning ₹21,000 or less per month, providing them with medical and cash benefits.
- ESI Contribution: Employers contribute 3.25% of the employee’s salary, while employees contribute 0.75%.
- ESI Benefits: Includes medical care, sickness benefits, maternity benefits, and more.
- ESI Returns: Regular filings are required to report contributions and beneficiaries.
Professional Tax (PT)
- PT Rates by State: Varies from state to state. Employers must be aware of the rates applicable in their respective states.
- PT Registration and Return Filing: Companies must register for professional tax and file returns periodically, detailing the taxes deducted from employees’ salaries.
Income Tax (TDS)
- TDS Calculation: Based on the applicable tax slabs for the financial year.
- Tax Slabs: Income tax rates vary depending on the employee’s income level and the financial year.
- Form 16: Issued to employees as proof of the TDS deducted and submitted to the government.
- TDS Returns: Quarterly returns need to be filed detailing the TDS deducted and submitted.
Labour Welfare Fund (LWF)
- States Where Applicable: Applicable in states like Maharashtra, Karnataka, and Tamil Nadu.
- Contributions: Both the employer and employee contribute a nominal amount towards the fund.
- Benefits: Includes support for welfare activities such as education, healthcare, and housing for employees and their families.
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