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Wshop Payroll & Compliance - Day 2 (1).pptx

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Wshop Payroll & Compliance - Day 2 (1).pptx

  1. 1. Payroll & Compliance Workshop Neterwala Group Day 2
  2. 2. Brief of Topics to be Covered Introduction: Day 1: Pay Heads & Income Tax • Basic Pay Heads ( ex: Basic, HRA, DA, Medical Allowances, Conveyance allowances etc) • Income tax – Basic Framework – Old & New Tax Regime 1. Rates/ Slabs of Income Tax 2. Some Deductions Under Income Tax 3. Comparison of New & Old Tax Regime through examples 4. Introduction of Tax Saving Pay Heads under Old Regime with Income Tax provisions Day 2: • Perquisite • Labour Codes – changes expected • Statutory Elements like PF, ESIC, Bonus, Gratuity, Prof Tax in Payroll • Minimum Wages • Rules and policies around all the above elements
  3. 3. Perquisite
  4. 4. Perquisite u/s 17(2) “Perquisite” may be defined as any casual emolument or benefit attached to an office or position in addition to salary or wages. Any non-cash consideration paid by an employer to the employee is considered to be a perquisite. Perquisites provided by an employer to an employee are taxable under the head of income known as Income from Salaries. “Perquisite” as defined in the section 17(2) of the Income tax Act include: (i) Value of rent-free/concessional rent accommodation provided by the employer. (ii) Any sum paid by employer in respect of an obligation which was actually payable by the assessee (iii) Value of any benefit/amenity granted free or at concessional rate to specified employees etc. (iv) The value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee. (v) The amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees (vi) the value of any amenity as may be prescribed
  5. 5. However, some types of perquisites are tax-free in the hands of the employee: Medical Facilities & Reimbursements • The value of medical treatment provided to an employee or any member of his/her family in a hospital, dispensary or a nursing home maintained by the employer • Money paid by the employer for expenditure incurred by the employee on his/her medical treatment or treatment of any member of his family subject to a maximum of Rs.15,000 Training: • Training to the employees or by way of payment of fees or refresher courses attended by the employees Recreational Facilities • Any recreational facility provided to a group of employees. Thus, health club, sports and similar facilities provided uniformly to all employees by the employer is a tax-free perquisite. Telephone & Laptops Expenses incurred by an employer on a telephone, mobile phone for use by the employee or any member of his household, a laptop or computer belonging to the employer can be treated as a tax-free perquisite. Perquisite – Tax Free
  6. 6. Education for Children • Any amount is given by an employer to an employee’s child as scholarship. • If an educational facility is maintained and owned by the employer and free educational facilities are provided to the children of the employee or where such free educational facilities are provided in any institution by reason of his/her being in employment of that employer, then the value of benefit provided can be treated as a tax-free perquisite if the amount does not exceed Rs.1000 per child per month. Food and Beverage • Free food and non-alcoholic beverages provided by an employer to an employee during working hours at office premises • Paid voucher that are not transferable and usable only at select places is a tax-free prerequisite, provided the value of such a mean is up to Rs.50 per meal. Loan to Employees • Any amount less than Rs.20,000 provided as a loan to an employee Insurance Premium & Pension Contributions • An insurance premium paid by an employer on an accident policy taken out for the employee . • Employers’ contribution to the superannuation fund of the employee up to Rs.1,50,000 per employee per year Perquisities – Tax Free 2
  7. 7. Valuation of Perquisites : As a general rule, the taxable value of perquisites in the hands of the employees is its cost to the employer. Exception to the above rule: Unfurnished Accomodation -Non-Govt. Employees: The value of perquisite is an amount equal to 15% of the salary in cities having population more than 25 lakh, (10% of salary in cities where population as per 2001 census is exceeding 10 lakh but not exceeding 25 lakh and 7.5% of salary in areas where population as per 2001 census is 10 lakh or below). In case the accommodation provided is not owned by the employer, but is taken on lease or rent, then the value of the perquisite would be the actual amount of lease rent paid/payable by the employer or 15% of salary, whichever is lower. In both of above cases, the value of the perquisite would be reduced by the rent, if any, actually paid by the employee Furnished Accomodation- Non govt Employees: The value would be as computed above, increased by 10% per annum of the cost of furniture (including TV/radio/ refrigerator/AC/other gadgets). In case such furniture is hired from a third party, the value of unfurnished accommodation would be increased by the hire charges paid/payable by the employer. However, any payment recovered from the employee towards the above would be reduced from this amount. Perquisities – Taxable
  8. 8. Valuation of Perquisites : As a general rule, the taxable value of perquisites in the hands of the employees is its cost to the employer. However, specific rules for valuation of certain perquisites have been laid down in Rule 3 of the I.T. Rules. These are briefly given below. Unfurnished Accomodation -Non-Govt. Employees: The value of perquisite is an amount equal to 15% of the salary in cities having population more than 25 lakh, (10% of salary in cities where population as per 2001 census is exceeding 10 lakh but not exceeding 25 lakh and 7.5% of salary in areas where population as per 2001 census is 10 lakh or below). In case the accommodation provided is not owned by the employer, but is taken on lease or rent, then the value of the perquisite would be the actual amount of lease rent paid/payable by the employer or 15% of salary, whichever is lower. In both of above cases, the value of the perquisite would be reduced by the rent, if any, actually paid by the employee Furnished Accomodation- Non govt Employees: The value would be as computed above, increased by 10% per annum of the cost of furniture (including TV/radio/ refrigerator/AC/other gadgets). In case such furniture is hired from a third party, the value of unfurnished accommodation would be increased by the hire charges paid/payable by the employer. However, any payment recovered from the employee towards the above would be reduced from this amount. Perquisities – Taxable
  9. 9. Hotel Accommodation: The value of perquisite arising out of the above would be 24% of salary or the actual charges paid or payable to the hotel, whichever is lower. The above would be reduced by any rent actually paid or payable by the employee. It may be noted that no perquisite would arise, if the employee is provided such accommodation on transfer from one place to another for a period of 15 days or less. Motor Car: If motor car is owned or leased by the employer 1. If Used exclusively for official purpose it will not be taxable in the hands of employee irrespective of cubic capacity of engine. 2. Used for both official and personal purpose i) If running and maintenance cost is reimbursed by the employer - Cubic Capacity within 1.6 litre – Rs 1,800 p.m. + Rs 900 p.m. (If driver is provided) Cubic Capacity exceeding 1.6 litre – Rs 2,400 p.m. + Rs 900 p.m. (If driver is provided) ii) If running and maintenance cost is reimbursed by the employee Cubic Capacity within 1.6 litre – Rs 600 p.m. + Rs 900 p.m. (If driver is provided) Cubic Capacity exceeding 1.6 litre – Rs 900 p.m. + Rs 900 p.m. (If driver is vided) 3. Used exclusively for personal purpose I it will be fully taxable in the hands of employee irrespective of cubic capacity of engine. The taxable value is as under: Actual cost of Running and Maintenance of motor car Plus: driver’s salary Plus: normal wear and tear @10% per annum of the actual cost of motor car If motor car is owned by the employee but running and maintenance and driver’s salary reimbursed by employer: 1) Used exclusively for official purpose - it will not be taxable in the hands of employee irrespective of cubic capacity of engine. 2) Used for both official and personal purpose If running and maintenance cost is reimbursed by the employer Cubic Capacity within 1.6 litre – Actual expenses less Rs 2,700 p.m. Cubic Capacity exceeding 1.6 litre – Actual expenses less Rs 3,300 p.m. Perquisities – Taxable
  10. 10. This Photo by Unknown Author is licensed under CC BY-NC-ND How Many Codes? Name? Labour Laws - Codes IT IS ALL ABOUT MONEY
  11. 11. Examples of Flexi Basket Elements – HRA, LTA, Medical allowance, Mobile allowance, Car Maintenance, Meal card, Driver’s salary, Children’s Education allowance, Children’s Hostel allowance, Gym fees etc ( those that have Income Tax implications) THE FOUR LABOUR CODES The four labour codes — the Code on Wages, Industrial Relations Code, Social Security Code and the Occupational Safety, Health and Working Conditions Code — are set to replace 44 labour laws Code on Wages: Seeks to regulate wage and bonus payments in all employments where any industry, trade, business, or manufacture is carried out. It incorporates four legislations: Code on Social Security: Seeks to amend and consolidate the laws relating to social security to extend social security to all employees and workers either in the organized or unorganized or any other sectors. It incorporates nine legislations. Industrial Relation Code The Code on Industrial Relation seeks to simplify the compliance process and promotes ease of doing business in an establishment. It incorporates three legislations: Occupational Safety, Health and Working Conditions Code The Code on Occupational Safety, Health and Working Conditions seeks to regulate workers’ health and safety conditions in establishments with ten or more workers and all mines and docks. It incorporates eleven legislations
  12. 12. Labour Codes A refresher training with focus on BEI is the need of the hour Social Security PF, ESIS, Compensation Act, Maternity Benefits Act,, Employment Exchanges,Gratuity, + 3 others Wages Equal Remmunertion Act Minimum Wages Act Payment of Bonus Act Payment of Wages Act Occupatio nal Health Factories Act, Contract Labour Act, + 11 other acts Industrial Relations Industrial Disputes Act Trade Unions Act Industrial Employment • Applicable to entire India • Date of coming to effect – not decided. Code of Wages is already passed • Intent 1. ease of doing business – short term contracts, hiring firing flexible, industrial strikes harder 2. secure the workforce – new national wage floor, informal & gig workers to get social security net, increase retirement savings • 48 hour work week – but workday can stretch to 12 hours – currently 8 hrs • 64% companies expect impact on P & L ( survey Wills Tower Watson) • OT hours increased from 50 to 125 • Wages ( basic +DA+Retaining Allowance) to be 50% of gross salary • F & F within 2 days Wages definition, workers definition – different in different laws
  13. 13. Code on Wages: 1. Payment of Wages Act, 2. Minimum Wage Act, 3. Payment of Bonus Act, 1965, 4. Equal Remuneration Act Occupational Safety, Health and Working Conditions Code 1. Factories Act, 1948, 2. Mines Act, 1952, 3. Dock Workers Act, 1986, 4. Contract Labour Act, 1970, 5. Inter-State Migrant Workers Act, 1979, 6. The Plantations Labor Act, 1951, 7. The Working Journalist and Other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955, 8. The Working Journalist (Fixation of Rates of Wages) Act, 1958, 9. The Motor Transport Workers Act, 1961, 10. The Sales Promotion Employees (Conditions of Service) Act, 1976 11. and The Beedi and Cigar Workers (Conditions of Employment) Act, 1966. Code on Social Security 1. The Employees’ Compensation Act, 1923, 2. The Employees’ State Insurance Act, 1948, 3. The Maternity Benefit Act, 1961, 4. The Payment of Gratuity Act, 1972, 5. The Cine Workers Welfare Fund Act, 1981, 6. The Unorganized Workers’ Social Security Act 2008 7. The Building and Other Construction Workers Welfare Cess Act, 1996 8. The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and 9. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, Industrial Relation Code: 1. Industrial Disputes Act, 1947, 2. Industrial Employment (Standing Orders) Act, 1946 3. Trade Unions Act, 1926. What Gets Where?
  14. 14. Examples of Flexi Basket Elements – HRA, LTA, Medical allowance, Mobile allowance, Car Maintenance, Meal card, Driver’s salary, Children’s Education allowance, Children’s Hostel allowance, Gym fees etc ( those that have Income Tax implications) Code on Wages 1.The State or Central Government shall not exceed five years to revise minimum wages. 2.The definition of ’employers’ includes any person who directly or indirectly employs one or more persons at an establishment. 3.This Code shall apply to all employees irrespective of monthly wages. 4.The Code provides a standard definition of the term ‘Wages’, as opposed to the different definitions given under the Payment of Wages Act, 1936, the Minimum Wages Act, 1948 and the Payment of Bonus Act, 1965. 5.According to the conditions applicable in the Code, the employer shall pay wages not less than 50% of total remuneration. The computation of wages will include basic pay, dearness allowance, and retaining allowance, and it excludes house rent allowance, conveyance, statutory bonus, overtime allowance, and commissions. Minimum 50% of Cost-to-Company shall comprise basic pay and dearness allowance. 6.It prohibits employers from paying wages less than the minimum wage. The Central or State Governments, as the case may be, are required to notify minimum wages based on (i) the time or number of pieces produced, (ii) skill of workers and (iii) work difficulty. 7.As per the Code, the Central Government will fix the floor wage, considering workers’ living standards. It is to be noted that the floor wages will be different for different geographical locations. 8.The minimum wages decided by the Central or State Governments must be higher than the floor wage. If the minimum wages fixed by the Central or State Governments are higher than the floor wage, they cannot reduce the minimum wages. 9.The employer has the right to deduct wages on the grounds including fines, absence from duty, accommodation provided by the employer or the advance payment made to the employee. It is to be noted that the deductions should not be more than 50% of the employee’s total wage. 10.The employees whose wages do not exceed a specific monthly amount are entitled to an annual bonus of at least 8.35% of their wages or Rs. 100/-, whichever is higher. As per the Code, an employee can receive a maximum bonus of 20% of his annual wages.
  15. 15. Examples of Flexi Basket Elements – HRA, LTA, Medical allowance, Mobile allowance, Car Maintenance, Meal card, Driver’s salary, Children’s Education allowance, Children’s Hostel allowance, Gym fees etc ( those that have Income Tax implications) Code on Social Security 1.Definitions for fixed-term employment, home-based worker, self-employed worker, platform worker and gig worker have been provided. 2.The definition of ‘employee’ was introduced and is applicable across all parts of the Code. 3.It is not mandatory to obtain registration if the industry establishment is already registered under any other Central labour law. 4.A fixed limitation period of 5 years will be set, including proceedings and inquiries for the determination of the money dues of an employee. 5.Fixed-term employees shall be subjected to payment of gratuity on a pro-rata basis by the employer. The gratuity period has been reduced from 5 years to 3 years for working journalists. 6.The Code specifies penalties for certain offences such as: 1. Maximum imprisonment for obstructing an inspector from performing his duty has been reduced from one year to six months. 2. Unlawfully deducting the employer’s contribution from the employee’s wages has been changed from imprisonment of one year or a fine of Rs 50,000 to only a fine of Rs 50,000. 7.The Central Government may defer or reduce the employer’s or employee’s contributions (under PF and ESI) for up to three months in the case of a pandemic, endemic, or national disaster
  16. 16. Examples of Flexi Basket Elements – HRA, LTA, Medical allowance, Mobile allowance, Car Maintenance, Meal card, Driver’s salary, Children’s Education allowance, Children’s Hostel allowance, Gym fees etc ( those that have Income Tax implications) Industrial Relation Code 1. Introduces definitions of both ‘employee’ and ‘fixed-term employment.’ 2. The term ‘workmen’ is replaced and renamed ‘worker’ in the Code. 3. Definition of the term ‘strike’ is now denoted as ‘mass casual leave’ by more than 50% of workers on a given day. 4. It is now mandatory under the Code to approach the grievance redressal committee in case of any grievance. An inquiry, along with its investigation, needs to be completed within 90 days. The time limitation starts from the date of the worker’s suspension. 5. The standing orders only applied to a threshold above 100 or more workers as per the Industrial Establishment Standing Order Act, 1946. The threshold of standing order has now been increased from 100 to 300 workers. 6. The Code has introduced a ‘sole negotiating union’ in establishments with more than one trade union. Such sole negotiating union must have 51% or more workers as members per Section 14 of the Code. Only a sole negotiating union shall be permitted to negotiate terms with the employer. If there’s no eligible sole negotiating union, a negotiating council will be formed, having at least 20% of the workers as members. 7. The Code provides provisions for workers to secure employment after being laid off. A fund shall be initiated consisting of contributions from the employer and the Appropriate Government. 8. The mechanism for resolving industrial disputes shall be constituted by the Central Government comprising a national industrial tribunal and one or more industrial tribunals. 9. No person shall go on strikes and lockouts in breach of contract: • without giving to the employer notice of strike/lockout, as hereinafter provided, within sixty days before striking; or • within fourteen days of giving such notice; or • before the expiry of the date of strike/lockout specified in any such notice; or • during the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings; or • during the pendency of proceedings before a Tribunal or a National Industrial Tribunal and sixty days after the conclusion of such proceedings; or • during the pendency of arbitration proceedings before an arbitrator and sixty days after the conclusion of such proceedings
  17. 17. Examples of Flexi Basket Elements – HRA, LTA, Medical allowance, Mobile allowance, Car Maintenance, Meal card, Driver’s salary, Children’s Education allowance, Children’s Hostel allowance, Gym fees etc ( those that have Income Tax implications) Occupational Safety, Health and Working Conditions Code 1.The Code has been introduced to prescribe uniform standards, reducing paperwork, promoting ease of doing business and reducing administrative bottleneck such as multiple registrations. 2.Leave encashment at the time of discharge/dismissal, death or superannuation during employment are laid out under Section 32 of the Code. Provisions relating to leave encashment are laid out for availing at the end of the calendar year. Most notably, the Code provides for carry-forward of leaves in case a worker does not avail the whole of the leave allowed to him in any calendar year. However, the total number of leave days that may be carried forward cannot exceed 30 days, and any leave with wages that have been refused can be carried forward without limit. 3.Provisions are included regarding the employment of women between 7 pm to 6 am with conditions related to their consent and safety, working hours, and holidays. If the employment of women is dangerous for their health and safety, the employer will provide adequate safeguards to them before their employment. 4.All the establishments must provide washrooms, bathing places and locker rooms for male, female and transgender employees. 5.Provision has been introduced for the employer to take consent from the employee for overtime work. It will also apply to a small establishment with up to 10 workers. Further, the workers shall receive twice the wages for their overtime work. 6.Employers are required to organize annual health check-ups for the employee at their own cost and expense. 7.The employer shall mandatorily issue an appointment letter to the employee to promote formalization at the workplace. 8.The Code prohibits contract labour in core activities except where: • The normal functioning of the establishment is such that the activity is ordinarily done through a contractor, • The activities are such that they do not require full-time workers for a significant portion of the day, • There is a sudden increase in the volume of work in the core activity, which needs to be completed in a specified time. 8.Any person who goes to another state and obtains employment there will be regarded as an inter-state migrant worker. A person drawing wages not exceeding the amount of rupees eighteen thousand per month or such higher amount as may be notified by the Central Government from time to time will be considered inter-state migrants. The inter-state migrant workers are entitled to certain benefits such as: • Option to avail the benefits of the public distribution system either in the native state or the state of employment, • Availability of benefits available under the building and other construction cess fund in the state of employment, • Insurance and provident fund benefits are available to other workers in the same establishment.
  18. 18. https://egazette.nic.in/WriteReadData/2019/210356.pdf Wages Code https://labour.gov.in/sites/default/files/SS_Code_Gazette.pdf Social Security Code https://labour.gov.in/sites/default/files/OSH_Gazette.pdf Occupational Safety, Health and Working Conditions Code https://egazette.nic.in/WriteReadData/2020/222118.pdf Industrial Relations Code Exercise Each Team to present on these one Code each covering the impact / changes
  19. 19. Wage Code - Impact • Basic goes up • PF / ESIC/ Gratuity goes up • Retirement benefits go up • Take home reduced • Uniformity – no wage ceiling, no sector classification, wages defined uniformly for all • Employee and worker defined . Employee has broader definition . Workers are also employees. Apprentice is not an employee • Minimum Wages Act was defined for certain scheduled employments – now it can be fixed by appropriate authorities for all industries • Equal remuneration – all genders ( third gender added now) • Payment of Bonus was earlier mandatory for wage <= 21k . Now it is removed and appropriate govt can fix their own limits • Inspector cum Facilitator in place of Inspector • Value of remuneration received in kind can be maximum 15%. If higher than 15% then it is included in wages
  20. 20. • The new definition of wages (that includes salaries of executives in the private sector) caps allowances at 50% of total compensation. That means basic pay (in government jobs, basic pay plus dearness allowance) will have to be 50% or more of total pay • Companies may see jump in costs as their contribution to the PF kitty rises and gratuity payout increases. • PF and gratuity components, and even take-home pay will be impacted • But their social security kitty as well as post-retirement gratuity amount will be bigger. Gratuity is calculated on the basis of basic pay, which will go up. Code on Social Security - Impact
  21. 21. Industrial Relation Code - Impact New Definition of 'Industry' Under the Code, 'industry' means any systemic activity between employer and workers for the production, supply, or distribution of goods or services with a view to satisfy human wants or wishes that are not merely spiritual or religious, irrespective of whether the activity is pursued with a profit motive or has capital investment. Enhanced Wage Ceiling for Coverage of Supervisory Employees under Workers The threshold for including supervisory employees within the ambit of "workers" has been enhanced from INR 10,000 to INR 18,000 Strengthening the Grievance Redressal Machinery Under the Code, a maximum of 10 members is required to constitute a grievance redressal committee ("GRC") as against the maximum of 6 members required under the existing law. The GRC also needs to have adequate representation of women workers. Now, a limitation period of 1 year has been prescribed for presenting grievances to the GRC. Further, if a grievance remains unresolved by the GRC, or a worker is aggrieved by the GRC's decision, the process no longer remains internal to the industrial establishment, as the worker has recourse to conciliation proceedings. Since non-constitution of a GRC is punishable with a fine of up to INR 100,000, the employers will need to take serious note of such compliance. Benefits of Permanent Employees Extended to More Fixed-Term Workers Deterrence of Arbitrary Strikes and Lock-outs Currently, only workers of public utility services may go on strike after the 14th day of their 42 days' advance notice of strike. The Code, however, requires workers of all industrial establishments to give 60 days' advance notice of strike Similar requirements have been prescribed for employers in relation to lock- outs. Further, the Code expands the definition of "strike" to include concerted or mass casual leave by 50% or more workers on a given day Time Limit of Disciplinary Proceedings for Misconduct by Workers The Code introduces a time limit of 90 days for the completion of an investigation or inquiry into any misconduct by a worker that involves his suspension by the employer. This will protect the interest of workers. Increase in Threshold for Closure, Lay-off and Retrenchment in Certain Establishments Under the Code, industrial establishments operating as factories, mines, and plantations need appropriate Government permission for closure of their establishments or lay-off/ retrenchment of their workers only if they, in the previous year, employed 300 or more workers on an average per working day. Further, the appropriate Government is empowered to increase this threshold. Under the existing law, this threshold is 100 workers, and certain States have increased it to 300 workers. This change will not only bring uniformity across all the States but also give greater operational independence to employers, which, in turn, encourages them to hire more workers.
  22. 22. Team Business – Amol, Sonali, Varun, Sheetal 4 Team Finance – Govind, Shirin, Uday, Hemant, Umesh, Velankani, Deepak 7 Team HQ – Stella, Yogita, Shuvangi, Pooja, Mayank, Shradhha Ambre 6 Team HR – Vijayan, Shradhha, Dhanraj, Chandrasekhar, Kedar, Sachin 5 Final Exercise – Each Team to present on Your key Takeaways Anything you need to Unlearn What can you apply in your area of work What support would you need to apply it in your work area What would you like the organisation to implement/ arrange
  23. 23. What Are the Statutory Components in Payroll? Gratuity Maternity Benefit Professional Tax Provident Fund Employees State Insurance Corp Statutory Bonus Leave Encashment
  24. 24. Quiz 1. What is the salary up to which PF is mandatory? 2. What percentage of PF goes to Superannuation fund 3. Does PF give Life Cover? 4. What is the ESIC amount which we have to pay to the govt? 5. What events get covered by ESIC? 6. How soon can we take benefits under ESIC? 7. For whom do we have to pay Bonus mandatorily? 8. Am I eligible for Bonus after leaving the organisation? 9. What is the Minimum tenure to be eligible for Gratuity 10. What is the ceiling for Gratuity which is non taxable? 11. Is leave encashment Taxable? 12. How many weeks of Maternity Leave does the mother of an adopted child get? 13. Can prof. Tax be paid by the employer directly? 14. What is the treatment of Income Tax if the Prof Tax is paid directly by the Company? 1. 15k ( basic + DA) 2. 8.33% of the Employer’s contribution 3. Yes. 4. 4% - 3,25% + 0.75% 5. Medical benefits, Disability benefit Maternity benefit, Sickness benefit, Unemployment allowance, Death benefit 6. 9 months after registration & 78 days contribution 7. 20+ employee, up to 21k gross salary 8. Yes. Prorata for the period worked 9. 5 years 10. 20 lakhs 11. During service yes. Retirement – minimum of… 12. 12 weeks for a child< 3 weeks. 13. yes 14. Gets added to salary and gets deducted from salary. Net effect is zero tax
  25. 25. Gratuity Sl. No What How? When? Remarks 1 Rate of Payment (15 * last drawn salary X period of employment) / 26 At least 5 years of Service > 6 months of service taken as 1 full year 2 Salary defined as Salary = Basic + DA 3 Frequency On employee's retirement ,Upon the resignation, In case of permanent disability , In the event of death due to accident and illness. To be paid within 30 days of last working day 4 Is there a limit 20 lakhs For Income tax us/ 10(10) • Under the Gratuity Payments, a provision has been made to pay lump sum amount on behalf of employer after retirement to any employee. For this, the employee is required to do a job for at least 5 years. • Applies to whole of India for any establishment with 10 or more employees.
  26. 26. Maternity Benefit Sl. No What How? When? Remarks 1 Confinement Allowed 26 weeks for up to 2 children 12 weeks for 3rd child. Can start 8 weeks prior to expected date of delivery. For Adoption < 3 months it is 12 weeks 2 To become eligible work in that company or establishment for at least 80 days within 1 year 3 Frequency of Return Once a year 4 Income Tax Taxed as normal Salary Income • The Maternity Benefit Provision has been enacted to provide maternity benefits to women employees. • Applies to whole of India for any establishment with 10 or more employees. • Register & Annual Return is mandatory
  27. 27. If the Professional Tax Act is applicable to an establishment, then professional tax will be deducted from the gross salary of every employee working in that establishment who is covered under this law. Since the Professional Tax Act is not applicable in all the states and due to the different rates of professional tax in the states where this act is applicable, the amount of deduction of professional tax also varies from state to state. The amount paid by employees towards P tax is deducted from total Taxable Income Examples: Maharashtra - Rs. 175 – 200 ( Rs. 300 only in Feb) from 7.5 k Karnataka - Rs. 2000 from 15k West Bengal – Rs 110- 200 from 10k Arunachal Pradesh, Himachal Pradesh, Delhi - Nil Professional Tax
  28. 28. Leave Encashment Any leave encashed during service is fully taxable and forms part of 'income from Salary'. However, relief under Section 89 can be claimed. Leave encashment received at the time of retirement / resignation is fully exempt for Central or State Government employee. The income received by private sector employees as leave encashment after retirement or resignation is taxable as 'Income from Salary'. But certain exemptions are applicable to this income. After allowing for the exemption, the remaining amount will be added to the regular income and taxed as per the income tax slabs. 1.In case of any other employee, least of the following shall be exempt: •Actual amount received •3,00,000 •10 months Average Salary (Salary Includes basic pay, dearness allowance and percentage wise fixed commission on turnover) • Average Salary x leaves at the credit of an employee (leaves cannot exceed 30 days for every completed year of service) where Average Salary = Average of salary drawn in the last 10 months immediately preceding the date of retirement. If leave encashment is received by an employee from more than one employer in the same previous year or in different previous years the aggregate maximum amount exempt from tax on account of leave salary cannot exceed 3,00,000.
  29. 29. MLWF • Maharashtra Labour Welfare Fund (MLWF) is Covered under The Maharashtra Labour Welfare Act, 1953. • Applicable to all the companies in the state that has 5 or more persons employed. • Includes all employees, including employees through contractor, except those working in the managerial or supervisory position and drawing wages more than Rs. 3,500/‐ per month. Contribution is to be deducted in respect of the Employees who are present on the Muster rolls on 30th June and 31st December every year, Due dates for payment: For 30th June ending On or before 15th July For 31st December ending On or before 15th January Ads by employee employer Up to 3000 pm 6/ 18/ >3000 12/ 24/
  30. 30. Provident Fund • Applies to whole of India for any establishment with 20 or more employees. • Employees include employees on contract. Apprentice & Trainees not included in employees. PF not applicable on OT. • Any interest on contributions made towards EPF of an employee only remains tax-free for contributions of up to ₹ 2.5 lakh a year. Employer's contribution to Provident Fund (PF), NPS and superannuation aggregating to a total sum of ₹ 7.5 lakh a year is exempt from taxes. Sl. No What How? When? Remarks 1 Rate of Deduction 24% - 12% of employee & 12% by employer 8.33% of Employer contribution goes to Pension fund 2 Deduct on Basic + DA or Minimum Wages 3 Frequency Every month 4 Is there a limit 15000 basic + da Beyond this limit employee can opt out of PF for the additional amount of salary 5 Withdrawal Building house, marriage, education, sickness Limits set for each 6 How does one get it 19 – Withdrawal/10C – Withdrawal of Pension EPS Certificate for transfer 2 months. If service length is > 6m and less than 10 yrs. Else gets after 58 as pension. PF is taxable if withdrawn before 5 years 7 EDLI insurance 35 months of Basic + DA On 15 k it comes to 7 lakhs incl Bonus
  31. 31. ESIC Sl. No What How? When? Remarks 1 Rate of Deduction 4% - 3.25% of employer & 0.75% by employee Benefits can be taken 9 months after registration. At least 78 days contribution 2 Deduct on Gross Salary 3 Frequency Every month From DOJ to LWD 4 Is there a limit 21000 gross 5 What are the Benefits Medical benefits, Disability benefit Maternity benefit, Sickness benefit, Unemployment allowance, Death benefit Maternity – 26 weeks Death benefit – 15 k for cremation + pension Unemployment – at least 2 years contribution 6 How does one get in Company has to register. Employee and all family members have to register • Medical assistance to the employees is mainly related to health, sickness, permanent or temporary disability or any type of occupational injury or any injury or death in the course of employment. • Applies to whole of India for any establishment with 10 or more employees.
  32. 32. Statutory Bonus Sl. No What How? When? Remarks 1 Rate of Payment 8.33% to 20% of years Basic + DA 2 Deduct on Yearly Basic + DA earned 3 Frequency At least once a year Has to be paid within 8 months of Financial year closure 4 Is there a limit 7000 Basic / Minimum wages • Payment of Bonus if at least a person has worked for 30 day. Payable also if the employee has left the services. • Applies to whole of India for any establishment with 20 or more employees. Is Statutory Bonus taxable?
  33. 33. Minimum Wages Act 1948 The purpose of the Act is to provide that no employer shall pay to workers in certain categories of employments wages at a rate less than the minimum wage prescribed by notification under the Act. This Act is applicable to all persons employed, whether directly or through contractors, in a factory or certain specified industrial or other establishments. There are three kinds of wages minimum wage, fair wage & living wage. At the bottom of the ladder there is the minimum basic wage which the employer of any industrial labour must pay in order to be allowed to continue in industry.

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