ESI and PF Compliance

//ESI and PF Compliance
News & Updates|| GST Council Meeting Adjourned|| CBIC issues guidelines for deduction and deposit of TDS by DDO under GST

ESI and PF Compliance

Employees’ State Insurance Scheme

This is a contributory fund which enables employees to take benefit of self-financing and healthcare insurance fund contributed by the employee and the employer. This scheme is managed by the Employees’ State Insurance Corporation. It administers and regulates ESI scheme as per the rules in the Indian ESI Act of 1948.

Eligibility for ESI deduction

ESI scheme applies to all establishments which are located in the scheme-implemented areas, where 10 or more people are employed. All employees of a covered unit, whose monthly incomes does not exceed INR 21,000 per month, are eligible to avail benefits under the ESI Scheme. This fund provides cash and medical benefits to employees and their immediate dependents.

ESI deduction is based on the employee’s gross pay. The word gross pay is the total income earned while working in a job, before deductions made for health insurance, social security and state or central taxes.

For ESI, the salary comprises of all the monthly payable amounts such as basic pay, dearness allowance, city compensatory allowance, HRA, incentive allowance, attendance bonus, meal allowance and special allowance. The Gross Pay, does not include an annual bonus, retrenchment compensation, encashment of leave and gratuity.

The contributions under the ESI Scheme is from the employees & employers. The contribution rates, as a percentage of wages payable to the employees, are:

Employees’ contribution 1.75% of the gross pay

Employers’ contribution 4.75% of the gross pay


Therefore, 6.50% of the wages is to be paid as a contribution to Scheme for each worker.

Due Dates to deposit ESI

The due date to deposit ESI Contribution is 21st of the succeeding month.

Statutory Compliance for EPF

The Employees Provident Fund (EPF) is also a contributory fund in which both the employee and employer contribute an equal amount. EPF is a compulsory and contributory fund for the organizations under “The Employees’ Provident Fund and Miscellaneous Provisions Act 1952”.

Contributions for PF Deduction

For EPF, both the employee and the employer contributes an equal amount, which is 12% of the salary of the employee. However, the employees may contribute more than 12% of their salary voluntarily. However, in that case, the employer is not bound to make the extra contribution of the employee.

For PF, the salary comprises of: basic wages, DA, conveyance allowance and special allowance.

For the PF deduction, the maximum limit of salary of the employee is INR 15,000 per month. This means that even if the employee’s salary is above INR 15,000, the employer is liable to contribute only on INR 15,000 that is INR 1,800.

The PF is divided into EPF and EPS contributions. The employees’ contribution is for EPF only whereas from the employer’s contribution, the 8.33% goes to EPS subject to INR 1,250 a month and the rest goes to EPF.

Due Dates to deposit EPF

The due date to deposit EPF Contribution is 15th of the succeeding month.