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

Payroll & Compliance Workshop
Neterwala Group
Day 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

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

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

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

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

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.

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.

This Photo by Unknown Author is licensed under CC BY-NC-ND
How Many Codes?
Name?
Labour Laws - Codes
IT IS ALL ABOUT MONEY

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

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

Code on Wages:
1. Payment of Wages Act,
2. Minimum Wage Act,
3. Payment of Bonus Act, 1965,
4. Equal Remuneration Act
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?

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.

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

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

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.

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

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

• 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

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.

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

What Are the Statutory Components in Payroll?
Gratuity
Maternity Benefit
Professional Tax
Provident Fund
Employees State Insurance Corp
Statutory Bonus
Leave Encashment

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

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.

Maternity Benefit
Sl.
No
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

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

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.

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/

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
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

ESIC
Sl.
No
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.

Statutory Bonus
Sl.
No
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.
Is Statutory Bonus taxable?

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.

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

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

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