Payroll (India) - Provident Fund (PF), ESIC, and Professional Tax (PT) Deductions
- Team CNC
- Jan 20
- 2 min read
Understanding Provident Fund (PF), ESIC, and Professional Tax (PT) Deductions in India
Managing employee payroll requires compliance with statutory deductions such as Provident Fund (PF), Employees' State Insurance Corporation (ESIC), and Professional Tax (PT). Here’s a brief overview of their deduction slabs, applicability, payment due dates, and income tax consequences.
1. Provident Fund (PF)
Applicability:
Applicable to establishments employing 20 or more employees.
Employees earning a basic salary up to Rs. 15,000 per month are mandatorily covered.
Deduction Rate:
Employee Contribution: 12% of basic salary.
Employer Contribution: 12%, with 8.33% allocated to the Pension Fund and 3.67% to the Provident Fund.
Payment Due Date:
PF contributions must be deposited by the 15th of the following month.
Income Tax Consequences:
Employer contributions up to 12% of salary are exempt from tax.
Employee contributions qualify for deduction under Section 80C of the Income Tax Act, subject to the overall limit.
Interest on PF exceeding Rs. 2.5 lakh (non-employer-contributed) is taxable.
2. Employees' State Insurance Corporation (ESIC)
Applicability:
Applicable to establishments with 10 or more employees.
Employees earning a gross monthly salary up to Rs. 21,000 are covered.
Deduction Rate:
Employee Contribution: 0.75% of gross salary.
Employer Contribution: 3.25% of gross salary.
Payment Due Date:
ESIC contributions must be paid by the 15th of the following month.
Income Tax Consequences:
Employer's contribution is allowed as a business expense deduction.
Employee contributions are not eligible for individual tax deductions.
3. Professional Tax (PT) – Maharashtra
Applicability:
Applicable to all employees, depending on their monthly gross salary.
Deduction Slab:
Up to Rs. 7,500: Nil
Rs. 7,501 to Rs. 10,000: Rs. 175 per month
Above Rs. 10,000: Rs. 200 per month, except for February when it is Rs. 300.
Payment Due Date:
For employers, the due date depends on their registration:
Monthly payment if the tax liability exceeds Rs. 50,000.
Annual payment for liabilities up to Rs. 50,000.
Income Tax Consequences:
Professional tax paid by employees is allowed as a deduction under Section 16 of the Income Tax Act.
Consequences of Non-Compliance
Interest and Penalties: Delays or defaults in payment attract interest and penalties, which vary depending on the applicable law.
Loss of Tax Benefits: Non-payment of employer contributions can lead to disallowance of expenses under the Income Tax Act.
By ensuring timely compliance with these deductions, businesses can avoid penalties and provide tax benefits to employees. Chaudhari & Chaudhary is committed to helping you stay compliant and efficient in payroll management.
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