Last Updated: Dec 02, 2021
Runtime HRMS automates statutory deductions for ESI, PF, Professional Tax and Income Tax Deductions. Read on to know more.
Runtime HRMS offers flexible options to configure statutory deductions and automates statutory compliances. Below is a detailed description of each deduction.
Employee’s State Insurance (ESI)
Employee’s State Insurance is applicable on businesses that employ more than 20 employees. It is a two-fold deduction where a part of employee’s salary and a part from employer is contributed to ESI. This contribution provides health benefits to employees like medical expenses as well as provides a minimum wage guarantee to employees when they are unable to work due to certain medical conditions.
Part 1 - Employee Contribution: This is 0.75% (effective April 2020) of employee’s total salary paid during a month.
Part 2 - Employer Contribution: This is 3.25% (effective April 2020) of employee’s total salary paid during the month.
Total of Employee and Employer’s contribution is deposited with ESI department every month by way of a challan.
Click here to know more about configuring ESI and generating ESI Returns in Runtime HRMS
Provident Fund (PF)
Like ESI, PF is also applicable on businesses that employ more than 20 employees. It is a also a two-fold deduction where one part from employee’s salary and another part from employer is contributed to PF. This contribution assures mandatory savings to employees during their work-life. The total amounts contributed to PF are returned to employees on their retirement and can also be used to receive pension for the entire life of the employee after retirement.
PF Contribution has following components
Part 1 - Employee Contribution: This is 12% of employee’s basic salary paid during a month.
Part 2 - Employer Contribution: This is also 12% of employee’s basic salary paid during the month. However, this is further divided into two parts:
Part 2A - PF Contribution: 3.67%
Part 2B - Pension Contribution: 8.33%
Apart from the above 12%, Employer also needs to pay following:
1. Admin Charges: 0.5%
2. EDLI Charges: 0.5%
Total of all above components is deposited with PF department every month by way of a challan.
Click here to know more about configuring PF and generating PF Returns in Runtime HRMS
Professional tax is a tax on employment imposed by different state governments. Professional tax rates are also vary state by state.
To illustrate, let’s take the example of Maharashtra.
Here is the tax slab for Maharashtra:
Salary between: 0 to 2499 - NIL
Salary between: 2500 to 2500 - Rs. 60
And so on...
Configuring Professional Tax in Runtime HRMS
Go to Setup > Statutory > Professional Tax.
Go to second tab ‘Salary Components’. Select all those components where PF is deductible. Usually PF is deductible on Basic salary only.
On the same page, click on ‘Locations’ tab to select locations where PF is applicable.
In case you wish to disable Professional Tax deduction for one or more employee as an exception, you can do so in employee profile. Open the employee record, go to Options tab, click to select ‘Do not deduct Professional Tax’ and save to save the changes.