Statutory Compliances of Indian Payroll System

Statutory Compliances of Indian Payroll System

Statutory Compliances

In India, there are plethora of statutory requirements that small and large businesses are ought to adhere to for keeping away from any legal complexities. If any company fails to abide by the required statutory compliances, they might incur heavy penalties. Worst case, it can cost their entire business. Now let’s have a look at the statutory compliances of Indian Payroll System:

  1. Minimum Wages Act

In this act there is requirement of fixing of minimum wages for the various skilled and unskilled laborers. It guarantees minimum survival for the workers to take care of their families, children education and medical needs as well.

  1. Maternity Benefits Act

According to this act women employees are entitled to maternity leaves of 26 weeks (amended in 2016 from 12 to 26) at a rate of her daily average wage.

  1. Payment of wages Act

The Payment of wages Act, 1936 assures payment of wages on time and without deductions except some specially authorized by the act. According to this act wages should be paid before the expiry of 7th day of the next wage period where less than 1000 workers work. In case of organizations where more than 1000 workers work they should be paid before the expiry of 10th day of the next wage period.

  1. Gratuity Act

Once an employee completes five years of service in an organization, the employer gives an amount to the employee which is called ‘Gratuity’. It is a one of the many retirement benefits provided by an employer to an employee upon leaving the job.

  1. Employee Provident Fund Act

Every employee and employer is ought to contribute an equal percentage of employee’s salary towards public provident fund for which the employee gets benefited. Employee receives this amount when he leaves the job.

  1. Employee State Insurance (ESI) Act

ESI fund is maintained by ESIC (Employee State Insurance Corporation) for the employees earning wages equal to or less than Rs. 15,000, in order to provide medical and cash benefits to them and their families.

  1. Tax Deduction at Source (TDS)

Every employer is ought to deduct TDS under the section 192 of the IT (Income Tax) act 1961, if an employee’s pay is higher than a permissible limit. Employers also need to maintain Form 16 and 24Q. Few salary components affecting TDS deduction include children education allowance, HRA, investments, travel allowance, special allowance and medical allowance.

  1. Professional Tax

A tax levied by a state government on all individuals who earn a living through any medium is known as professional tax. The amount collected and calculation may differ from one state to another but it has a limit of Rs. 2500 per year.

These statutory compliances mentioned above are for your reference. To know in detail, you can go through the respective websites.

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