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jagdish (Service)     09 January 2009

ESI Query a bit Tricky

Dear Friends,



Would like to know from you all whether Conveyance allowance is not taken into consideration for coverage purpose in ESI i.e if employee X draws a gross salary of Rs. 10,150/- per month which also includes a conveyance allowance of Rs. 200/- as such whether since we exclude Rs. 200/- (Conveyance from Gross) it is Rs. 9950/- hence ESI is deducted.


But whether on Conveyance allowance is ESI deducted or excluded? I am confused… I hope I could convey my query to you’all.


Pls help me … I need ur opinions / advice on the above.


Pls respond…




 7 Replies

D.V.RamaKrishna (Advocate)     09 January 2009

Mr. Jagdish,

the Answer to Your query as whether amount of conveyance allowance paid to an employee is to be included in the wages for the purpose of reckoning the coverage under the ESI Act lies in the definition of Wage given in the ESI Act which is reproduced below for the benefit of one and all :

Chapter I, Section 2(22) of the ESI Act : -

"Wages" means all remuneration, paid or payable, in cash to an employee, if the terms of the contract of employment, express or implied, were fulfilled and includes any payment to an employee in respect of any period of authorized leave, lock-out, strike which is not illegal, lay-off and other additional remuneration if any paid at intervals not exceeding two months, but does not include --

(a) .............

(b) any travelling allowance or the value of any travelling concession

(c) .........



A.R.KUPPUSAMI (ADVOCATE)     10 January 2009

The Supreme Court held in the Case M/s.Harihar Polyfibres, that  the Conveyance Allowance is not wages under Sec.2(22)of the ESI Act.And Act itself determined clearly. So, the amount of salary seggregated in payroll including the Con.All. cannot be taken as salary. the ESI contn.deduction for 9950/- is correct.

Jagdish Vasta (Service)     10 January 2009

2 differentviews by my friends i am confused still.... what is it is ESI deducted on Conveyance or not?


H. S. Thukral (Lawyer)     10 January 2009


Akhil Gupta (Manager-HR)     16 January 2009

Hello Mr. Jagdish

You would deduct ESI on 9950 only because ESI does not inculde Conv. Allow.


mr. jagdish

u have to include conv alllowance.

as per ESI act if conv is reimbursed then only it will be excluded and if it is fixed then it is a part  of salary and it shoul be included in calculation of ESI contribution in this case u have to calculate ESI on GROSS.




A.R.KUPPUSAMI (ADVOCATE)     11 November 2009

Conveyance allowance is paid to the employee to compensate the expenses incurred by him on travelling etc., The Travelling  Allowance or expenditure  made to any travelling conv\cession is also being paid to the employees in the nature of conveyance allowance, which is neither wages for the purpose of coverage of an employee u/s 2(22) nor wages for the purpose of payment of contribution. As a proof  so many case laws Rulings are there.  IT IS NOT WAGES. HENCE ON DEDUCTION OF CONVEYANCE ALLOWANCE YOUR FRIED'S SALARY COMES WITHIN THE PURVIEW OF ESI ACT. THE DEDUCTION IS CORRECT

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