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Sandeep Kumar   17 May 2024

Payroll & govt payments

Handling payroll and government payments involves several critical steps to ensure compliance with legal requirements and timely payment to employees. Here's a detailed guide to managing payroll and associated government payments:

Payroll Processing

  1. Employee Information Collection

    • Gather necessary employee information, including personal details, job titles, salary, working hours, tax information, and any deductions for benefits or loans.
  2. Salary Calculations

    • Calculate gross salaries based on agreed pay rates and working hours.
    • Include additional compensation such as overtime, bonuses, and allowances.
  3. Deductions

    • Subtract statutory deductions like income tax, provident fund (PF), and Employees' State Insurance (ESI).
    • Deduct contributions for benefits such as health insurance, retirement plans, and other agreed-upon deductions.
  4. Net Salary Calculation

    • Calculate the net salary by subtracting total deductions from the gross salary.
  5. Payslip Generation

    • Generate payslips for each employee detailing gross salary, deductions, and net pay.
    • Distribute payslips securely to employees.
  6. Salary Disbursement

    • Transfer the net salaries to employees' bank accounts via electronic funds transfer or other agreed payment methods.

Government Payments

  1. Provident Fund (PF)

    • Employee Contribution: 12% of basic salary + dearness allowance.

    • Employer Contribution: 12% of basic salary + dearness allowance (split into 3.67% for EPF and 8.33% for EPS, with EPS contribution capped at ₹1,250 for salaries above ₹15,000).

    • Payment Process:

      • Calculate monthly contributions.
      • File the Electronic Challan-cum-Return (ECR) through the EPFO portal.
      • Pay the contributions by the 15th of the following month.
  2. Employees' State Insurance (ESI)

    • Employee Contribution: 0.75% of gross salary.

    • Employer Contribution: 3.25% of gross salary.

    • Payment Process:

      • Calculate monthly contributions.
      • File the ESI return online via the ESIC portal.
      • Pay the contributions by the 15th of the following month.
  3. Income Tax (TDS - Tax Deducted at Source)

    • Calculate TDS based on applicable income tax slabs and exemptions.

    • Deduct TDS from employees' salaries monthly.

    • Payment Process:

      • Deposit TDS with the government using the Challan ITNS-281 by the 7th of the following month.
      • File quarterly TDS returns in Form 24Q.
  4. Professional Tax

    • Varies by state; calculate based on state-specific rules.

    • Payment Process:

      • Deduct professional tax from salaries.
      • Deposit with the state government as per the prescribed schedule.
      • File returns as required by the state government.
  5. Labour Welfare Fund

    • Varies by state; applicable in certain states.

    • Payment Process:

      • Deduct contributions as per state rules.
      • Deposit with the state labour welfare board as required.

Compliance and Record-Keeping

  • Maintain Records: Keep accurate records of all payroll transactions, deductions, and government payments for compliance and audit purposes.
  • Stay Updated: Regularly update knowledge of changes in tax laws, labor laws, and statutory requirements to ensure ongoing compliance.
  • Timely Filings: Adhere to deadlines for filing returns and making payments to avoid penalties.



 2 Replies

T. Kalaiselvan, Advocate (Advocate)     19 May 2024

Thanks for the information, but what is the purpose of posting this information in this forum?

Dr. J C Vashista (Advocate )     20 May 2024

The information provided in the post is very well known to experts on this platform, find out some other site to propagate your acumen.

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