EPF Contribution-Update May 27, 2014

May 29, 2014 Comments off

Reference : http://www.epfindia.com/Circulars/Y2014-15/LC_ReviewPet_MarathwaraGraminBank_203.pdf

 

In 2011, the Hon. Supreme Court of India in the case of ‘Marathwada Gramin Bank Karamchari Sanghatana vs. Management of Gramin Bank’ held that an employer cannot be compelled to contribute more than the statutory ceiling under the PFAct and that employers contributing in excess of the statutory ceiling may at any time discontinue the same.

on May 27, 2014, the EPFO has clarified that The Provident Fund office will not challenge the 2011 Supreme Court ruling. As per the wordings of the letter ( cited above),  Regional Provident Fund offices are directed not to force the employers to contribute towards Provident Fund over and above the statutory ceiling.

 

Check our earlier posts on Provident fund for FAQs & Updates in the provisions

https://implanthr.wordpress.com/2012/06/27/recent-amendments-in-pf-mp-act-1952/

https://implanthr.wordpress.com/2012/04/08/provident-fund-common-issues-faced-by-employees/

Categories: Labour Law Tags: ,

HRA Exemption Limit – Changes

November 19, 2013 Comments off

Source : – Livemint

If you plan to claim tax exemption under house rent allowance (HRA) for the current financial year, remember that you will have to furnish the Permanent Account Number (PAN) of your landlord if your annual rent exceeds Rs.1 lakh, or Rs.8,333 per month. Earlier you had to furnish PAN of your landlord only if annual rent exceeded Rs.1.80 lakh, or Rs.15,000 per month.

What’s the change?
According to a circular (http://tinyurl.com/luyxazk) issued by the Central Board of Direct Taxes (CBDT) on 10 October 2013, if annual rent paid by an employee exceeds Rs.1 lakh per annum, it is mandatory for the employee to report PAN of the landlord to the employer. The new circular replaces the earlier circular wherein for financial year 2011-12 onwards, CBDT had stated that while computing the tax liability employees who are paying house rent of more than Rs.15,000 per month and are claiming exemption under HRA are required to furnish a copy of the PAN card of the landlord.
What is the exemption?
Under section 10 (13A) of the Income-tax Act, if you are a salaried individual and get HRA from your employer, you are entitled for tax exemption. In order to claim tax exemption, you need to produce house rent receipts. For administrative ease, salaried employees who get house rent allowance up to Rs.3,000 per month don’t have to produce rent receipt.
This concession is only for the purpose of tax exemption at source. However, the assessing officer can ask for a receipt, if required, as he deems fit for the purpose of satisfying himself that the employee has incurred actual expenditure on payment of rent.
For any rent above Rs.3,000 per month, you have to produce a rent receipt to claim tax exemption. The actual HRA exemption that one can avail under section 10(13A) would be the minimum of the following: the actual amount of HRA received, or 50% of the salary for individuals residing in metros (Delhi, Mumbai, Chennai or Kolkata) and 40% of the salary for individuals living in non-metros, or the rent paid minus 10% of the total salary.
What should you do if your landlord doesn’t have PAN?
If your landlord doesn’t have a PAN, you have to make a declaration. According to the CBDT circular, in case the landlord does not have a PAN, a declaration to this effect from the landlord along with the name and address of the landlord should be filed by the employee

House Rent Allowance (HRA) – Common Issues

February 19, 2013 9 comments

House rent allowance is one of the key components of wages paid to an employee. The object of payment of HRA is to enable an employee to meet the expenses incurred by him for hiring an accommodation at his place of work. Some frequently asked doubts about HRA are addressed below

1) Is it compulsory to pay HRA as part of wages to an employee?

No. It is not compulsory for an employer to pay certain sum as HRA as part of the wages unless there is a statute (law) in that state making payment of HRA at certain minimum rate as compulsory.

2) Is there any statute making payment of HRA as compulsory?

Certain states like Maharashtra have enacted law namely the Maharashtra Workmen’s Minimum House Rent Allowance Act 1983 where by an employer covered under the Act, is required to provide HRA at minimum rate to workmen. Therefore one needs to check with regard to one’s state about the existence of any such law.

3) Is there any specified formula in fixing the quantum of HRA in the industry?

Except where there is a statutory provision in states like Maharashtra, there is no prescribed formula for fixing the quantum of HRA.

4)  Whether HRA can be uniform for all places?

No.HRA cannot be uniform for all places in order to be realistic. For example, a company fixes HRA at Rs.1500/- for an employee working in a small city. However the same amount cannot be said to be realistic for an employee working at a lage city, where he is compelled to hire accommodation at far higher rates.

5) In the absence of any fixed formula or rule, what are the factors that are relevant to fix the quantum of HRA?

The following are the factors that can be considered as relevant.

i) HRA shall be linked to the place of work/posting of an employee but not to the place of the residence of his family. For example an employee is working at Nasik but his family is staying at Mumbai for education of his children. He is eligible for HRA at the rates fixed for Nasik town but not at the rate fixed for Mumbai.

ii) It shall bear reasonable relationship to the rental values prevailing at his place of work.

iii) It shall be commensurate with the status, roles and levels of the employees. For example the HRA drawn by a junior officer and a Senior Manger cannot be the same. The company needs to have a pragmatic formula, having regard to the size of accommodation which it considers as adequate for each class of employee.

6) What are the sources that can be looked for guidance in deciding the quantum of HRA?

On can look for the following sources
i) The statute, if any prevailing in any state providing for payment of HRA
ii) The HRA paid across  the industry or the companies of similar nature and size, located in the same region in which the company in question is located, can also be adopted as a norm.

7) Is HRA and house rent reimbursement the same?

NO. HRA is paid as part of salary every month as any other regular allowance like dearness allowance. Whereas in the scheme of house rent reimbursement, no HRA is paid and an employee is required to produce rent receipt or some evidence, prescribed by the company for having incurred the expenses towards the rent of his accommodation upon which the company reimburses him the said amount.

8) Is HRA also payable as part of wages when employee is also claiming reimbursement of house rent?

No. The employee is either eligible for HRA or for house rent reimbursement.

9) Is HRA also to be deducted when an employee is on leave without pay?

Yes. When HRA is paid as part of salary, it is to be deducted when an employee is on leave without pay.

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This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc.

The opinions expressed in the various blog posts on this site are those of the respective authors and are not necessarily endorsed by Talentmoon Human Capital Solutions LLP ( ” Talentmoon”)  or its Partners.  The guest posts on the various Labour laws and acts are only intended to present these laws in simplified language and they are not to be construed as legal interpretations or legal advice. The replies to various comments & queries on these blogs are based on the understanding of these Acts and laws, by the guest Author and the reader is advised to use his discretion and take appropriate legal opinion before acting on these posts & comments.

Talentmoon is not a law firm and none of its partners are legal practioners

Is a software company a factory?

January 28, 2013 3 comments

The judgment of the Honorable Bombay High Court in Asst. Director E.S.I.C  Vs  Western Outdoor Interactive Pvt. Ltd, pronounced in July 2012, has become a hot subject for discussion in the I.T industry particularly in Mumbai which  is a hub of many a I.T and ITeS business. The anxious question that throws the I.T industry in dilemma is if an industry dealing with software development or applications in it’s business is a factory, whether the Factories Act 1948 will also be applicable to it?

The dispute arose out of a demand notice issued by the Employees  State Insurance Corporation to two companies of which one is engaged in software development, maintenance of software and content management, creation and maintenance of designs, integration and development of applications for in-flight entertainment system including development of games to be used in in-flight entertainment system. The other company carries on the business of providing stock market services to it’s traders and in the process, uses computers in recording, storing and transmitting share market data to it’s clients.

The companies contended that their activities are commercial in nature and cannot be termed as manufacturing process within the meaning of Sec.2(14AA) of the ESI Act 1948 and further that the explanation to section –II to Sec.2(m) of the Factories Act which defines “Factory”, excludes a premises from the definition of factory merely because some computer units were installed on it if no manufacturing process is carried on such premises.

The High Court has considered the definition of  “factory” both under Sec.2(m) of the Factories Act as well as under Sec.2(12) of the ESI Act and also the definition of “manufacturing process” under Sec.2(k) of the Factories Act since the same was adopted by Sec.2(14AA) of the ESI Act. The High Court observed that the definition of “manufacturing process” in sec.2(k) of the Factories Act(which was borrowed by Sec.2(14AA) of the ESI Act) uses various verbs like making , altering, repairing,  ornamenting etc. to cover various activities like welding etc. within the ambit of manufacturing process though it does not specify such activities in the definition. Similarly though the activity of software development and applications are not specified under Se,2(k) of the Factories Act, they nevertheless fall within the definition of manufacturing process.

The High Court further observed that the definitions of  “factory” under the ESI Act and that under Factories Act are different and the same is wider under ESI Act than under Factories Act since Explanation –II to Sec.2(m) of the factories Act(which excludes the premises, having computer units from factories If no manufacturing process is carried on it) is not incorporated in Se.2(12 ) of the ESI Act and further the issue whether software development is a factory under Factories Act is still pending before the larger Bench of the hon’ble Supreme Court and has no relevance to the present case that since it arose under ESI Act.

Thus the implication of this judgment  will be that it terms a software development unit as factory only for the purpose of the ESI Act but not under Factories Act since that issue is pending before the larger Bench of the Supreme Court. It may not be much concern to I.T industries, if they are covered under ESI Act as factories since they will any how cannot avoid being covered under ESI on the basis of “shops” based on the judgment of Supreme Court in the case of Southern Agency, Rajahmundry Vs  ESIC 2000(7) SCALE 69o.

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This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc.

The opinions expressed in the various blog posts on this site are those of the respective authors and are not necessarily endorsed by Talentmoon Human Capital Solutions LLP ( ” Talentmoon”)  or its Partners.  The guest posts on the various Labour laws and acts are only intended to present these laws in simplified language and they are not to be construed as legal interpretations or legal advice. The replies to various comments & queries on these blogs are based on the understanding of these Acts and laws, by the guest Author and the reader is advised to use his discretion and take appropriate legal opinion before acting on these posts & comments.

Talentmoon is not a law firm and none of its partners are legal practioners.

 

Key Amendments to Workmen’s Compensation Act 1923

July 25, 2012 1 comment

In continuing with our effort to present the various labour laws in a layman’s language, a brief update is provided on Workmen’s Compensation act 1923.

S.NO Section Pre-amended position Post-amended position
1 Title Workmen’s Compensation Act 1923 Tile of the Act amended to “Employees Compensation Act 1923”.
2 Words and expressions Refer to the words ‘workman’ or ‘workmen’ in the Act They are substituted by the words ‘employee’ or ‘employees’ wherever they occur.
3 Schedule II Clerks were not covered for compensation under the Act. Clerks are now covered for compensation. Please refer to  schedule-II for specified employments.
4 Sec.4 (a) The minimum ceiling limit of compensation for death was Rs.80000/- Now it has been revised to Rs1,20,000/-
5 Sec.4(b) The minimum ceiling limit of compensation for permanent total disablement was Rs.90000/- Now it has been revised to Rs1,40,000/-
6 Sub-Sec.2A of sec.4 Non-existent This sub-section was added after sub-section(2).This entitles an employee to reimbursement of actual medical expenditure incurred by him for injuries caused during the course of employment.
7 Explanation II to clauses(a)&(b) of Sec.4 of Sec.4 Explanantion –II prescribes the maximum wage limit at Rs.4000/- p.m for the purpose of computing compensation for death and permanent disablement The Explanation was omitted and a new sub-section (IB) has been added after Sub-section IA of sec.4 whereby the maximum wage limit has been revised to Rs.8000/-p.m
8 Sub-sec.(4) of Sec.4 The existing limit of funeral expenses is Rs.2500/- It has been revised to Rs.Rs.5000/-
9 Sec.25A Non-existent A new section has been added which fixes 3 months time limit for disposal of claims from the date of reference.

 

This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc and currently advises Talentmoon and its clients.

Key Amendments in Industrial Disputes Act 1947

July 17, 2012 1 comment

Continuing with simple presentation on amendment sin various labor law related acts, this blog presents the key amendments in industrial disputes act in a tabular form

 

S.NO Section Pre-amended position Post-amended position
1 Sec.2(a)(i) The scope of appropriate Government so far as central Government is concerned was restricted to only those enumerated in sub-clause(i) of clause(a) of Sec. 2 Now  this scope has been expanded to include companies —

i)In which not less than 51% of the paid up share capital is held by Central Government or any corporation(excluding those mentioned in sub-clause(i) set-up by Central law or held by central public sector undertakings or by subsidiaries of principal undertakings owned by or controlled by the Central Government.

 

ii) Another important amendment made to clause (a) of Sec.2 is to define appropriate government with regard to disputes between contractor and the contract labour. It now depends up on the question whether the industrial establishment which employs the contract  labour in which such dispute arises, falls under the control of Central Government or State Government. If it falls under the control of Central Govt., central govt. will be the appropriate government otherwise, the State Govt.

2 Sec.2(s) Supervisors drawing wages not exceeding Rs.1600/-p.m are coming within the definition of workmen. Now, Supervisors drawing wages not exceeding Rs.10000/-p.m are coming within the definition of workmen.

 

3 Sec.2A Under present provision, an individual dispute raised a workman who is retrenched or dismissed can be adjudicated by the Labour Court/Industrial Tribunal only when it is referred by the Government on recipt of report from Conciliation Officer. After amendment, a new sub-sections (2)&(3) have been added which enable the individual workman who is retrenched or dismissed and who raises the dispute before conciliation officer, can now directly make an application to the Labour Court/industrial Tribunal for adjudication of his dispute after a lapse of 45 days from the date of making an application to the conciliation officer.

(3) The application referred to in sub-section (2) shall be made to the Labour Court or Tribunal before the expiry of three years from the date of discharge, dismissal, retrenchment or otherwise termination of service as specified in sub-section (1).”.

 

4 Chapter IIB-Sec.9(C) The Present Sec. 9(C) does not precisely give the constitution of the grievance redressal mechanism and the procedure. This Section has been substituted by new Sec.9(C). The new Section 9(C) provides –

i)Composition of the Grievance Redressal Committee.

ii)Fixes a thirty day time limit for redressal of the grievance.

 

iii)Provides for appeal to the employer by the workman aggrieved by the decision of the committee.

5 Sec.11 The present section does not refer to the manner of execution of awards made by Labour Court/ Industrial Tribunal. New subsections (9) &(10) have been added to Section 11 where by the Labour Court or Industrial Tribunal shall transmit any award or order or settlement arrived before it to a civil court which will execute the same as if it were a decree passed by it.

This is a Guest post by Sai kumar, an HR professional with three decades of experience in the field of labour laws and industrial relations in a public sector as well as in a reputed labour law firms. 

Sai Kumar has been  involved  extensively in research on labour law issues and case-law  on subjects such as the Industrial Disputes Act, the Standing Orders Act, the Factories Act, the Contract Labour Act, the P.F Act, the ESI Act  and the Gratuity Act etc and currently advises Talentmoon and its clients.

Recent Amendments in PF & MP Act, 1952

June 27, 2012 2 comments

As part of the third article in our 3 part series, we present the recent amendments in the PF & MP Act 1952 in a simple tabular form.

We hope this series will be helpful to all our readers.

Key amendments of P.F & M.P Act 1952 along with schemes there under


0S.No Section/Para Pre-amended position Post -amended position
1 Para 22 of EDLI A  person entitled to receive P.F accumulations of  a deceased member of  a fund or Provident fund exempted under Sec.17 of the P.F Act, is also entitled to receive an amount which is equal to the average of  the balances in the P.F  account of the member during the preceding 12 months or during the period of membership  of the deceased employee whichever is less. If such average balance exceeds Rs.35000/, he is entitled to receive Rs35000/+ 25% of the amount in excess of RS. 35000/- subject to the maximum of Rs 65000/- Now  after the amendment, the  ceiling limits of the average balance of  Rs.35000/- has been revised up to Rs.50000/- and in case the average balance exceeds Rs 50000/– the person is entitled to receive  an additional 40% of the amount in excess of Rs 50000/- instead of the previous 25% subject to the maximum of Rs.100000/-(Rs. one lakh)
 2 Para 22 of EDLI scheme Non existent The new Sub-Para (3) has been inserted after sub-Para (2) of Para 22. This Para stipulates the formula of paying an additional sum under EDLI scheme, in addition to P.F accumulations, to a person entitled to receive the P.F accumulations of the deceased employee who is a member of the Provident Fund exempted under Sec.17 of the P.F Act , if such deceased employee was in employment for a continuous period of twelve months preceding  the month in which he died.

Formula :

Average monthly wages drawn during the preceding 12 months( subject to the maximum of Rs. 6500)/- X 20  or the amount of benefit calculated u/ Sub-Para(1) of Para 22 whichever is higher.

It means, if an employee covered under EDLI Scheme dies and was in employment for a continuous period of 12 months preceding the month in which he died, the benefit payable under EDLI scheme has to be calculated as per the formula under Sub-Para(1) of Para  22 and also as per formula under Para (3) and whichever benefit is higher ,has to be paid to the person entitled to receive it .

Similarly an explanation has also been added  to stipulate a formula  in case of death of part time employees serving in more than one factory or establishment for a continuous period of 12 months.

3 Para 60 of  P.F. Scheme 1952 Non existent Sub-Para (6) was added to Para (60). As per this interest shall not be credited to the account t of the employee from the date on which it has become inoperative.

An account becomes inoperative under Para.72(6), if no claim has been made within three years from the date it becomes payable

4 Para 72(6) of  P.F. Scheme 1952 The  existing sub-Para (6) permits transfer  of certain  sums , incapable of being paid to the employee/legal  heirs  either for want of address or for want of receiving a claim for the  same, to an inoperative account if no claim has been preferred within 3 years of from the date on which the amount becomes payable. After the amendment, the period of thirty six months (but not three years) needs to be computed from the date of preferring an application for withdrawal under Para s (69) or (70).

 

5 Para (20) of Pension scheme 1995 As per Para(1)&(2) of Para (20) the employer has to submit  a consolidated return of the employees entitled to become members and a return of employees leaving service in physical form to the commissioner . Now Para (5) has been added after Para(4) whereby  such returns shall be submitted in electronic form in the format prescribed by the Commissioner.
6 Para 10 of EDLI scheme As per the existing sub- Paras (1)(1-A) &(1-B), the returns specified in them shall be sent to the Commissioner  in physical form. A new Sub-Para(3) has been added requiring the returns specified in Sub-Paras (1)(1-A) &(1-B)  to be submitted in electronic form

 

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