Professional Tax in Kerala and PF contribution

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Is it mandatory to deduct and pay professional tax, if the company is in Panjayath?
Salary limit of 15K for PF includes Basic+DA+Allowances or Just basic+DA?

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Hi @afsal.cp ,

Let’s address your queries in two parts: professional tax and the salary limit for Provident Fund (PF).

1. Professional Tax in Panchayat Areas

Professional tax is a tax levied by state governments in India on individuals earning an income from salary or practicing a profession. The applicability and regulations regarding professional tax vary by state.

Telangana Professional Tax:

  • Applicability: Professional tax is applicable in Telangana, and it is levied on individuals, including salaried employees, by the respective local authorities (municipal corporations, municipalities, and panchayats).
  • Panchayat Areas: Even if the company is located in a panchayat area, professional tax must be deducted from employees’ salaries and remitted to the state government as per the provisions applicable in Telangana.

Therefore, it is mandatory to deduct and pay professional tax for employees, regardless of whether the company is located in a panchayat area or a municipal area.

2. Salary Limit for Provident Fund (PF)

The Provident Fund (PF) contributions in India are governed by the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.

Salary Limit and Calculation:

  • Basic Salary + Dearness Allowance (DA): The PF contribution is calculated on the basis of Basic Salary plus Dearness Allowance (DA).
  • Allowance Inclusion: Other allowances (such as house rent allowance, conveyance allowance, etc.) are generally not included in the calculation of PF contributions. The statutory contribution is limited to Basic Salary and DA.

Wage Ceiling for Mandatory PF Contributions:

  • Wage Ceiling: The current wage ceiling for mandatory PF contributions is ₹15,000 per month. This means that if an employee’s Basic Salary + DA exceeds ₹15,000, the PF contribution is still calculated on ₹15,000 unless both employer and employee agree to contribute on the actual salary exceeding this limit.

Summary:

  • Professional Tax: It is mandatory to deduct and pay professional tax in Telangana, including for companies located in panchayat areas.
  • PF Salary Limit: The ₹15,000 limit for PF contributions includes only Basic Salary and Dearness Allowance (DA). Other allowances are not included in this calculation.

For specific guidance and compliance, it is always advisable to consult with a payroll specialist familiar with local labor laws and regulations.

Hope this helps.

Chitra,

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Hi,

A small clarification on the Salary part (Basic). Under PF, Basic definition is totally different from the rest of the Basic definitions.

Under PF alone, Basic is defined as, all components of salary except HRA. Another part which can be excluded are OT. Other than these two, there are no other exclusions under EPFO.

Regards,

Anand C
PAYOF
Kochi
8089946456

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