Salary Structures & Components

Allowance : A component in the structure that is paid out to an employee as an earning is termed as allowance. The breakup of the entire salary is mostly done on the basis of base components and allowances. The allowance can be medical allowance, conveyance allowance, etc. Mostly these components are tax exempted by the organisation or requires a document proof for it to be exempted.

Reimbursable Component : A component that is paid out only when the document proof of its usage is provided are known as reimbursable components. The various components that are considered as reimbursable components are medical reimbursements. Claiming for these components to the maximum value is to be done either every month or during the year end.

Recurring Deduction : A deductible component that would be deducted from the gross salary on a regular basis every month are set as recurring deductions. These can be deductions like insurance premium. For the insurance provided, the premium amount has to be deducted every month from the employee’ salary which is created as recurring deduction that automatically deducts the amount while running the payroll.

Note: This topic keeps updating whenever a new payroll report is added to Keka

As of now, there are around 50 payroll reports available on Keka with many more coming soon.  To view the available reports, please go to Payroll >> Reports.

Few examples of payroll reports available on Keka:

Payroll:

• Current Salary Structure
• Current Salary With Bonus
• Employees Current CTC
• Expense Claim Report
• Financial Information
• Component break up for each employee (Pay Register)
• Contribution / Deduction Reconciliation Report
• Head Count Monthly Report
• Monthly Batch Payment – Bank Transfer, Cheque, Cash
• Payroll Journal Vouchers Report – Tally
• Salary Revision Report
• All Employee YTD Report

Income Tax:

• Annual Income Tax Report
• Annual HRA Reports
• Investment Declaration Summary Report
• Monthly Income Tax Statement

Provident Fund (PF):

• PF Remittance Report
• PF Monthly Electronic Return (ECR)
• PF Contribution card – Form 6A
• PF Joinee Statement – Form 5
• PF Exits Statement – Form 10
• PF Monthly Statement – Form 12A (Revised)
• Aadhar (UIDAI) submission Form
• PF Summary Report
• PF Arrear Report
• PF Admin Charges Report

Employees’ State Insurance (ESI):

• ESI Monthly Statement
• ESI Monthly Return (Electronic)
• Contribution Register (Form 5)
• ESI Overrides
• ESI Summary Report

Professional Tax (PT):

• PT Monthly Statement
• PT State Wise Report (Form 5)
• PT Override Report

If you are looking for any specific report, write to support@keka.com.

Submit claims for tax exempted allowances

Certain allowances are exempted at source, as per The Income Tax Act. The total tax liability of an individual of an employees can come down to a great extent if these allowances are included as part of salary structure.

In most of the cases, your employer might require you to submit bill at the end of financial year against these allowances to get tax exemption. In case you fail to provide bills for these allowances, the total allowance amount becomes taxable.

To submit claims/bills for tax exemptions on such salary allowances, follow the steps below:

Step 1: Go to My Finances >> Manage Tax >> Declaration

Step 2: Under ‘Declaration’, go to ‘Tax Saving Allowances’

Step 3: You can view list of all the allowances which are part of your salary and tax exemption (max. limit) associated with it. If you want to submit a claim/bill, click on ‘Edit’ link against the respective allowance.

Step 4: Enter the amount you want to declare for tax exemption, and click on ‘Upload’ link to upload proof of declaration. Once done click on ‘Save’ button to submit the declaration for approval from employer.

Once the declaration is accepted/rejected by your employer, you can view change in status. Only in case of accepted declarations, it will be considered for tax exemption.

Related:

What is meant by Tax exempted allowances?

An allowance in salary structure requires claim submission for tax exemption, how do I configure this?

Employees are unable to make Income Tax (IT) declarations and submit proofs, why?

How can employee make IT (Income Tax) declarations?

Where can I view and approve all the IT declaration made?

In case you are facing trouble when making declarations, write to support@keka.com.

The rate at which Professional tax is charged is based on the Income Slabs set by the respective State Governments. In case of salaried individual, the Professional Tax (PT) is to be deducted by the employer from the salary and deposit the same with the state government.

In case of organisations having employees spread across various states, they can either choose to deduct PT by employee’s work location, or can choose the central work location (from where the payroll processing happens). A good example of latter case is a company (located in Mumbai) employing sales individual across various states in India, but salary being processed from Mumbai (Maharashtra State) location. In such cases, the company might want to deduct PT of all employees (irrespective of their work location) as per Maharashtra state rules/slab.

To configure PT deduction for your employees, follow the steps below:

Step 1: Go to Settings >> Payroll >> Statutory Filing Information

Step 2: Under ‘Statutory Filing Information’, go to ‘Professional Tax Info’ (Section 3) to turn on/off, or configure PT deduction location.

Step 3: Use the toggle button to turn PT on/off.

In case PT applicable state is same as work location of employees, select ‘Use Actual’. This will enable the PT deduction of employees based on their actual work location.

In case of PT applicable state needs to be defaulted to any specific organisation’s location, select ‘Use Default State’. Click on ‘+Add’ button to choose the default state that needs to be considered for PT deduction.

Once done, click on ‘Save’ button and the settings will be effective immediately.

Related:

What is Professional Tax (PT)?

Keka is not calculating Professional Tax (PT) for employee(s), why?

In case you are facing trouble while configuring PT for your employees, write to support@keka.com.

Employee and the Employer contribute 12% of your basic salary (plus dearness allowances, if any) into your EPF account.
The amount that the Employee contributes (12% of Basic) from his salary gets directly gets deposited in the EPF account, whereas, the Employer’s 12% contribution is distributed in 2 parts; 3.67% is deposited in EPF account and the remaining 8.33% is added to EPS (Employee Pension Scheme) account.

Apart from the 12% of EPF contribution, employer has to pay some other charges, the breakdown of which is given below

• EPF Administrative Charges (A/c No 2) – 0.65% of Basic
• Employees Deposit Linked Insurance (EDLI) (A/c No 21) – o.50% of Basic
• EDLIS Administrative Charges (A/c No 22) – 0.01% of Basic

The PF other charges are cumulative of EPF Admin charges, EDLIS and EDLIS admin charges, that totals to 1.16%.

In case your employees are not able to view selected month’s pay slips, this might be because viewing of pay slip is not enabled yet by the Payroll admin.

To enable viewing of payslip, go to Payroll >> Run Payroll >> Payroll OutCome Actions > Manage Payslips

On the popup that appears, click on the toggle button (to Yes) to enable pay slips viewing. Once enabled, click on ‘Save’ button. You can also choose to email payslip to your employees by clicking on the check-box to select and then clicking on ‘Send Email’ button.

In case your employees are having trouble viewing/downloading pay slip, write to support@keka.com.

Issuing or Adding Bonus to Employee’s Salary

Bonuses can be part of employee’s CTC but might not be paid out on a regular basis. Also, there can be variable bonuses that are paid out based on employee’s and company’s performance, and fixed bonus which are paid out in full.

Example of a variable bonus can be ‘Performance Incentive’, which is paid out (partially or fully) based on company’s and employee’s performance. There can other fixed bonuses such as ‘Retention Bonus’, ‘Joining Bonus’, etc. which are paid out in full based on the negotiation between employee and employer.

Prerequisite: Before issuing bonus, read How do I create bonus?

To issue/add bonus to an employee’s salary, follow the steps below:

Step 1: Go to employee’s profile by typing the employee’s name in the search bar

Step 2: Go to ‘Finances >> Pay’ tab on employee’s profile

Under Pay, go to Salary tab and click on ‘Issue Bonus’ button

Step 3: On the popup screen that appears, choose Bonus (from dropdown) that is part of employee’s salary, amount that needs to be paid out, and payable month.

In case the status chosen is ‘Pending’, the system will automatically include this bonus during the payable month’s payroll run (and ask for payment confirmation). In case of ‘Paid Outside Keka Payroll’, choose the date on which the payment was made, so that the amount, though won’t be paid using Keka payroll, will be considered for tax calculation (default).

Once done, click on ‘Add’ button to add this bonus to employee’s salary.

This bonus will now be visible on employe’s salary page, along with other details

You can issue as many bonuses as you wish to an employee, there is no limitation to number of bonuses that can be paid out to an employee.

In case you are having trouble with issuing bonus to an employee or want to do a bulk bonus assignment to multiple employees, write to support@keka.com.

Creating Bonus

Bonuses can be part of employee’s CTC but might not be paid out on a regular basis. Also, there can be variable bonuses that are paid out based on employee’s and company’s performance, and fixed bonus which are paid out in full.

Example of a variable bonus can be ‘Performance Incentive’, which is paid out (partially or fully) based on company’s and employee’s performance. There can other fixed bonuses such as ‘Retention Bonus’, ‘Joining Bonus’, etc. which are paid out in full based on the negotiation between employee and employer.

To create a new bonus on Keka, follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

Step 2: Under ‘Salary Components & Structures’, go to ‘Adhoc Components’ (Section 3)

Step 3: Under Adhoc components, go to 4th section  ‘Bonus’ and click on ‘Add Bonus’ link to add a new Bonus.

Step 4: On the popup that appears, add Bonus name and description for easy identification. Click on ‘Save’ button when done.

Once done, you will be able to see the newly added bonus in the list of Bonuses.

Once done with creating bonus type, click on ‘Continue’ button to finish adding Bonus(s).

Next Step: To issue bonus to your employees, see How do I issue bonus to my employees?

In case you are not able to create/issue bonus to your employees, write to support@keka.com.

Overriding salary component amounts to be different/varying for employees

Even though the same salary structure is assigned to multiple employees in an organisation, chances are that the amount of components (Other than Basic & HRA) might vary from one employee to other.

For example, though 2 employees are having same salary structure (‘Basic = 40% of Gross’ & ‘HRA = 40% of Basic’), the components such as Mobile Reimbursement, Professional Allowance, Food Coupon, etc. might have different annual value/amount for both employees.

Since the value of components are based on the negotiation between employer and employee, this can vary from one employee to other, and thus needs to be updated on Keka for effectively calculating the amount when running payroll.

IMPORTANT: Before you can override the component amount for employees, the configuration needs to be enabled for the overriding component’s amount. To configure this, read Can I configure a salary component to have different amount for employees having same salary structure?

To override the component amount to be different/varying for employees, follow the steps below:

Step 1: Go to Payroll >> Payroll Admin >> Salary & Income Tax > Employee Component Overrides

Step 2: On the screen that follows:

• For updating the component value of individual employee, enter the annual amount for the component (in case the component doesn’t exist in employee’s salary, enter 0). Blank field will take the default maximum amount configured at the salary structure level. Once done with adding the amount/value, click on ‘Update’ button to override the amount at individual employee level.

• For updating the component value in bulk for multiple employees, click on the ‘Import Component Overrides’ link

Download the Excel file by clicking on ‘Excel template’ on the next screen

Open the Excel file and update the annual amount/value of the component applicable to an employee. In case the component doesn’t exist in employees salary, make it 0. If the amount is calculated according to maximum amount defined at salary structure level, leave it blank.

Once done, save the Excel file and go back to the screen to upload the Excel file

Click on ‘Upload Excel File’ button and choose the file to upload. Once done, this will update the salary component amount of all employees in bulk.

Note: ‘Not applicable’ represents that the component is not present in salary structure of the employee. In case you wish to include this in the salary structure of employees, go back and edit the salary structure.

Related:

How do I create a salary structure and manage its components?

In case you are not able to update the salary component at employee level, write to support@keka.com.

Revision of salary

The revision of employees’ salary in organisations usually happens in either of the 2 ways:

• As and when an employee completes an year since his/her last revision.
• A particular period/month of year is defined for the revision to happen, for all employees.

There can also be exceptional cases where employer decides to revise the salary of an employee even if yearly cycle of revision is not yet completed.

In order to revise the salary of an employee, follow the steps below:

Step 1: Go to employee’s profile by typing the employee’s name in the search bar

Step 2: Go to ‘Finances >> Pay’ tab on employee’s profile

Under Pay, go to Salary tab and click on ‘Revise Salary’ button

Step 3: On the revision screen that appears, enter the ‘Revision Effective From’ date of new CTC.  You can choose to either enter new annual CTC amount, or the percentage of revision that might have happened.

By default, the ‘Range Based’ salary structure will be selected, change this in case the employee has been assigned to a custom salary structure by clicking on ‘Manually Choose’ and selecting the respective structure from the drop-down.

Step 4: You can add any bonus that might be part of the CTC of employee by clicking on ‘Add Bonus’ button. You can choose this bonus to be either a fixed amount of CTC or a percentage of the CTC.

Choose additional fields such as Bonus Type, Due on, and Status and click on ‘Save Bonus’ to add this bonus in employee’s CTC.

You can add multiple bonus for an employee.

Once done, click on ‘Revise’ to completing the salary revision of an employee.

In case you are having trouble with salary revision of an employee or want to do a bulk salary revision of multiple employees, write to support@keka.com.

Viewing & Downloading Pay Slips

To view and download pay slip of an employee, follow the steps below:

Step 1: Go to employee’s profile by typing the employee’s name in the search bar

Step 2: Go to ‘Finances >> Pay’ tab on employee’s profile

Step 3: Under Pay tab, go to ‘Pay Slips’ tab and choose the desired month on the left hand side to view salary slip

Scroll down to the bottom and you will find an option to ‘Download’ the pay slip. Click on ‘Download’ button to download the pay slip.

In case your employees are not able to view selected month’s pay slips, this might be because viewing of pay slip is not enabled yet by the Payroll admin.

To enable viewing of payslip, go to Payroll >> Run Payroll >> Payroll OutCome Actions > Manage Payslips

On the popup that appears, click on the toggle button (to Yes) to enable pay slips viewing. Once enabled, click on ‘Save’ button. You can also choose to email payslip to your employees by clicking on the check-box to select and then clicking on ‘Send Email’ button.

In case you are having trouble viewing/downloading pay slip of your employee, write to support@keka.com.

Configuring salary component amounts to be different/varying for employees

Even though the same salary structure is assigned to multiple employees in an organisation, chances are that the amount of components (Other than Basic & HRA) might vary from one employee to other.

For example, though 2 employees are having same salary structure (‘Basic = 40% of Gross’ & ‘HRA = 40% of Basic’), the components such as Mobile Reimbursement, Professional Allowance, Food Coupon, etc. might have different annual value/amount for both employees.

Since the value of components are based on the negotiation between employer and employee, this can vary from one employee to other, and thus needs to be updated on Keka for effectively calculating the amount when running payroll.

To make a salary component customisable and have different amount at employee level, follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

Step 2: Under ‘Salary Components & Structures’, go to ‘Recurring Components’ (Section 2) to view list of salary components.

You can either choose to make an existing salary component customisable at employee level, or configure this when creating a new salary component as well.

Step 3: To configure salary component to be customisable, click on ‘Edit’ link against the component

Step 4: On the pop-up that appears, select the option ‘Allow this component value to be customized and override at employee level ‘.

Once done, click on ‘Update’ button to save the settings for the respective component.

Related:

How do I override salary component value/amount for an employee?

In case you are having trouble with customizing salary component or over-riding its value, write to support@keka.com.

Configuring tax exempted allowance for proof submission

Certain allowances are exempted at source, as per The Income Tax Act. The total tax liability of an individual of an employees can come down to a great extent if these allowances are included as part of salary structure.

In most of the cases, employer might require you to submit bill at the end of financial year against these allowances to get tax exemption. In case you fail to provide bills for these allowances, the total allowance amount becomes taxable.

Here are examples of few allowances:

Medical Allowance/Reimbursement
Tax Exemption up to Rs 1,250 per month Rs 15,000 per annum

Conveyance/Transport allowance
Tax Exemption up to Rs 1,600 per month or 19,200 per annum

Leave Travel Allowance (LTA)/Leave Travel Concession (LTC )
Actual travel cost can be claimed for tax exemption twice in a block of four years (u/s. 10(5))

To configure proof submission for an allowance, follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

Step 2: Under ‘Salary Components & Structures’, go to ‘Recurring Components’ (Section 2) to view list of salary components.

You can either choose to make an existing salary component tax exempted (and requires proof submission), or configure this when creating a new salary component as well.

IMPORTANT: You will be able to change settings of any salary component only while it is not assigned to any existing salary structure.  In case the component (you wish to update) is already assigned to any salary structure, please delete it to make changes to settings and then re-assign it to the structure. The new settings will only be applicable for future payrolls and won’t affect any past/previous payroll data.

Step 3: To configure requirement of proof submission (for an allowance) for tax exemption, click on ‘Edit’ link against the component

Step 4: On the pop-up that appears, select the option ‘This component is Tax exempt (not taxable). Income tax Section ______‘ and its sub-section ‘Required submission of document proof (or bills) to claim for tax exemption‘.

Once done, click on ‘Update’ button to save the settings for the respective component.

Go to salary structure and re-assign the component. To learn how to assign component to a salary structure, see How do I create a salary structure and manage its components?

Related:

How do I submit claims for tax exemption on salary allowances (e.g. Medical Reimbursement, Conveyance, LTA etc.)?

In case you are having trouble configuring proof submission option for an allowance, write to support@keka.com.

Hiding a component from salary slip

There can be few salary components that an organisation is paying out to employees separately, which means, though these components can be part of Gross salary of employees, but they might not have a direct monetary value and are usually not part of Salary Slip.

One example of such component can be ‘Food coupons/cards’. Food coupons though can be part of your Gross salary, but might not be a direct earning (and thus doesn’t have a direct monetary value). Such components are usually paid out separately (in form of food coupons) and are not included in the salary slip of employees.

To hide a component from salary slip, follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

Step 2: Under ‘Salary Components & Structures’, go to ‘Recurring Components’ (Section 2) to view list of salary components.

You can either choose to hide an existing salary component from the payslip of employees, or configure this when creating a new salary component as well.

IMPORTANT: You will be able to change settings of any salary component only while it is not assigned to any existing salary structure.  In case the component (you wish to update) is already assigned to any salary structure, please delete it to make changes to settings and then re-assign it to the structure. The new settings will only be applicable for future payrolls and won’t affect any past/previous payroll data.

Step 3: To hide an existing component from the payslip of employees, click on ‘Edit’ link against the component

Step 4: On the pop-up that appears, select the option ‘This component is paid separately‘ and its sub-section ‘Hide component in Payslip (and exclude from gross earnings calculation in Payslip)‘.

Once done, click on ‘Update’ button to save the settings for the respective component.

Go to salary structure and re-assign the component. To learn how to assign component to a salary structure, see How do I create a salary structure and manage its components?

Related:

An allowance in salary structure requires claim submission for tax exemption, how do I configure this?

Can I configure a salary component to have different amount for employees having same salary structure?

In case you are having trouble hiding the component from payslips, write to support@keka.com.

Employees earning Basic (plus DA) Salary of more than Rs. 15,000/month can choose to contribute more towards their PF contribution. Instead of restricting the contribution to be 12% of (statutory minimum Basic) Rs. 15,000/month, they can choose to contribute 12% of their actual Basic (plus DA).

For example, if the Basic (plus DA) salary of employee is Rs. 25,000, he can contribute 12% of Rs. 25,000 instead of Rs. 15,000. This might lower the take-home salary, but will help the employee reduce the tax liability (The employer PF contribution is exempt from tax and employee’s contribution is taxable but eligible for deduction under section 80C of Income Tax Act).

Please note that the employer is not bound to match your contribution, and can limit his contribution to statutory minimum of Rs. 1800/month.

To configure employees’ PF contribution to be 12% of their actual Basic, follow the steps below:

Step 1: Go to Settings >> Payroll >> PF and ESI Settings

Step 2: On ‘Provident Fund & ESI Setting’ screen, choose the 2nd option that says ‘Allow PF calculated as percentage of Basic Salary beyond Statutory Minimum’.  Once this option is selected, it will calculate PF as 12% of Basic for all employees irrespective of the Basic (plus DA) amount.

In case, you want to limit the employer’s contribution amount per month, check the option that says ‘Pay Employer Contribution of Provident Fund outside the Gross Salary of an Employee’ and then choose the sub-option ‘Limit employer’s PF contribution amount maximum of ____ Monthly’. Fill in the blank with desired maximum monthly amount you wish to contribute.

Once done, click on ‘Complete’ button to save the settings.  The employees’ contribution will now be calculated as 12% of their actual Basic (plus DA).

Related:

How do I limit employees’ maximum monthly PF contribution to Rs. 1800?

What are other charges of Provident Fund? How is it calculated?

How to configure Employer’s PF contribution to be inside/outside of employee’s Gross Salary?

How to configure PF other charges to be inside/outside of employee’s Gross Salary?

Can PF contribution amount (of employee & employer) be over-ridden?

Can an employee opt-out of PF?

In case you are having trouble setting employees’ PF contribution, write to support@keka.com.

Employees earning Basic (plus DA) Salary of more than Rs. 15,000 can choose to limit his contribution to Rs. 1800/month and not contribute 12% of the actual Basic (plus DA) he is receiving. Though, this will increase the take-home salary, it will also increase the tax liability (The employer PF contribution is exempt from tax and employee’s contribution is taxable but eligible for deduction under section 80C of Income Tax Act).

To limit the employees’ maximum monthly contribution towards PF to Rs. 1800, follow the steps below:

Step 1: Go to Settings >> Payroll >> PF and ESI Settings

Step 2: On ‘Provident Fund & ESI Setting’ screen, choose the 1st option that says ‘Limit PF amount to statutory minimum salary for all employees’.  Once this option is selected, it will calculate PF as 12% of Basic for all employees whose Basic is less than or equal to Rs. 15,000/month, and limit to to Rs. 1800/month in case Basic salary goes beyond Rs. 15,000.

Once done, click on ‘Complete’ button to save the settings.  The employees’ contribution will now be restricted to Rs. 1800/month in case the Basic (plus DA) goes beyond Rs. 15,000/month.

Related:

How do I configure employees’ PF contribution to be 12% of their actual Basic and not limited to Rs. 1800 monthly?

What are other charges of Provident Fund? How is it calculated?

How to configure Employer’s PF contribution to be inside/outside of employee’s Gross Salary?

How to configure PF other charges to be inside/outside of employee’s Gross Salary?

Can PF contribution amount (of employee & employer) be over-ridden?

Can an employee opt-out of PF?

In case you are having trouble limiting employees’ maximum PF contribution, write to support@keka.com.

Now that you have created all the salary structures that exists in your organisation, you are required to assign respective salary structures to your employees.

IMPORTANT: In case of employees falling under ‘Range Based’ salary structure, there is no assignment of structure required, because the system is automatically going to assign respective structure (Range Based) against the Gross salary of the employee. ‘Range Based’ structure is considered as the default salary structure by Keka and is assigned to all employees as soon as the Gross salary of employees is added.

To assign salary structure to employee, follow the steps below:

Step 1: Go to employee’s profile by typing the employee’s name in the search bar

Step 2: Based on the scenarios defined below, choose the method to update salary structure

• 1st time assignment of salary and structure:

If you are trying to add salary and assign structure for the 1st time, go to ‘Finances’ tab on employee’s profile

Once on ‘Finances’ tab, click on ‘Add Salary’ under ‘Summary’ section

If Employee’s worker type is Permanent – Add the Gross (Annual) salary of the employee, and choose the salary structure applicable (by default Range Based Salary Structure will be assigned).

In case of ‘Custom Salary’ structure, choose ‘Manually Choose’ radio button and select the structure from the drop-down

If Employee’s worker type is Contract – Add the Gross (Annual) salary of the employee, and choose the ‘Contractor Salary’ structure applicable from the drop-down.

You will also be asked to select the date from which this salary is going to be effective.  Once done, click on ‘Save & Continue’ to save the salary & structure details.

• Correction of salary and structure (No salary processed yet for the employee):

If you want to make corrections to salary amount, structure or effective from date of salary, go to ‘Finances >> Pay’ tab on employee’s profile

Under Pay, go to Salary tab and click on ‘Edit’ link against the salary you wish to update

On the pop-up that appears, you can make changes to salary amount, salary structure or effective from date of the salary.

Once done, click on ‘Update’ button and the details will be updated.

Related:

How do I revise salary of employees?

In case you want to bulk update the salary data & structure for your employees, or having trouble updating the structure, write to support@keka.com.

‘Contractor Salary’ structure is defined for employees working on contract basis in your organisation. You can choose to create multiple contractor salary structures by defining the TDS amount that needs to be deducted under each structure.

To create ‘Contractor Salary’ structures, follow the steps below:

Step 1: Go to Settings >> Payroll >> Contractor Salary Structures

Step 2: On the next screen, click on ‘+ Add New Structure’ to add a new contractor salary structure.

Step 3: Give the salary structure a name and description for easy identification.  There are no break-up of components for contract employees and all the amount is considered under ‘Basic’. Use the checkbox to define if there is any TDS that needs to be deducted for contractors having this salary structure.

Once done, click on ‘Create’ button to add the new contractor salary structure.

All the contractor salary structures are visible as listing post creation.  In case, you wish to edit/update them at any point in time, click on ‘Edit Structure’ link.

Related:

How do I assign salary structure to my employees?

In case you are having trouble while creating contractor salary structure, write to support@keka.com.

Edit ‘Range Based’ salary structure

Since setting up salary structure and defining various components can be a hectic task if there are too many components and conditions involved, it is quite common to miss out on adding any salary component to a ‘Range Based’ salary structure, or define the value/formula incorrectly. This can be easily fixed by editing the salary structure. To edit a ‘Range Based’ salary structure, follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

Step 2: Go to ‘Salary Range’ (section 4) to view ‘Range Based’ salary structure section.

Step 3: Choose the salary range (will be highlighted in Blue) you wish to edit and click on ‘Edit Structure’ button.

Clicking ‘Edit Structure’ will enable editing of all components under the chosen salary range.

Step 4: Once in edit mode, you can edit the name of range, edit value/formula for components and/or delete any component which is not part of the structure. You can also add more components to this structure, by clicking on ‘+ Add Component’ and choosing from the drop-down list.

On the ‘Edit’ pop-up, you can either define a fixed annual value of the component (example – Medical Reimbursement is Rs. 15,000/year for all employees), or assign a formula for calculation (example – Basic is 40% of Gross).

Once done with defining the value/formula for calculation of component, click on ‘Update’ to save the value.

IMPORTANT: In case the component amount varies for employees (and cannot be defined by fixed value or formula) within a salary range. Please read the Related articles below to learn how to update the value of component at employee level.

Related:

How do I override salary component value/amount for an employee?

Can I configure a salary component to have different amount for employees having same salary structure?

Once you have configured the value of all components in a salary range, click on ‘Save’ button to finish creating salary structure for the chosen salary range.

Confirm the changes by clicking on ‘Yes’

Once done with editing/updating structures, click on ‘Apply Changes’ to bring the new changes into effect immediately.

This will edit/update the ‘Range Based’ salary structures.

In case you are having trouble editing/updating any salary structure, write to support@keka.com.

Since the salary structure and its components can vary based on negotiation between employee and employer, it is quite possible that an employee, though falling under a particular salary range, has a different salary structure (where Basic, HRA and components included in salary are different). In such cases, even though a ‘Range Based Salary’ structure exists, it won’t work for this employee, given that the components and values differ.

To create ‘Custom Salary’ structure in such cases, follow the steps below:

Step 1: Go to Settings >> Payroll >> Custom Salary Structures

Step 2: On the next screen, click on ‘+ Add New Structure’ to add a new custom salary structure.

Step 3: Give the new salary structure a name and description for easy identification.  Use the right side section to edit value/formula for a component, delete component which are not part of this structure, or add a new component.

Once done, click on ‘Create’ button to add the new custom salary structure.

Related:

How do I create a salary structure and manage its components?

All the custom salary structures are visible as listing post creation.  In case, you wish to edit/update them at any point in time, click on ‘Edit Structure’ link.

Related:

How do I assign salary structure to my employees?

In case you are having trouble while creating custom salary structure, write to support@keka.com.

Creating Salary Structure & Components

For any payroll system to know the details of salary that needs to be paid out to employees, it is important to have a salary structure in place for all your employees.  Salary structure of an employee, in simple words, can be defined as group of compensation items (a.k.a. salary components) with defined values.

Once salary structure is defined, it is assigned to respective employees, for the system to know about the details of payment to be made.

There are 2 part to creating a salary structure:

1. Defining salary components/compensation items
2. Grouping of components and assigning values to create a structure

Defining salary components

To define salary components such as Medical Allowance, Conveyance, Food Coupon, etc., follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

Step 2: Under ‘Salary Components & Structures’, go to ‘Recurring Components’ (Section 2) to view list of salary components.

This screen will be Super Set of all the salary components that exists in your organisation irrespective of whom it is assigned to. Few components, such as Medical, Transport, Gratuity etc. are enabled by default and can be configured before adding it to any salary structure. A component will only be applicable to employees, if it is added to their salary structure.

On this same screen you can also add any new salary component that exists in your organisation.

IMPORTANT: Basic Salary, HRA, PF (If applicable) and Special Allowance are treated as Base Component for any salary and need not be configured on this screen.  We only define their calculation when creating salary structure.

Step 3: To add new Salary Component, click on ‘+ Add Component’ button at the left bottom of the screen.

Step 4: On the pop-up that appears, you can choose the component type and configure its details

To learn about various components type that can be configured, read What is the difference between Allowance, Reimbursable Allowance and Recurring Deduction?

Related:

An allowance in salary structure requires claim submission for tax exemption, how do I configure this?

How do I hide a component from salary slip?

Can I configure a salary component to have different amount for employees having same salary structure?

Once done with creating and configuring all the salary components that exists in your organisation, click on ‘Continue’ button.

Go to ‘Salary Range’ (section 4) to view ‘Range Based’ salary structure section. We are going to take ‘Range Based’ as an example to understand the configuration.

Grouping of components and assigning values to create a structure

Once on ‘Salary Range’ screen, you can view pre-defined ranges of salary. You can make edit to the ranges or delete any unwanted range if you wish to, by clicking on the tab.

To start creating a structure follow the steps below:

Step 1: Choose the salary range (will be highlighted in Blue) you wish to configure and click on ‘Edit Structure’ button.

Clicking ‘Edit Structure’ will enable editing of all components under the chosen salary range.

Step 2: Once in edit mode, you can edit the name of range (for easy identification), edit value/formula for components and/or delete any component which is not part of the structure. You can also add more components to this structure, by clicking on ‘+ Add Component’ and choosing from the drop-down list.

On the ‘Edit’ pop-up, you can either define a fixed annual value of the component (example – Medical Reimbursement is Rs. 15,000/year for all employees), or assign a formula for calculation (example – Basic is 40% of Gross).

Once done with defining the value/formula for calculation of component, click on ‘Update’ to save the value.

IMPORTANT: In case the component amount varies for employees (and cannot be defined by fixed value or formula) within a salary range. Please read the Related articles below to learn how to update the value of component at employee level.

Related:

How do I override salary component value/amount for an employee?

Can I configure a salary component to have different amount for employees having same salary structure?

Once you have configured the value of all components in a salary range, click on ‘Save’ button to finish creating salary structure for the chosen salary range.

Confirm the changes by clicking on ‘Yes’

Follow the process for each ‘Salary Range’ (‘Rs. 5,00,001 to Rs. 10,00,000’ & ‘Rs. 10,00,001 & Above’ in above image) that you might have in your organisation to create salary structures.

Once done with configuring structures, click on ‘Apply Changes’ to bring the new salary structures into effect immediately.

For creating ‘Custom Salary’ structure, please visit How do I create or edit a Custom Salary Structure?

In case you are having trouble creating salary structure for your organisation, write to support@keka.com.

Range Based, Custom and Contractor Salary Structure

The way salary structures are defined in organisations, varies drastically.  This is because each organisation has the flexibility to choose salary components along with allowances that they want to provide to their employees. It is always recommended/important to decide on the compensation structure, in a way that maximises employees’ net salary and minimises tax burden.

Related:

How do I create a salary structure and manage its components?

Keka gives you the flexibility to setup any type of salary structure that you might be following. Here’s a brief of various salary structures that can be configured on Keka:

Range Based Salary

In cases where the salary structure of employees remains same as long as they are within a particular bracket of salary range, ‘Range Based Salary’ structure is the best way forward.  In simple terms, the calculation of Basic Salary (w.r.t Gross Salary) and HRA (w.r.t. Basic + DA) doesn’t change as long as employees’ salary has a lower and upper limit defined. Other components’ value/calculation, that exists in a salary range, can differ for each employee falling within this range.

Here’s an example of ‘Range Based Salary’ structure:

Suppose the 3 ranges of salary that are defined in the organisation are:

• Rs 1 to Rs 5,00,000
• Rs 5,00,001 to Rs 10,00,000
• Rs 10,00,001 & Above

Here’s how the Range based salary can be defined for each range:

• Upto Rs. 5,00,000

Basic = 40% of Gross

HRA = 60% of Basic

Conveyance = Rs. 9,000/annually

Medical = Rs. 15,000/annually

Uniform Allowance = Fixed amount for all employees, or Varies for each employee

Children Education Allowance = Rs. 2400/annually

• Rs. 5,00,001 to Rs. 10,00,000

Basic = 50% of Gross

HRA = 50% of Basic

Conveyance = Rs. 19,200/annually

Medical = Rs. 15,000/annually

Books & Periodicals = Fixed amount for all employees, or Varies for each employee

Children Education Allowance = Rs. 2,400/annually

Hostel Expenditure Allowance = Rs. 7,200/annually

Telephone/Mobile Reimbursement = Fixed amount for all employees, or Varies for each employee

• Rs. 10,00,001 & Above

Basic = 40% of Gross

HRA = 50% of Basic

Conveyance = Rs. 19,200/annually

Medical = Rs. 15,000/annually

LTA = Rs. 36,000/annually

Books & Periodicals = Fixed amount for all employees, or Varies for each employee

Children Education Allowance = Rs. 2,400/annually

Hostel Expenditure Allowance = Rs. 7,200/annually

Telephone/Mobile Reimbursement = Rs. 60,000/annually

Car Allowance = Rs. 1,20,000/annually

From the example above, it is evident that calculation of Basic and HRA needs to be fixed for all employees falling within a salary range, all other components can either be part of salary structure or not (based on range selected), and the value of these components can be either fixed or vary for each employee.

Related:

What are the various salary components in a salary structure?

How do I override salary component value/amount for an employee?

How do I edit an existing range based salary structure?

Custom Salary Structure

Since the salary structure and its components can vary based on negotiation between employee and employer, it is quite possible that an employee, though falling under a particular salary range, has a different salary structure (where Basic, HRA and components included in salary are different). In such cases, even though a ‘Range Based Salary’ structure exists, it won’t work for this employee, given that the components and values differ.

Here’s an example of ‘Custom Salary’ structure:

Suppose there is an employee who is falling under salary range of Rs. 5,00,001 to Rs. 10,00,000, but as per salary negotiation, it was agreed that the employee’s Basic would be 40% of Gross, whereas HRA would be 60% of Basic. Also, the employee didn’t want ‘Children education allowance’ & ‘Hostel Expenditure Allowance’ as part of their salary structure, but wants an additional component of ‘Food Coupon’ to be added.  In such cases, a custom salary structure is defined (and assigned) to this employee.

The custom salary structure for this employee might look something similar to following:

Basic = 40% of Gross

HRA = 60% of Basic

Conveyance = Rs. 19,200/annually

Medical = Rs. 15,000/annually

Books & Periodicals = 16,000/annually

Telephone/Mobile Reimbursement = Rs. 60,000/annually

Food Coupon = Rs. 36,000/annually

‘Custom Salary Structure’ is defined in such exceptional cases where employees’ salary compensations can’t be defined using existing ‘Range Based’ structure.

Related:

How do I create or edit a Custom Salary Structure?

Contractor Salary Structure

‘Contractor Salary’ structure is defined for employees working on contract basis in your organisation. You can choose to create multiple contractor salary structures by defining the TDS amount that needs to be deducted under each structure. For example, if you are paying Rs. 10,000/month to a contract employee, you might not be deducting any TDS, but same will not be the case with a contract employee whom you are paying Rs. 1,50,000 per month. Contractor salary structure lets you define the TDS amount that needs to be deducted under each salary (contract) type.

Related:

How do I create or edit a Contract Salary Structure?

In case you are not sure what type of salary structure is going to suit your organisation, write to support@keka.com.

Enabling ESI for Employees

Employees State Insurance Act has been passed to provide certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for related matters. As the name suggests, it is basically an ‘insurance’ scheme i.e. employee gets benefits if he is sick or disabled.

Employees State Insurance provides cash and medical benefits to employees (and their families) who are earning a gross of Rs. 21,000 or less.

In case ESI is applicable for your employees, you can enable the same in Keka, so that the system starts calculating ESI for your employees every month. To enable ESI for your employees, follow the steps below:

Step 1: Go to Settings >> Payroll >> PF and ESI Settings

Step 2: Use the toggle button to turn on ESI Status. Click on button to set the status as ‘ON’ (in case it was previously ‘Off’)

Once done, review the additional options and make changes to them (if applicable) and then click on ‘Complete’ button to save the settings. The system will automatically calculate ESI for employees whose are eligible.

Related:

How much do an employee and employer contribute towards ESI?

The ESI amount calculated doesn’t seem to be correct percentage of gross, what can be the issue?

Can ESI amount calculation be restricted to max gross of 21000 during the contribution period?

In case you are having trouble with setting up ESI , write to support@keka.com.

Employees’ Provident Fund

Employees’ Provident Fund (EPF) is a retirement benefit scheme that’s available to all salaried employees. This fund is maintained and overseen by the Employees’ Provident Fund Organization (EPFO) of India. Any organisation employing 20 employees or more is required, by law, to register with the EPFO.

EPF is created with a purpose of providing financial security and stability. Employee contributes in fund on a regular basis (monthly in most cases), thus saving a fraction of their salary every month, to be used in an event that the employee is temporarily or no longer fit to work, or at retirement.

Is Provident Fund (PF) Contribution Mandatory?

Yes, contribution to PF is mandatory for employees who are earning Basic Salary (plus DA, if applicable) upto Rs. 15,000 per month.

Employees earning a Basic (plus DA) Salary of more than Rs. 15,000 can choose not to contribute to PF. Though, opting out of PF will increase your take-home salary, it will also increase your tax liability (The employer PF contribution is exempt from tax and employee’s contribution is taxable but eligible for deduction under section 80C of Income tax Act.). It is strongly recommended to contribute to PF, since it helps you lower your tax liability as well as build a huge corpus for retirement.

IMPORTANT: You can only choose to opt-out of the PF when you start your job. If you are new to job and your monthly Basic (plus DA) is more than Rs. 15,000, you can let your employer know that you don’t want to be part of PF scheme. If a person has been part of PF scheme once, he doesn’t have an option to opt-out of it.

What is the contribution rate (Employee & Employer) for EPF?

Employee and the Employer contribute 12% of your basic salary (plus dearness allowances, if any) into your EPF account.
The amount that the Employee contributes (12% of Basic) from his salary gets directly gets deposited in the EPF account, whereas, the Employer’s 12% contribution is distributed in 2 parts; 3.67% is deposited in EPF account and the remaining 8.33% is added to EPS (Employee Pension Scheme) account.

Apart from the 12% of EPF contribution, employer has to pay some administration charges.

Here’s a table with the breakup of EPF contribution:

Employee Pension Scheme (EPS)

• EPS amount is paid only by the Employer (8.33%).
• EPS can be withdrawn at the time of retirement.
• EPS amount cannot be contributed for the Employee who crosses the age of 50 years as he/she wouldn’t be able complete 10yrs of service.
• EPS cannot be collected from the employee who crosses the age of 58 years and is still working as an employee.
• No interest is earned on EPS.

Example of how the PF contributions are distributed for employee and employer:

Basic Salary of Employee is Rs. 10,000

12% of Employee’s contribution Rs. 1200 is saved in EPF Account

12% of Employer’s Contribution Rs. 1200 is divided as (8.33% for EPS i.e. Rs. 833 and 3.67% for EPF i.e. Rs. 367 which is equal to Rs.1200)

Admin charges are divided into (EDLI which is 0.65% i.e. Rs. 65, EPF Admin which is 0.5% i.e. Rs. 50 & EDLI Admin which is 0.01% i.e. Re. 1)

Can I contribute more than 12% towards my PF scheme?

You can contribute more than 12% towards your PF scheme. EPF gives option to employees to increase the contribution amount. It is known as Voluntary Provident Fund (VPF). Here are few points to be noted when it comes to contributing more towards your PF scheme:

• You can contribute up to 100% of your basic salary in EPF account.
• The employer is not bound to match your contribution.
• You will get the tax benefit under section 80C on extra contribution as well.
• The extra contribution becomes the part of your EPF account.
• The rules on loan, transfer and withdrawal of PF amount won’t change.

What are the tax benefits of PF contributions?

The employer PF contribution is exempt from tax, and employee’s contribution is taxable but eligible for deduction under section 80C of Income tax Act. The exemption limit under Section 80C is capped to Rs. 1,50,000.

Can I withdraw my EPF money if I am still working?

Though, EPF withdrawal is not permitted if you are still working. But there are exceptions when an Employee can withdrawal partial amount of his PF.

Here’s list of qualifying conditions, when you can withdraw your Provident Fund amount:

Marriage or education of self, your siblings, or children.

Conditions:

• Should have completed a minimum of seven years of service.
• Maximum amount you can withdraw is 50% of your contribution.
• Can be availed three times during your working life.
• Required to submit the ‘wedding invitation’ or a ‘certified copy of the fee payable’ as proof.

Medical treatment for Self or family (spouse, children, dependent parents)

Conditions:

• Major surgical operations, or for treatment of  TB, Leprosy, Paralysis, Cancer, Mental or heart ailments.
• Maximum amount you can withdraw is 6 times your salary
• Required to submit proof of hospitalisation for one month or more with leave certificate for that period from your employer.

Repay a housing loan for a house in the name of self, spouse or owned jointly

Conditions:

• Should have completed at least 10 years of service.
• Maximum amount you can withdraw is 36 times your salary.

Alterations/repairs to an existing home for house in the name of self, spouse or jointly

Conditions:

• Minimum service of five years after the house was built/bought.
• Maximum amount you can withdraw is 12 times your salary.
• Can be availed only once during entire service.

Construction or purchase of house, site or plot for self or spouse or joint ownership

Conditions:

• Should have completed at least five years of service.
• Maximum amount you can withdraw is 36 times your salary. To buy a site or plot, the amount is 24 times your salary.
• Can be availed only once during entire service.

Do I earn any interest on the EPF?

Yes. As decided by EPFO On 19 Dec 2016, the current EPF interest rate for FY 2016-17 is fixed at 8.65%. The rate of interest is not fixed at the beginning of each financial year. This is for the reason that EPFO gives interest according to the earned profit. This also means that the interest rate of EPF is declared for the outgoing/past financial year.

Related:

How do I limit employees’ maximum monthly PF contribution to Rs. 1800?

How do I configure employees’ PF contribution to be 12% of their actual Basic and not limited to Rs. 1800 monthly?

What are other charges of Provident Fund? How is it calculated?

How to configure Employer’s PF contribution to be inside/outside of employee’s Gross Salary?

How to configure PF other charges to be inside/outside of employee’s Gross Salary?

Can PF contribution amount (of employee & employer) be over-ridden?

Can an employee opt-out of PF?

In case you are facing trouble with PF configuration & calculation for your employees, write to support@keka.com.

Gratuity Configuration on Keka

Gratuity is a part of salary that is received by an employee from the employer in gratitude for the services offered by the employee to the company. An employee becomes eligible for gratuity only after completion of 5 or more years of full time service with the same employer.

Related: What is Gratuity?

In case your organisation contribute towards gratuity for employees, you should first configure it on Keka and then add it to employees’ salary structure.  This can ONLY be done by user having either ‘Global admin’ or ‘Payroll admin’ role on Keka for their organisation’s account.

To configure gratuity on Keka, follow the steps below:

Step 1: Go to Settings >> Payroll >> Salary Components & Structures

Step 2: Under ‘Salary Components & Structures’, go to ‘Recurring Components’ (Section 2) to view list of all salary components.

Few components, such as Medical, Transport, Gratuity etc. are enabled by default and can be configured before adding it to any salary structure. A component will only be applicable for employees, if it is added to their salary structure.

Step 3: In the list of all pre-defined components, go to ‘Employee Gratuity contribution’ and click on ‘Edit’ link against the component.

Step 4: On the ‘Employee Gratuity Contribution’ pop-up that appears, configure options including maximum limit of gratuity per annum, number of months of service required for being eligible for gratuity, etc.

Maximum Limit Per Annum: Define this limit for Keka system to know the maximum amount of gratuity per annum that can be contributed by the organisation for it’s (individual) employee. All employees’ gratuity contribution will be less than or equal to this maximum amount.

Minimum no. of months of employment required for eligibility: Define minimum months of employment required (in the organisation) for an employee to be eligible for gratuity. As per Gratuity Act, this is by default 60 months, i.e. 5 years.  You can change this duration.

Include component in Arrears calculation: Check this box if you wish to consider arrears that might have accumulated due to salary revision with past effective dates.

For example, the employee had a salary of Rs. 50,000 from May to October, and the amount of gratuity has been calculated on the Salary of Rs. 50,000.  In the month of October, there has been a salary revision of employee with revision effective date of 1st July. Since there has been a delay in salary revision, there is a salary arrear that needs to be paid out (for past months) to the employee because of the salary revision with past effective date. In such cases the amount of gratuity contributed might also need revision for past months.

Allow this component value to be customized and override at employee level: If, in your organisation, the amount of gratuity contribution varies even for the employees’ having same salary structure, or you wish to limit the amount that is being contributed for selective employees, check this box.  You will have an option to over-ride the amount of contribution at individual employee level.

Related: How do I override salary component value/amount for an employee?

Loss of pay due to employee attendance will affect this component: In case loss of pay (LOP) in a month affects the gratuity amount, check this box.

Once done with configuring the Gratuity component, click on ‘Update’ button.  This will update the Gratuity settings.

To learn how to assign this component to a salary structure, read How do I create a salary structure and manage its components?

In case you are having trouble configuring ‘Employee Gratuity Contribution’, write to support@keka.com.

Gratuity

Gratuity is derived from the word ‘Gratitude’. As the term indicates, Gratuity is a part of salary that is received by an employee from the employer in gratitude for the services offered by the employee to the company.

Eligibility for Gratuity

An employee becomes eligible for gratuity only after completion of 5 or more years of full time service with the same employer. It is more of a retirement benefit and social security benefit received by the employee when they are leaving their job. For the purpose of gratuity calculation, the number of years of service is rounded off to the nearest full number. For example, if you have completed 6 years and 8 months, it will be rounded off to 7 years. In case you have completed 8 years and 5 months, the number of years will be rounded off to 8 years only.

Contribution to Gratuity

Unlike EPF, the employer pays gratuity amount, and employee doesn’t have to contribute in gratuity. Employer can either choose to pay for gratuity from their own fund or approach a life insurer to purchase a group gratuity plan. In case of a group gratuity plan, the employer should make annual payments as decided by the insurer. The employee can make contributions to gratuity in this case but it is not mandatory.

Calculation of Gratuity

The formula to calculate gratuity differs for employees who are covered under gratuity act and the ones who are not.

For employees under gratuity act:

Any employee whose workplace consists of more than 10 employees will be covered under the gratuity act. The formula for calculation of gratuity is:

Gratuity = [(Basic Pay + D.A) x 15 days x No. of years of service] / 26.

For employees not covered under gratuity act:

If the number of employees are less than 10, the company is not covered under the gratuity act. Even if the company is not covered under gratuity act, an employer can always choose to give gratuity to the employee for their service.

The formula for calculation of gratuity is:

Gratuity = [Average of last 10 months salary x No. of years of service] / 2.

Taxability of Gratuity

Some portion of gratuity received is exempt from tax as per Section 10(10) of the Income Tax.

The tax exemption on gratuity differs for following 3 categories:

• Government Employees:

Any gratuity received by an employee of the Central Government, State Government or local authority, on death or retirement is fully exempted from tax.

• Non-government Employees covered under Gratuity Act:

Maximum tax exemption will be least of the following 3:

1. Actual gratuity received
2. Rs. 10,00,000
3. 15 days’ salary for each completed year of service or part thereof (*) (number of days in a month is considered as 26. Therefore, 15 days’ salary = (Salary * 15/26))

Salary = Basic + D.A.

*Completed year of service or part thereof – Full time service of more than 6 months is considered as 1 completed year of service; and less than 6 months is ignored. For example, if you have completed 6 years and 8 months, it will be rounded off to 7 years. In case you have completed 8 years and 5 months, the number of years will be rounded off to 8 years only.

Example:

Sam worked with company X (covered under Gratuity Act) for 12 years and 9 months. At the time of leaving, his salary was Rs. 50,000 and he received Rs. 6,00,000 as gratuity. Here’s how the tax exemption will be calculated:
1. Actual gratuity received: Rs. 6,00,000
2. Rs. 10,00,000
3. 15 days’ salary for each completed year of service or part thereof: [50,000 * 13 * 15]/26 = Rs. 3,75,000

The least of the 3 is Rs. 3,75,000 and thus this amount will be tax exempted. Remaining amount of Rs. 6,00,000 – Rs. 3,75,000 = 2,25,000, will be taxable.

• Non-government employees not covered under Gratuity Act:

Maximum tax exemption will be least of the following 3:

1. Actual gratuity received
2. Rs. 10,00,000
3. Half-month’s average salary for each completed year of service and no part thereof (#).

Salary = Basic + D.A.

#Completed year of service and no part thereof – Full time service of more than 1 year is considered as 1 completed year of service; and less than 1 year is ignored. For example, if you have completed 6 years and 8 months, it will be rounded off to 6 years.

Example:

Abhishek worked with company Y (not covered under Gratuity Act) for 15 years and 8 months. He receives Rs 7,00,000 as a gratuity and his average monthly salary of 10 months immediately preceding month of completing service is Rs 30,000. Here’s how the tax exemption will be calculated:
1. Actual gratuity received: Rs. 7,00,000
2. Rs. 10,00,000
3. Half-month’s average salary for each completed year of service and no part thereof: [30,000 * 15]/2 = Rs. 2,25,000

The least of the 3 is Rs. 2,25,000 and thus this amount will be tax exempted. Remaining amount of Rs. 7,00,000 – Rs. 2,25,000 = 4,75,000, will be taxable.

Related: How do I configure gratuity for my employees on Keka?

Labour Welfare Fund (LWF), Contribution Rate & Periodicity, Rules

To improve standard of living and socio-economy conditions of employees, the State Labour Welfare Board provides services and facilities (E.g. Welfare Centre, Day Care, Scholarships, etc.) according to provisions under Labour Welfare Fund Act.

Labour Welfare Fund (LWF) is a statutory contribution managed by states.  States are also responsible for deciding contribution rate and frequency of LWF. The LWF contribution, periodicity and rules differs from state to state.

Here are the details of LWF for states it’s applicable in:

Andhra Pradesh

Employees in the managerial capacity or supervisory capacity with wages above Rs. 1,600 per month are exempted.

Chandigarh (Union Territory)

Half Years for Contribution Deposit  – ‘April to September’ & ‘October to March’

Chhattisgarh

Employees in the managerial capacity or supervisory capacity with wages above Rs. 3,500 per month are exempted.

Delhi

Employees in the managerial capacity or supervisory capacity with wages above Rs. 2,500 per month are exempted.

Goa

Employees in the managerial capacity or supervisory capacity with wages above Rs. 3,500 per month are exempted.

Gujarat

Employees in the managerial capacity or supervisory capacity with wages above Rs. 3,500 per month are exempted.

Haryana

Karnataka

Kerala (Under Factories Act)

Kerala (Under Shops and Establishment Act)

Madhya Pradesh

Employees with wages above Rs. 10,000 per month are exempted.

Maharashtra

Employees in the managerial capacity or supervisory capacity with wages above Rs. 3,500 per month are exempted.

Punjab

Half Years for Contribution Deposit  – ‘April to September’ & ‘October to March’

Tamil Nadu

Employees in the managerial capacity or supervisory capacity with wages above Rs. 3,500 per month are exempted.

Telangana

Employees in the managerial capacity or supervisory capacity with wages above Rs. 1,600 per month are exempted.

West Bengal

Employees in the managerial capacity or supervisory capacity with wages above Rs. 2,500 per month are exempted.

If you are facing trouble setting up LWF on Keka, write to support@keka.com.

Professional Tax (PT) is a tax levied by the State Governments and is not be applicable in all States & UTs. Also, the rate at which PT is charged is based on the Income Slabs set by the respective State Governments.

Learn more about PT, States & Union Territories it’s applicable in, and PT Rate Slabs »

If Keka is not calculating PT for your employee(s), it can be because of any of the following reasons:

If PT is not calculated for few employees, please check the following conditions:

1. Check if the work location (State/UT) of employees (getting excluded from PT calculation), in applicable for PT deduction.
2. Employee’s Income is falling under Income Slabs applicable for PT deduction.  Check Income Slab for PT deductions »
3. Employee’s ‘Date of Birth’ and ‘Gender’ are filled in.  This is important because PT depends on age and gender of an employee as well.

To check if ‘Gender’ and ‘Date of Birth’ data of an employee exists, please follow the steps below:

Step 1: Go to employee’s profile by typing the employee’s name in the search bar

Step 2: Go to ‘Profile’ tab of the employee’s profile

Step 3: Under Profile >>Primary Details, check if ‘Gender’ and Date of Birth’ information exists

Step 4: If any of the information is missing, click on ‘Edit’ link to add these details.

For updating multiple employees profile information in bulk, read How do I update employees Profile & Job information in bulk?

If PT is not calculated for all employees, please check if the work location (State/UT) of employee is applicable for PT deduction.

To check work location of all employees, please follow the steps below:

Step 1: Go to Employees >> Dashboard >> All Employees

Step 2: Click on ‘All employees (Number)’ to view list of all employees along with their work location

In case ‘Location’ is missing for employee(s), update ‘Location’ of employee(s) either by going to their profile, or update in bulk. Read, How do I update employees Profile & Job information in bulk?

Also, check if the ‘Location’ is correctly associated to the State or UT your employees’ work location belongs to. To do this, follow the steps below:

Step 1: Go to Settings >> Company Settings >> Locations

Step 2: Against ‘Location’ name, you want to verify, for associated State or UT, click on ‘Edit’ icon to view details of State or UT it has been associated with.  In case you think that this has been wrongly selected, please update it.

List of states that are applicable for PT deduction:

• Andhra Pradesh
• Assam
• Bihar
• Goa
• Gujarat
• Jharkhand
• Karnataka
• Kerala
• Madhya Pradesh
• Maharashtra
• Meghalaya
• Odisha
• Tamil Nadu
• Telangana
• Tripura
• West Bengal

If you are still facing issues with PT calculation of employees, write to support@keka.com.

Professional Tax (PT)

Professional Tax is a tax levied by the State Governments on all ‘Earning Individuals’. ‘Earning Individuals’ include all salaried individuals, as well as individuals practising any profession such as Doctor, Lawyers etc.

The rate at which Professional tax is charged is based on the Income Slabs set by the respective State Governments. However the maximum Professional Tax that can be levied by any State till date is Rs 2,500/-. There are some states and union territories that do not charge professional tax.

The total amount of professional tax paid during the year is allowed as Deduction under Section 16 of The Income Tax Act.

Professional Tax is a source of revenue for the State Governments and is used to implement schemes for the welfare and development of the region.

In case of salaried individual, the Professional Tax (PT) is to be deducted by the employer from the salary and deposit the same with the state government. If case the earning individual is not a salaried individual, PT needs to be paid by the person directly.

Professional Tax Slab Rates in Various Indian States:

Andhra Pradesh

Assam

*Professional Tax is payable @Rs 208 for first 11 months and Rs 212 in the last month.

Bihar

Goa

Gujarat

Jharkhand

*Professional Tax is payable @Rs 208 for first 11 months and Rs 212 in the last month.

Karnataka

Kerala

Madhya Pradesh

Maharashtra

Meghalaya

*Professional Tax is payable @Rs 208 for first 11 months and Rs 212 in the last month.

Odisha

Tamil Nadu

Telangana

Tripura

West Bengal

Exemption from Paying Professional Tax (As per the Act)

• Any person suffering from a permanent physical disability (including blindness)
• Parents or guardian of any person who is suffering from mental retardation.
• Persons who have completed the age of 65 years.(60 years in case of Karnataka)
• Parents or guardians of a child suffering from a physical disability as specified in clause (C) w.e.f 1.10.1996.

Professional Tax is not applicable in following States & UTs:

Arunachal Pradesh
Andaman & Nicobar
Chandigarh
Chattisgarh
Dadra & Nagar Havelli
Daman & Diu
Delhi
Haryana
Himachal Pradesh
Jammu & Kashmir
Lakshadweep
Nagaland
Punjab
Rajasthan
Uttaranchal
Uttar Pradesh

 

Related: Keka is not calculating Professional Tax (PT) for employee(s), why?

If you are facing trouble with PT deductions on Keka, write to support@keka.com.

Tax Exempted Allowances

Certain allowances are exempted at source, as per The Income Tax Act. The total tax liability of an individual of an employees can come down to a great extent if these allowances are included as part of salary structure. These components can be added to all salary structures (lower or higher CTC).

In most of the cases, your employer might require you to submit bill at the end of financial year against these allowances to get tax exemption. In case you fail to provide bills for these allowances, the total allowance amount becomes taxable.

Here are example of few allowances, along with exemption rules/limits:

House Rent Allowance (HRA)
Tax Exempted Amount will be least of the 3:

1. Actual HRA received
2. Location Based HRA (40% – If staying in Non-Metro, 50% – If staying in Metro)
3. Rent paid less 10% of basic salary

Medical Allowance/Reimbursement
Tax Exemption up to Rs 1,250 per month Rs 15,000 per annum

Conveyance/Transport allowance
Tax Exemption up to Rs 1,600 per month or 19,200 per annum

Leave Travel Allowance (LTA)/Leave Travel Concession (LTC )
Actual travel cost can be claimed for tax exemption twice in a block of four years (u/s. 10(5))

Uniform Allowance/Attire Allowance
Tax Exemption can be claimed on the actual expenditure incurred (u/s. 10(14))

Children’s Education Allowance
Tax Exemption up to Rs 100 per month per child, for up to 2 children, i.e. maximum of Rs. 200 per month

Children Hostel Allowance
Tax Exemption up to Rs 300 per month per child, for up to 2 children, i.e. maximum of Rs. 600 per month

Professional Pursuit/Research Allowance
Tax Exemption can be claimed on the actual expenditure incurred

Food Coupon/Meal Voucher
Tax Exemption claimed at Rs 50/meal for up to Rs 2,200 per month

Mobile Reimbursement/Telephone Reimbursement
Tax Exemption can be claimed on the actual expenditure incurred

Books & Periodicals
Tax Exemption can be claimed to the extent of actual expenditure towards purchase of books and periodicals

List of all benefits available to Salaried Persons »

In case you need help with creating a salary structure for your employees, write to support@keka.com.

ESI Contribution

Employees State Insurance provides cash and medical benefits to employees (and their families) who are earning a gross of Rs. 21,000 or less.

The contribution payable to the Employees State Insurance Corporation (ESIC) in respect of an employee shall comprise of employer’s contribution and employee’s contribution at a specified rate. The rates are revised from time to time.

Current Contribution Rate for ESI:
Employee Contribution = 1.75% of the wages paid/payable in respect of the employees in every wage period.
Employer’s Contribution = 4.75% of the wages paid/payable in respect of the employees in every wage period.

Employees in receipt of a daily average wage upto Rs.100/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees.

For ESI calculation, the Gross salary comprises of all the monthly payable amounts such as Basic, Dearness Allowance, City Compensatory Allowance, HRA, Incentives, Attendance Bonus, Meal Allowance, etc. The Gross salary, however, does not include Annual Bonus, Retrenchment Compensation, Encashment of leave and gratuity.

Example of an ESI calculation:

Gross salary of employee = Rs 18,000/month

Employee ESI Contribution (@ 1.75%) = 1.75% of 18,000 = Rs 315

Employer ESI Contribution (@ 4.75%) = 4.75% of 18,000 = Rs 855

Total ESI Contribution = Rs 315 + Rs 855 = Rs 1170

In case you are facing issue with ESI calculation on Keka, write to support@keka.com.

The current maximum gross salary eligible for ESI is Rs 21,000 per month (w.e.f. 1st Jan. 2017). This means all industrial workers drawing a salary of up to Rs.21,000 will be eligible for health care – from primary to tertiary – at more than 1,500 clinics and hospitals run by the Employees’ State Insurance Corporation (ESIC) directly or indirectly.

Employees State Insurance Act has been passed to provide certain benefits to employees in case of sickness, maternity and employment injury and to make provisions for related matters. As the name suggests, it is basically an ‘insurance’ scheme i.e. employee gets benefits if he is sick or disabled.

Employees State Insurance provides cash and medical benefits to employees (and their families) who are earning a gross of Rs. 21,000 or less.

Employees State Insurance (E.S.I.) Scheme being contributory in nature, all the employees in the factories or establishments to which the Act applies shall be insured in a manner provided by the Act. The contribution payable to the Employees State Insurance Corporation (ESIC) in respect of an employee shall comprise of employer’s contribution and employee’s contribution at a specified rate. The rates are revised from time to time.

Current Contribution Rate for ESI:
Employee Contribution = 1.75% of the wages paid/payable in respect of the employees in every wage period.
Employer’s Contribution = 4.75% of the wages paid/payable in respect of the employees in every wage period.

Employees in receipt of a daily average wage upto Rs.100/- are exempted from payment of contribution. Employers will however contribute their own share in respect of these employees.

For ESI calculation, the Gross salary comprises of all the monthly payable amounts such as Basic, Dearness Allowance, City Compensatory Allowance, HRA, Incentives, Attendance Bonus, Meal Allowance, etc. The Gross salary, however, does not include annual bonus, retrenchment compensation, encashment of leave and gratuity.

Example of an ESI calculation:

Gross salary of employee = Rs 18,000/month

Employee ESI Contribution (@ 1.75%) = 1.75% of 18,000 = Rs 315

Employer ESI Contribution (@ 4.75%) = 4.75% of 18,000 = Rs 855

Total ESI Contribution = Rs 315 + Rs 855 = Rs 1170

Collection of Contribution:
An employer is liable to pay his contribution in respect of every employee and deduct employees contribution from wages bill and shall pay these contributions at the above specified rates to the Corporation within 21 days of the last day of the Calendar month in which the contributions fall due. The Corporation has authorized designated branches of the State Bank of India and some other banks to receive the payments on its behalf.

Contribution Period and Benefit Period:
There are two contribution periods each of six months duration and two corresponding benefit periods also of six months duration as under.

• For contribution period ‘1st April to 30th Sept’, the benefit period is ‘1st Jan of the following year to 30th June’
• For contribution period ‘1st Oct to 31st March of the year following’, the benefit period is ‘1st July to 31st December’

An employee can only avail ESI benefits after 9 months of joining employment and contributing to ESI. This is because the ‘Benefit Period’ starts 3 months after the end of ‘Contribution Period’, and any medical or maternity benefits can be availed during the benefit period only.

IMPORTANT: In case the salary goes above Rs 21,000 per month during the contribution period, the ESI would be calculated on the higher salary. For example, if the salary of an employee is raised to Rs 30,000 per month during the ESI contribution period, then the ESI would be calculated on Rs 30,000 instead of Rs 21,000.

Applicability of ESI:

Under Section 2(12) the Act is applicable to non-seasonal factories employing 10 or more persons.

Under Section 1(5) of the Act, the Scheme has been extended to shops, hotels, restaurants, cinemas including preview theatres, road-motor transport undertakings and newspaper establishments employing 10* or more persons.

Further under section 1(5) of the Act, the Scheme has been extended to Private Medical and Educational institutions employing 10* or more persons in certain States/UTs.

*Note: However in some States threshold limit for coverage of establishments is still 20 Employees of the aforesaid categories of factories and establishments. These State Governments/UTs are in the process of reducing the same.

The existing wage limit for coverage under the Act is Rs. 21,000/- per month ( w.e.f. 01/01/2017).

Areas Covered:
The ESI Scheme is being implemented area-wise by stages. The Scheme has already been implemented in different areas in the following States/Union Territories of Indian Union.
STATES – All the States except Manipur, Sikkim, Arunachal Pradesh and Mizoram.
UNION TERRITORIES – Delhi and Chandigarh

Visit ESIC website »

Related: How do I enable ESI for my employees on Keka?

In case you are having trouble setting up ESI for your employees, write to support@keka.com.

Salary Structure & Components

It is important to understand the various salary components that forms your salary structure. Most of the times when we negotiate terms of employment, we focus on getting a higher CTC without giving much attention to the compensation structure and components involved. Although higher CTC is important part of salary negotiation, but it doesn’t always means that a higher CTC will ensure a higher in-hand salary as well.

Thus, if you have the flexibility to decide the compensation structure, it is important to structure it efficiently to maximize net salary and minimize tax burden.

Components in any salary structure can be broadly divided into 5 segments:

1. Basic: This forms the base of salary and other components like HRA, PF, etc are calculated on this.
2. Allowances: House Rent Allowance (HRA), Dearness Allowance (DA), Conveyance Allowance, etc.
3. Variable Components: Performance Bonus, Sales Incentives, etc.
4. Contributions: Provident Fund (PF), Employees’ State Insurance (ESI), Statutory Bonus, etc.
5. Perquisites: Benefits received by a person as a result of his/her official position and are over and above the salary or wages.

Basic:

Basic is usually 40%-50% of the Gross Salary or CTC (Cost to Company).  Since the Basic salary is fully taxable, it is very crucial to decide what percentage of your Gross or CTC will form Basic salary. If the Basic is high, the tax liability will be high as well.
Also, other salary components such as HRA and PF, that can get you tax exemptions, are calculated based on your Basic salary.

It is recommended that employee with lower CTC should opt for a lower Basic salary since this is going to get them higher monthly net pay.

Allowances:

Certain allowances are exempted at source, as per The Income Tax Act. The total tax liability of an individual of an employees can come down to a great extent if these allowances are included as part of salary structure. These components can be added to all salary structures (lower or higher CTC).

In most of the cases, your employer might require you to submit bill at the end of financial year against these allowances to get tax exemption. In case you fail to provide bills for these allowances, the total allowance amount becomes taxable.

Here are example of few allowances, along with exemption rules/limits:

House Rent Allowance (HRA)
Tax Exempted Amount will be least of the 3:

1. Actual HRA received
2. Location Based HRA (40% – If staying in Non-Metro, 50% – If staying in Metro)
3. Rent paid less 10% of basic salary

Medical Allowance/Reimbursement
Tax Exemption up to Rs 1,250 per month Rs 15,000 per annum

Conveyance/Transport allowance
Tax Exemption up to Rs 1,600 per month or 19,200 per annum

Leave Travel Allowance (LTA)/Leave Travel Concession (LTC )
Actual travel cost can be claimed for tax exemption twice in a block of four years (u/s. 10(5))

Uniform Allowance/Attire Allowance
Tax Exemption can be claimed on the actual expenditure incurred (u/s. 10(14))

Children’s Education Allowance
Tax Exemption up to Rs 100 per month per child, for up to 2 children, i.e. maximum of Rs. 200 per month

Children Hostel Allowance
Tax Exemption up to Rs 300 per month per child, for up to 2 children, i.e. maximum of Rs. 600 per month

Professional Pursuit/Research Allowance
Tax Exemption can be claimed on the actual expenditure incurred

Food Coupon/Meal Voucher
Tax Exemption claimed at Rs 50/meal for up to Rs 2,200 per month

Mobile Reimbursement/Telephone Reimbursement
Tax Exemption can be claimed on the actual expenditure incurred

Books & Periodicals
Tax Exemption can be claimed to the extent of actual expenditure towards purchase of books and periodicals

List of all benefits available to Salaried Persons »

Variable Components:

Many companies include variable component as part of employee’s CTC, and pay it out (total or part of it) based on the performance of employee (a.k.a. Performance Bonus).  Since variable pay is dependent on company’s performance along with employee’s performance, companies are willing to pay employees if the business is profitable. Variable pay/Bonus is fully taxable.

Contributions:

Contributions such as Provident Fund & ESI  are made by employer for employees’ long term saving schemes and social benefits. Since these are long-term savings, they are not paid out to the employees immediately.  Contributions can affect an employee’s net salary package and thus it is important to have the right ratio of these contributions as part of your package.  Contributions do have some extent of tax exemptions associated to them.

Provident Fund: Employer makes a contribution (12% of Basic salary) against EPF (Employee’s Provident Fund). It is statutory obligation on part of the employer. Employee’s PF deduction is tax exempted u/s. 80C of income tax.
ESIC (Employee State Insurance Corporation): ESI is applicable for employees whose gross salary is less than Rs. 21,000. Employee needs to make a contribution of 1.75% of gross salary, whereas, employer needs to deposit 4.75% of gross salary.
Statutory Bonus: It is statutory bonus which is paid to employees whose basic is less than or equal to Rs 21,000. Bonus payable is capped at Rs 7,000 per month. Statutory Bonus is fully taxable.

Perquisites:

Perquisites are perks/benefits received by an employee over and above the salary.  For example, car or house provided by employer which is over and above person’s salary.  These perks/benefits might attract perquisite tax since these benefits are provided by employer over and above employee’s salary.  These perks/benefits or perquisites can be taxable or non-taxable depending upon their nature.

• Taxable Perquisites: Rent-free accommodation, Salary of servant employed by employee, Supply of gas, electricity or water for household purposes, ESOP/ Sweat Equity Shares, etc.
• Exempted Perquisites: Travel allowance, Interest free loan or Loan at concessional rate of interest, Computer or laptop provided for official use,  Refreshment provided during office hours, Use of health club and/or sports club, etc.

Perquisites taxable only by employees: Car owned by company but used by employee, Education facility, Service of domestic servant, etc.

List of all benefits available to Salaried Persons »

Use the above mentioned components smartly in your salary structure and you will be able to lower the tax liability and increase you net package.

Related:

What is meant by Tax exempted allowances?

What is Provident Fund (PF)?

What is ESI?

What is the current maximum gross salary eligible for ESI?

How is ‘total taxable income’ calculated?

How do I submit claims for tax exemption on salary allowances (e.g. Medical Allowance)?

What is Professional Tax (PT)?

What is the difference between Allowance, Reimbursable Allowance and Recurring Deduction?

What is Gratuity?

How do I assign benefits to employee?

In case you need help with creating a salary structure for your employees, write to support@keka.com.

Most of the professionals in India are confused or unacquainted about the various details about their salary structure. Majority of the confusion relates to difference between Cost to Company (CTC), Gross Salary and Net Salary.

Here’s a brief explanation of CTC, Gross Salary and Net Salary along with examples, to have a better understanding:

1. CTC (Cost to Company) – 

The total cost incurred by the organisation when hiring an employee is known as CTC. Apart from Basic salary, it also includes allowances such as HRA (House Rent Allowance), Medical Insurance, Food Coupons, EPF (Employees’ Provident Fund), ESI (Employees’ State Insurance) etc. Other elements that are included in your CTC, can be Loans, Gratuity, Bonus, or any other benefits (direct or indirect) you are receiving.  The components that are included in CTC, varies from organisation to organisation.

Here’s an example of CTC and its breakdown:

Suppose CTC of an employee is Rs. 10,00,000

Here’s a breakdown of the above CTC

Basic: Rs. 5,00,000

HRA: Rs. 2, 50,000

Medical: Rs. 15,000

Conveyance: 19,200

Food Coupon: Rs. 36,000

EPF Contributions: Rs. 21,600

Gratuity: Rs. 20,000

Medical & Life Cover Insurance: Rs. 13,200

Annual Bonus: Rs. 125,000

CTC is basically summation of Direct Benefits (Basic, HRA, Medical Allowance etc.), Indirect Benefits (Medical & Life Cover Insurance, Food Coupon etc.), and Saving Contributions (Gratuity, EPF etc.).

CTC = Direct Benefits* + Indirect Benefits# + Savings Contributions$

Here’s a list of various Direct benefits, Indirect benefits and Savings Contributions:

CTC of an employee includes deductions/contribution such as Provident Fund, Medical Insurance etc. Though they are part of your compensation, but you do not get them as part of in-hand/net salary. Though these components increases your CTC, you net salary doesn’t increase.

*Direct Benefits: Amount paid to the employee monthly by the employer which forms part of his/her gross earnings and is subject to government taxes.

#Indirect Benefits: Benefits that employees enjoy without paying for them. The company pays them on behalf of the employee but adds these expenses to the employee’s CTC as it is an expense from the company’s point of view.

$Savings Contributions: Contribution such as Provident Funds, Gratuity whose monetary value is added to the employee’s CTC.

2. Gross Salary –

In simple words, Gross Salary = CTC – Employer’s Contributions (such as EPF, ESI, Gratuity). Gross salary will be the amount that is paid before deduction of taxes or any other deductions. Gross salary will be inclusive of bonuses, or any other additional payments.

Here’s an example of Gross Salary calculation:

From the CTC example above

Basic: Rs. 5,00,000

HRA: Rs. 2, 50,000

Medical: Rs. 15,000

Conveyance: 19,200

Food Coupon: Rs. 36,000

EPF Contributions: Rs. 21,600

Gratuity: Rs. 20,000

Medical & Life Cover Insurance: Rs. 13,200

Annual Bonus: Rs. 125,000

CTC = Rs. 10,00,000

Gross Salary = CTC – EPF Contributions – Gratuity = Rs. 10,00,000 – Rs. 21,600 – Rs. 20,000 = Rs. 9,58,400

Related: 

What is Employees’ Provident Fund (EPF)?

What is Gratuity?

How do I configure gratuity for my employees on Keka?

What is ESI?

The amount of Rs. 9,58,400 will be considered as employee’s Gross Salary.

3. Net Salary –

Simply put, Net Salary = Gross Salary – Taxes – Other Contribution/Deductions. Net salary, also known as take-home salary, will be the amount that you actually get after deduction of taxes (TDS and/or PT) or any other deductions (such as Employee PF & ESI contribution).

Related: 

How do I create a salary structure and manage its components?

What are the various salary components in a salary structure?

What is meant by Tax exempted salary component?

How do I submit claims for tax exemption on salary allowances?

How is ‘total taxable income’ calculated?

How is ‘net income tax payable’ calculated on ‘taxable income’?

If you have any additional query or concern related to this topic, write to support@keka.com.

Employees earning a Basic (plus DA) Salary of more than Rs. 15,000 can choose not to contribute to PF. Though, opting out of PF will increase your take-home salary, it will also increase the tax liability (The employer PF contribution is exempt from tax and employee’s contribution is taxable but eligible for deduction under section 80C of Income tax Act.).

Prerequisite to remove employee from PF contribution: ‘Opt-out from PF’ option should be enabled under PF settings.

To do this, go to Settings >> Payroll >> PF and ESI settings, and check the option under PF Contribution that says ‘Allow employee to override PF Contribution, opt-out from PF, limit to statutory pf’.

In case you wish to remove or opt-out an employee from PF contribution, follow the steps below:

Step 1: Go to Payroll >> Payroll Admin >> Provident Fund & ESI > Employee PF options

Step 2: On the next screen, click on ‘Change’ link against the employee for whom you want to disable the PF contribution.

Step 3: On the pop-up that appears, turn on the ‘Desired PF Override’ (toggle button) and update the value to ‘0’. Click on ‘Submit’ button and the PF contribution amount will be updated to ‘0’, thus disabling the PF contribution for the selected employee.

If you wish to do a bulk update/disable PF contribution amount, click on ‘Bulk Import’ link to download the Excel file template and update/disable PF contribution in bulk.

In case you are not able to disable PF contribution of employees, write to support@keka.com.