Case: Our client has deducted ESIC for the month of April & May 2011 in the month of jun 2011 due to delay in finalising appraisal process. Arrears were given in 7 june 2011 after deducting ESIC. Employees whose Gross salary was upto 15000 per month in march 2011& according to the promotion / increment letters given to those employees their gross salary will be above 15000/- per month wef April 2011. Please suggest whether deduction made for ESIC based on March 2011 salary for the month of April & May 2011 is correct or not
22 June 2011
Dear sir, Query was regarding ESIC deduction based on March salary when employees were covered under ESIC. After appraisal for April 2011 to March 2012 which were finalised in 1st week of June 2011, salaries of some employees who were covered under ESIC hv crossed the exemption limit of 15000/- for which as per ESIC act, payment has to be made uptil September 2011 since in April 2011 the revised CTC was not known. Now my query is whether the company can claim refund in next contribution period explaining that employees wef April 2011 were not covered under ESIC & can the company get the refund of the amount paid?.
21 July 2024
In the scenario described, where ESIC deductions were made for the months of April and May 2011 based on salaries in March 2011, but employees received promotions or increments effective April 2011 that increased their salaries above Rs. 15,000 per month, and the appraisal process was delayed until June 2011, here’s how you can approach the situation regarding a potential refund:
### ESIC Contribution and Refund:
1. **ESIC Coverage Based on Salary**: ESIC contributions are applicable to employees earning up to Rs. 15,000 per month. If employees' salaries increased above this threshold effective from April 2011 due to promotions or increments, they would be exempt from ESIC deductions from April 2011 onwards.
2. **Applicability for April and May 2011**: Since the revised salaries effective from April 2011 were not known at the time of ESIC deduction for April and May 2011, the company deducted ESIC based on the salaries in March 2011, which were within the ESIC coverage limit.
3. **Claiming Refund**: - **Legal Provisions**: As per ESIC rules, once contributions are made for a particular period, it can be challenging to claim a refund for those contributions unless there was an error or miscalculation. - **Adjustments in Next Contribution Period**: Since the revised CTC (Cost to Company) and salaries above Rs. 15,000 per month were known from June 2011 onwards, the company can adjust ESIC contributions accordingly for the subsequent contribution periods (from June 2011 onwards). - **Refund Procedure**: If ESIC contributions were incorrectly deducted for April and May 2011 based on the salaries in March 2011, the company can request a correction or adjustment in the subsequent contribution period. This adjustment would typically involve reducing or not deducting ESIC for employees whose salaries exceeded Rs. 15,000 per month from April 2011 onwards.
### Steps to Take:
- **Document Review**: Verify the promotion or increment letters and their effective dates to substantiate that employees' salaries exceeded Rs. 15,000 per month from April 2011. - **Communication with ESIC**: Contact the ESIC authorities or consult with a qualified ESIC consultant to understand the procedure for adjusting contributions and potential refund eligibility. - **Adjust Contributions**: Ensure that ESIC deductions are correctly adjusted from June 2011 onwards for employees whose salaries were above Rs. 15,000 per month from April 2011.
### Consultation:
For precise guidance and assistance in claiming a refund or adjusting ESIC contributions based on your specific circumstances, it is advisable to consult with a qualified chartered accountant or tax advisor who specializes in ESIC compliance and regulations. They can provide tailored advice, help navigate the process with ESIC authorities, and ensure compliance with all legal requirements.
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