ESI deduction to be made above 21K salary

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Mahesh S M (Querist)
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15 May 2024 What should be done at the time of ESI return filing if we have an employee who was previously enrolled for ESI and now has a salary that crosses 21K?

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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07 July 2024 If you have an employee who was previously enrolled for ESI (Employee State Insurance) and now their salary has increased to a level where they are no longer eligible for ESI coverage (crosses Rs. 21,000 per month), you need to follow these steps for ESI return filing:

### Steps to Handle the Change:

1. **Update Employee Records:**
- Update the employee's salary details in your payroll records to reflect the new salary exceeding Rs. 21,000 per month.
- Ensure that the updated salary details are accurate and reflect the current earnings of the employee.

2. **Stop ESI Deductions:**
- Stop deducting ESI contributions from the employee's salary once their gross salary exceeds Rs. 21,000 per month.
- Ensure that the payroll system is configured to correctly stop deducting ESI for this employee.

3. **Update ESI Portal:**
- Log in to the ESI portal (https://www.esic.in/ESICInsurance1/ESICInsurancePortal/).
- Update the employee details on the portal to reflect that they are no longer eligible for ESI coverage due to their increased salary.
- Ensure that all necessary changes are made accurately and promptly.

4. **File ESI Returns:**
- When filing ESI returns, report the correct information regarding the employee's earnings and contributions.
- Ensure that you do not include this employee in the ESI contribution calculations if they are no longer eligible.

### Additional Considerations:

- **Communication:** Inform the employee about the change in their ESI status and ensure they understand the implications.
- **Compliance:** Ensure compliance with all applicable laws and regulations regarding ESI contributions and reporting.
- **Consultation:** If unsure about the specific process or requirements, consider consulting with a payroll or compliance expert to ensure proper handling of the situation.

By following these steps, you can manage the transition smoothly when an employee's salary exceeds the ESI threshold, ensuring compliance with ESI regulations while accurately reporting and filing ESI returns.

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