Statutory Compliance in Payroll- A Complete Guide

The Payment of Bonus Act, 1965

The Payment of Bonus Act provides an annual bonus to the employee in the certain establishment- including factories and establishments employing 20 or more persons Under the Act, The bonus is calculated by the employee’s salary and the profits of the establishment.

Employees drawing ₹21000 per month or less (basic + DA, excluding other allowances) and have completed 30 working days in that financial year are eligible for the bonus payment.

Salary or wages include only basic and DA for the bonus payment, and the rest of the allowances (e.g., HRA, overtime, etc.) are excluded. Bonus should be paid at a minimum rate of 8.33% and maximum rate of 20%. It needs to be paid within 8 months from the close of the accounting year.

Employees can be disqualified from bonus payments if they are dismissed by fraud, misconduct, or even absenteeism. The employer needs to ensure that on dismissal, the procedures of domestic inquiry, proper documentation and employee acceptance of the misconduct are all carried out as per the standing orders before disqualifying the bonus payment.

Know more on The Payment of Bonus Act.

Tax Deduction at Source (TDS)

TDS is deducted from the payments made by the individuals as per Income Tax Act. It is managed by the Central Board of Direct Taxes (CBDT), which comes under the Indian Revenue Services (IRS).

Under TDS, when an assessee gets his income, there will be a TDS deduction by the person (deductor) paying the assessee and is submitted to the income tax department.

The assessee then files the TDS return and the tax calculated from his income will be deducted and the final amount will be refunded.

TDS is exempted in the following 2 cases:
1. If the receiver gives a self-declaration saying that he had made the required investments in FORM 15G/15H
2. If there is a certificate of exemption provided by the Assessing Officer

Income tax slab for individual tax payers & HUF
(less than 60 years old) (both men & women)

Less: Rebate under Section 87A
Add: Surcharge and Education Cess

In case of a resident senior citizen (who is 60 years or more at any time during the previous year but less than 80 years on the last day of the previous year)

Less: Rebate under Section 87A
Add: Surcharge and Education Cess

In case of a resident super senior citizen
(who is 80 years or more at any time during the previous year)

Add: Surcharge and Education Cess

To understand the other tax slabs, refer here. Also to understand the various Rates for tax deduction at source, refer here.

TDS Last Dates of FY 2018-2019 for Return Filing

The TDS certificate will be given as

• Form 16 for the people receiving the salary
• Form 16A for the people receiving income from any other source
• Form 16B- TDS on sale of any immovable property

For late filing of TDS return, there is a penalty of Rs. 200 per day or the amount of TDS payable whichever is lower out of the two.

Professional Tax

Professional Tax is levied by the state government. This tax is paid by every individual who earns. The limit is Rs.2500 per year and the calculation and amount collected may differ from one state to another.

Since it is a tax that is levied by the state government, it tends to differ from one state to another. Each state has a slab set, and the professional tax is deducted based on these slabs.

PT is collected by the employers from employees monthly salaries, and it then paid to the government. Failure to collect or to pay professional tax may result in penalties.

Also if you're not working for an employer, you are liable to pay the professional tax yourself. For professionals, not working with any employer, can register by applying through a form. Once the form is received, a registration number will be issued to the individual. Payment of the professional tax can be made under these registration numbers at banks.

Amendments to Maternity Benefit Act, 1961

The Maternity Benefit (Amendment) Act 2016, was passed by the Rajya Sabha in August 2016 and Lok Sabha in March 2017.

Under the law:
• The maternity leave is increased to 26 weeks, and the prenatal leaves are also extended from 6 to 8 weeks.
• A woman is entitled to 12 weeks of maternity leave if she already has 2 or more children and in this case, the prenatal leaves remain 6 weeks.
• The act also provides adoption leave of 12 weeks for a woman who adopts a child below 3 months.
• Female civil servants are entitled to maternity leave for 180 days for their first two live-born children.
• Also, a commissioning mother gets about 12 weeks of leave when the child is handed over to her.

The act also further requires an employer to inform women about her rights under this act during her appointment day. This must be given to her in writing and also in the email.

Only on completion of at least 80 days in an establishment in the 12 months before her delivery date, the maternity leave is awarded full pay. Apart from 12 weeks of salary, a female worker is entitled to a medical bonus of 3,500 Indian rupees.

Know more on the compliance and rules in The Maternity Benefit Act, 1961

Equal Remuneration Act, 1976

The Equal Remuneration Act, 1976 provides for the payment of equal remuneration to men and women workers for the same work and prevents discrimination, on the ground of sex, against women in the matter of employment, recruitment and for matters connected in addition to the that or incidental to it. This Act applies to virtually every kind of establishment.

Refer here to know more about the compliance in this act.

Shops & Establishments Act

The Shop and Establishment Act is to regulate the employment condition of workers in shops and establishments. This includes work hours, rest intervals, overtime, holidays, termination of service, etc.

Registration needs to be done within 30 days from the date of commencement of business. Even if there is no employee, the entity has to get registered under this act.

An application has to be submitted along with the fee and the scanned documents online. Within 15 days of successful document submission, the department approves the registration. The registration certificate can be downloaded from the portal.

A registration certificate is valid for 5 years and should be renewed after that.

In case of a change in address, status, partners intimation has to be given to the department within 30 days of change through an online application.
The registration fee depends on the number of employees hired by the entity. Additional fee has to be paid through filing an online application when there is an increase in headcount, pay, etc.

The annual return should be filed online in Form U on or before 31st January of the subsequent year.