1. What are the components of a salary structure?

Answer: A typical salary structure includes:

• Basic Salary
• House Rent Allowance (HRA)
• Special Allowance
• Bonus/Incentives
• Conveyance Allowance
• Provident Fund (PF) Contribution
• Employee State Insurance (ESIC) Contribution
• Professional Tax
• Income Tax (TDS) Deduction
• Gratuity (if applicable)

 2. How is Provident Fund (PF) calculated?

Answer: PF is calculated as:

• Employee Contribution: 12% of Basic Salary
• Employer Contribution: 12% of Basic Salary
  • 8.33% to Pension Fund (EPS) (on max Rs. 15,000)
  • 3.67% to EPF

For example, if Basic Salary = Rs. 20,000
Employee PF = Rs. 2,400 (12%)
Employer PF = Rs. 2,400 (8.33% of Rs. 15,000 = Rs. 1,250 to EPS, Rs. 1,150 to EPF)

 

3. What is ESIC and who is eligible?

Answer: ESIC (Employees' State Insurance Corporation) is a social security scheme.
Eligibility: Employees with gross salary ≤ Rs. 21,000/month.

• Employee Contribution: 0.75% of Gross Salary
• Employer Contribution: 3.25% of Gross Salary

 

4. How is Professional Tax (PT) calculated?

Answer: PT is a state-specific tax. For Maharashtra, it’s:

• Salary up to Rs. 7,500: Nil
• Rs. 7,501 – Rs. 10,000: Rs. 175/month
• Above Rs. 10,000: Rs. 200/month, except Rs. 300 in February

 

5. What are pre-tax and post-tax salary components?

Answer:

• Pre-Tax Components: Part of gross salary before TDS (e.g., Basic, HRA, allowances)
• Post-Tax: What employee gets after deductions like PF, PT, ESIC, and TDS

 

6. How do you compute the net salary of an employee?

Answer: Net Salary = Gross Salary – (Employee PF + ESIC + PT + TDS)

 

7. Is PF deduction mandatory?

Answer: Yes, if the Basic Salary is ≤ Rs. 15,000. If above Rs. 15,000, it’s optional, but many companies deduct on full basic.

 

8. Is ESIC deduction applicable if salary increases during the contribution period?

Answer: Yes. Once covered, ESIC applies for the full contribution period (April–September, October–March), even if salary crosses Rs. 21,000.

 

9. What is Form 16?

Answer: Form 16 is a certificate issued by an employer showing the salary paid and TDS deducted for a financial year.

 

10. What statutory compliances are involved in payroll?

Answer:

• EPF registration & returns (monthly/annual)
• ESIC registration & returns
• PT registration & monthly payment
• TDS deduction & quarterly returns
• Labour Welfare Fund (if applicable)

 

11. What is the difference between CTC and Gross Salary?

Answer:

• CTC (Cost to Company): Total expense incurred by the employer (includes salary + employer PF + ESIC + gratuity + benefits).
• Gross Salary: Total salary before deductions (includes Basic + HRA + Allowances).

 

12. What is Basic Salary, and how is it usually determined?

Answer:
Basic Salary is the fixed component of the salary, usually 30–50% of CTC. It forms the base for calculating PF, bonus, gratuity, etc.

 

13. What are allowances in salary? Name a few.

Answer:
Allowances are fixed monetary benefits paid to employees. Common types:

• HRA (House Rent Allowance)
• Conveyance Allowance
• Medical Allowance
• Special Allowance
• LTA (Leave Travel Allowance)

 

14. What are standard deductions allowed under Income Tax on salary?

Answer:
As per FY 2023-24:

• Standard Deduction: Rs. 50,000
• Professional Tax: Allowed
• HRA (subject to rent paid & city)
• 80C deductions (PF, LIC, etc.)

 

15. What is UAN and why is it important?

Answer:
UAN (Universal Account Number) is a unique number assigned to each employee under EPFO to track PF accounts across employers.

 

16. Is PF applicable on special allowance?

Answer:
If special allowance is part of the basic wage as per EPFO rules, then PF should be deducted. Supreme Court ruled in 2019 that PF should be on total "basic wages".

 

17. When is ESIC registration mandatory for an employer?

Answer:
If the company has ≥10 employees (in most states), and at least one earns ≤ Rs. 21,000/month.

 

18. What is Form 24Q?

Answer:
Form 24Q is a quarterly return filed by the employer for TDS deducted on salary.

 

19. What is the difference between Form 16 and Form 12BA?

Answer:

• Form 16: Summary of salary & TDS.
• Form 12BA: Details of perquisites & other non-monetary benefits.

 

20. An employee's salary is Rs. 25,000. Calculate his PF and ESIC deductions.

Answer:

• PF (12% of Rs. 25,000) = Rs. 3,000
• ESIC: Not applicable (Salary > Rs. 21,000)
•  

21. If an employee resigns mid-month, how will you calculate salary?

Answer:
Use pro-rata calculation based on the number of days worked:

Salary = (Monthly Salary ÷ Total Days in Month) × Days Worked

 

22. What registers are maintained under the Payroll/HR laws?

Answer:

• Muster Roll (attendance)
• Wage Register
• PF Register
• ESIC Register
• PT Register
• Salary Slip & Pay Sheet

 

23. How do you calculate gross salary from basic salary?
A: Gross salary is calculated by adding basic salary to all allowances (HRA, conveyance, special allowances, etc.) and any bonuses or incentives. The formula is: Gross Salary = Basic Salary + Allowances + Bonuses + Other Benefits.

24. What's the typical percentage breakdown between basic salary and allowances?
A: Commonly, basic salary is 40-50% of CTC (Cost to Company). HRA is often 40-50% of basic salary, and other allowances make up the remainder. However, this varies by company policy and industry standards.

25. What are the benefits of ESIC registration?
A: ESIC provides medical benefits, sickness benefits, maternity benefits, disablement benefits, and dependent benefits to insured employees.

26. Is professional tax deducted from all employees?
A: Yes, except in states where it's not applicable or for employees earning below the threshold limit.

27.  What are the common deductions under Section 80C?
A: EPF, PPF, life insurance premiums, ELSS, NSC, tuition fees, home loan principal repayment (up to Rs. 1.5 lakh total).

28. How do you handle payroll for employees joining or leaving mid-month?
A: Salary is calculated on a pro-rata basis: (Monthly Salary/Total Days in Month) × Number of Days Worked.

29. What is Form 16 and when is it issued?
A: Form 16 is a TDS certificate issued by employers to employees by June 15th each year, summarizing salary paid and TDS deducted for the previous financial year.

30. What is the gratuity calculation formula?
A: Gratuity = (Last drawn salary (basic + DA) × 15/26) × Number of completed years of service (minimum 5 years required).

31. How do you handle payroll for different types of leave?
A: Paid leaves don't affect salary, while unpaid leaves result in salary deduction based on per-day calculation. Sick leaves may have special rules depending on company policy.

32.  What are the compliance requirements for payroll processing?
A: Timely PF/ESI deposits, TDS payments, returns filing (Form 24Q for TDS, PF ECR, ESI returns), issuance of Form 16, maintaining proper records for audits.

33.  How do bonuses affect payroll calculations?
A: Bonuses are added to gross salary and are subject to TDS, PF (if part of basic), and other statutory deductions based on their nature (ex-gratia, performance bonus, etc.).

 

 

Return Forms / Due Dates / Penalties & Interest

 

1. Provident Fund (PF)

Return Forms

• ECR (Electronic Challan-cum-Return) – Monthly return for PF contributions.
• Form 5A – For exempted establishments.
• Form 10C – For EPS withdrawal/scheme certificate.
• Form 19 – For PF withdrawal.
• Form 31 – For partial withdrawal/advance.

Due Dates

• PF Payment & ECR Filing: 15th of the following month (e.g., April's PF by May 15).
• Annual PF Return (Form 3A & 6A): By 25th April (for the previous financial year).

Penalties & Interest

• Late Payment Interest: 12% p.a. on delayed PF deposits.
• Penalty:
  • Rs. 1,000 per day (for severe delays, up to Rs. 10,000 per default).
  • Prosecution under Section 14 of EPF Act for non-compliance.

 

2. ESIC (Employee State Insurance Corporation)

Return Forms

• Monthly Return (ESIC Portal): Details of employees & contributions.
• Half-Yearly Return (Form 6): Filed in April & October (for preceding 6 months).
• Annual Return (Form 5): By 31st December (for the previous financial year).

Due Dates

• Contribution Payment: 15th of the following month (e.g., April’s ESIC by May 15).
• Half-Yearly Return (Form 6):
  • 30th April (for Oct-Mar)
  • 31st October (for Apr-Sep)
• Annual Return (Form 5): 31st December (for previous FY).

Penalties & Interest

• Late Payment Interest: 12% p.a. on delayed contributions.
• Penalty:
  • Up to Rs. 10,000 + imprisonment (for willful default).
  • Rs. 500/day for late filing of returns.

 

3. Professional Tax (PT)

Return Forms

• Form 5 (Monthly Return): Filed by employers deducting PT.
• Form 6 (Annual Return): Yearly reconciliation (varies by state).

Due Dates (Varies by State)

State	Monthly Due Date	Annual Return Due Date
Maharashtra	21st of next month	30th June (for previous FY)
Karnataka	20th of next month	30th April (for previous FY)
Tamil Nadu	15th of next month	30th April (for previous FY)
West Bengal	21st of next month	30th April (for previous FY)

Penalties & Interest

• Late Payment Interest: 1-2% per month (varies by state).
• Penalty:
  • Rs. 5-200 per day (for delayed filing).
  • Additional 10-50% of tax due (for non-payment).

 

Summary Table

Statutory Deduction	Monthly Due Date	Annual Return Due Date	Late Payment Interest	Penalty
PF	15th of next month	25th April	12% p.a.	Rs. 1,000/day (up to Rs. 10K)
ESIC	15th of next month	31st Dec (Form 5)	12% p.a.	Rs. 500/day + prosecution
Prof. Tax	Varies by state	Varies (mostly 30th Apr)	1-2% pm	Rs. 5-200/day

✔ PF & ESIC have strict 15th of next month deadlines.
✔ Professional Tax deadlines vary by state rules.
✔ Penalties can be severe—up to Rs. 1,000/day for PF and prosecution for ESIC.
✔ Always check state-specific PT rules (Maharashtra, Karnataka, etc.).