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Firms can’t claim deduction if social security deposits are delayed

The authorities on Monday stated the employers who delay the deposit of employees’ share of social security contributions like workers’ provident fund won’t be able to claim the quantity as deduction from their revenue.

 

Image for illustration solely. Photograph: ANI Photo

An modification on this regard is proposed within the Finance Bill 2021, to make sure that corporations deposit the social security contributions of their workers like Employees’ State Insurance (ESI) nicely in time.

Besides it’s proposed to tax curiosity earned on annual provident fund contribution of over Rs 2.5 lakh from April 1, 2021.

At current there is no such thing as a tax on curiosity earned on provident fund deposits.

The authorities has additionally proposed to arrange an internet portal to map casual sector employees, like gig and platform employees, to offer them numerous advantages like well being, credit score and meals and so forth.

In her price range speech, Finance Minister Nirmala Sitharaman stated in Lok Sabha, “We have noticed that some employers deduct the contribution of employees towards provident funds, superannuation funds, and other social security funds but do not deposit these contributions within the specified time.”

She was of the view that for the workers, this implies a lack of curiosity or revenue.

In circumstances the place an employer later turns into financially unviable, non-deposit leads to a everlasting loss for the workers.

The minister informed the House, “In order to ensure that employees’ contributions are deposited on time, I reiterate that the late deposit of employees’ contribution by the employer will not be allowed as deduction to the employer.”

These amendments will take impact from April 1, 2021 and can accordingly apply to the evaluation 12 months 2021-22, and subsequent evaluation years as per the Finance Bill 2021.

According to the speech doc, to be able to rationalise tax exemption for the revenue earned by high-income workers, it’s proposed to limit tax exemption for the curiosity revenue earned on the workers’ contribution to numerous provident funds to the annual contribution of Rs 2.5 lakh.

This restriction shall be relevant just for the contribution made on or after April 1, 2021.

Under the social security schemes run by the retirement fund physique EPFO, employers in addition to workers contribute 12 per cent of fundamental wages every in direction of social security schemes run by it.

These social security schemes present the advantage of provident fund, group insurance coverage and pension to organised sector employees which primarily embody personal and public sector undertakings’ workers.

Similarly, for the ESI scheme, workers deposit 0.75 per cent of the wages and that of employer’s is 3.25 per cent of the wages.

The ESI is a medical health insurance scheme offered primarily to industrial employees.

S P Tiwari General Secretary Trade Union Co-ordination Centre stated it is a good transfer within the course of selling fairer employment. But the federal government must also think about stopping all incentives to defaulter corporations who do not pay their or workers’ contribution in direction of social security schemes (EPFO, ESI).

On taxing provident fund curiosity revenue, he stated that he opposes any transfer to tax curiosity revenue of any social security contribution in precept as a result of increased revenue incomes people pay increased revenue tax finally.

Tiwari who can be on the board of Employees’ State Insurance Corporation (ESIC) opined that establishing a portal for mapping casual sector employees can be a great initiative because it was mandatory to offer over 40 crore unorganised employees the advantage of numerous social security schemes and authorities schemes.

The finance minister has additionally introduced to arrange a devoted net portal for amassing data of casual sector employees to offer them advantages of varied authorities schemes like well being, credit score, meals and different advantages.

The minister additionally stated that for the primary time globally, social security advantages will lengthen to gig and platform employees.

However, she didn’t elaborate whether or not it could be offered by way of the ESIC or some other company or physique.

She additionally apprised the House that ‘minimal wages will apply to all classes of employees, and they’re going to all be coated by the ESIC. Women will probably be allowed to work in all classes and likewise within the night-shifts with sufficient safety.

‘At the identical time, compliance burden on employers will probably be lowered with single registration and licensing, and on-line returns.’

The gig and platform employees are those that are engaged by numerous e-commerce companies like Uber, Ola, Swiggy and Zomato.

These employees are not paid salaries and therefore disadvantaged of social security advantages like provident fund, group insurance coverage and pension.

India has a complete workforce of over 50 crore together with 40 crore unorganised sector which embody farm and rural employees.

The finance minister additionally famous the labour reforms finished by the federal government the place the vast majority of labour legal guidelines have been concised into 4 broad codes on wages, industrial relation, social security and occupational security, well being & working circumstances.

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