What is the Eligibility for ESI Deduction?
ESI scheme applies to all establishments, like corporate organizations, factories, restaurants, cinema theatres, offices, medical and other institutions which are located in the scheme-implemented areas, where 10 or more people are employed. All employees of a covered unit, whose monthly incomes (excluding overtime, bonus, leave encashment) does not exceed Rs. 21,000 per month, are eligible to avail benefits under the Scheme. ESI fund provides cash and medical benefits to employees and their immediate dependents.ESI deduction is calculated on an employee’s gross pay. Most of the employees face confusion in understanding ESI deduction rules because they aren’t clear with the concept of Gross Salary amount.Gross salary is described as the total income earned while working in a job, before any deductions made for health insurance, social security and state or federal taxes.For ESI calculation, the salary comprises of all the monthly payable amounts such as basic pay, dearness allowance, city compensatory allowance, HRA, incentive allowance, attendance bonus, meal allowance and special allowance. The salary, however, does not include annual bonus, retrenchment compensation, encashment of leave and gratuity.