What are the social security contributions in India?

In India, social security contributions are part of a broader system of employee benefits and welfare programs designed to provide financial security and support. Here’s an overview of the main social security contributions:

1. Employee Provident Fund (EPF):

Employee Contribution: 12% of the employee's basic salary.
Employer Contribution: 12% of the employee's basic salary. Of this, 3.67% goes to the EPF, and 8.33% goes to the Employees' Pension Scheme (EPS).
Total Contribution: The combined contribution from both employee and employer amounts to 24% of the basic salary.
Interest Rate: The EPF earns interest, which is declared by the government annually.

2. Employees' Pension Scheme (EPS):

Employer Contribution: Out of the employer’s 12% contribution, 8.33% is allocated to the EPS. The EPS provides a pension to employees after retirement.
Eligibility: Employees who have contributed to the EPS are eligible for a pension upon retirement, subject to certain conditions and periods of service.

3. Employees' Deposit Linked Insurance (EDLI):

Employer Contribution: 0.5% of the employee's basic salary.
Purpose: Provides a lump sum insurance benefit to the family of the employee in case of death while in service.

4. Gratuity:

Eligibility: Paid to employees who have completed at least five years of continuous service.
Calculation: Gratuity is calculated based on the employee’s last drawn salary and years of service. The formula is: Here, "15" refers to the number of days’ salary for each year of service, and "26" is the number of working days in a month.

5. Maternity Benefit (for female employees):

Eligibility: Female employees are entitled to paid maternity leave of up to 26 weeks for the first two children and 12 weeks for subsequent children.
Payments: The maternity leave is paid based on the employee’s full salary during the leave period.

6. Employee State Insurance (ESI):

Contribution: ESI is applicable to employees earning up to a specified wage ceiling (₹21,000 per month as of the latest updates).
Employee Contribution: 0.75% of the monthly wages.
Employer Contribution: 3.25% of the monthly wages.
Benefits: Provides medical, maternity, and disability benefits, among other welfare services.

7. Professional Tax:

Applicability: Professional Tax is levied by state governments and varies by state. It is a small tax that employers withhold from employees' salaries.
Limits: The maximum amount varies depending on the state regulations.

8. Labour Welfare Fund:

Applicability: This fund is applicable in some states and is used for the welfare of workers. Contributions are typically minimal and are deducted from the employee’s salary.

These contributions and benefits are designed to ensure financial security and support for employees in different situations. Employers are responsible for deducting and remitting these contributions to the respective authorities.

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