To create Employees' ESI Deduction Pay Head,
Go to Gateway of Tally > Payroll Info. > Pay Heads > Create
Enter the name of the Pay Head in the Name field
Select Employees' Statutory Deductions as the Pay Head Type from the List of Pay Head Types
Select Employee State Insurance in the Statutory Pay Type field
Select Current Liabilities from the List of Groups in the Under field
By default, Affect Net Salary is set to Yes. Type No, if you do not want this component to be included in the Pay Slip
By default, the Pay Head component name entered in the Name field will appear in the Pay Slip, if you want to change the default Pay Head component name then type it in Name to appear in Payslip field
In the Calculation Type field is pre-filled with As Computed Value and Calculation Period is pre-filled with Months by default
Select Normal Rounding from the list of Rounding Methods and type 1 as the rounding Limit
In the Compute field, select On Specified Formula from the Computation On list
The Compute sub-screen appears, In the Pay Head column select Basic Pay from the List of Pay Heads and select Add Pay Head to add other Pay Heads that will be considered for ESI calculation one by one and select End of List to return to Pay Head Creation
In the Effective Date field, enter the desired date from which the ESI Deduction will come into effect
The Percentage is defaulted as Slab Type
Enter the Percentage in the Value Basis field
Similarly, enter the From Amount, Amount Upto, Slab Type and Value Basis details for the next slab
Note: The amount is not specified in the Pay Head creation for ESI as the same will be picked up from the Satutory Master file.
Press Enter to accept.
Note: Any income of a regular nature will be subject to ESI calculation viz., Basic Pay, Dearness Allowance, House Rent Allowance, Conveyance, Overtime etc.
ESI Deduction Pay Head should be added in the Salary Details after Basic Pay, HRA, Conveyance and Overtime as the calculation for ESI is dependant on these Pay Heads.
Also, when more than one Pay Head is added in the formula for Calculation, you need to make sure that the independent Pay Heads appear first and the dependent Pay Heads later (e.g. HRA is dependant on Basic and hence, Basic should come first then HRA).