ESI (Employees’ State Insurance) Return Filing in India is a mandatory compliance requirement for employers registered under the Employees’ State Insurance Act, 1948. This scheme, managed by the Employees’ State Insurance Corporation (ESIC), provides socio-economic security and health insurance benefits to workers and their dependents in case of sickness, maternity, disability, and death due to employment injury, among other conditions.
What is ESI?
ESI is a self-financing social security and health insurance scheme funded by contributions from both employees and employers. A small percentage of the employee’s gross wages is contributed by the employee, and a higher percentage is contributed by the employer.
Employee Contribution
Currently, 0.75% of wages.
Employer Contribution
Currently, 3.25% of wages.
(These rates are subject to revision by the government.)
Who is Required to Register for ESI?
The ESI Act, 1948, generally applies to
- Factories employing 10 or more persons.
- Other establishments (like shops, hotels, restaurants, cinemas, road transport undertakings, newspaper establishments, educational institutions, and medical institutions) employing 10 or more persons.
- Note: In some states, the threshold for applicability might be 20 employees, depending on state government notifications.
- Employees earning wages up to ₹21,000 per month (₹25,000 for persons with disabilities) are covered under the ESI scheme.
Why is ESI Return Filing Important?
Mandatory Compliance
It is a legal obligation for all covered employers.
Benefit Disbursement
Accurate and timely filing ensures that employees can avail themselves of the various ESI benefits (medical care, sickness benefit, maternity benefit, disablement benefit, dependent benefit, funeral expenses, etc.).
Avoid Penalties
Non-compliance or delays can lead to significant financial penalties, interest charges, and even legal prosecution.
Record Keeping
It serves as a record of contributions made for each employee, ensuring transparency and accountability.
Types and Frequency of ESI Returns
ESIC compliance involves both monthly payments and half-yearly return filings.
Monthly ESI Contribution Payment
- Employers must remit both the employer’s and employee’s share of contributions to ESIC by the 15th of the following month.
- Even if there are no employee contributions in a given month (e.g., no covered employees, or nil wages paid), employers may still need to file a “NIL Declaration” depending on the specific state/portal requirements.
Half-Yearly ESI Return (Return of Contributions – RC)
This is the main ESI return, providing a comprehensive report of contributions made for all employees during a six-month period.
There are two contribution periods and corresponding due dates for filing the half-yearly returns.
- Contribution Period 1: April 1st to September 30th
- Due Date for Return Filing: November 11th of the same year.
- Contribution Period 2: October 1st to March 31st (of the next year)
- Due Date for Return Filing: May 12th of the next year.
- Contribution Period 1: April 1st to September 30th
While the contributions are paid monthly, the detailed return is consolidated and filed half-yearly.
Process of Filing ESI Returns (Online)
The entire ESI compliance process, including registration, contribution payment, and return filing, is done online through the ESIC Unified Portal (www.esic.gov.in).
Employer Registration
The establishment must first register with ESIC and obtain a 17-digit Employer Code.
Employee Registration (IP Generation)
All eligible employees must be registered under ESIC, and an Employee Insurance Number (IP Number) is generated for each.
Monthly Contribution Calculation
Calculate the employee and employer contributions based on the wages paid for each month.
Generate and Pay Challan
- Log in to the ESIC portal using your employer credentials.
- Generate the challan for the monthly contributions.
- Pay the ESI dues online through net banking or other authorized payment modes by the 15th of the subsequent month.
- Log in to the ESIC portal using your employer credentials.
Prepare and Upload Half-Yearly Return (RC)
- For the half-yearly return, ensure all employee details, wages, and contributions for the entire six-month period are accurately compiled.
- The ESIC portal provides options to view contributions, verify details, and make any missing payments.
- Once all contributions for the period are paid, navigate to the “Monthly Contribution” or “Return Filing” section.
- Select the relevant contribution period.
- Perform a “Self-Certification” or declaration, confirming the accuracy of the data.
- Submit the return online.
- For the half-yearly return, ensure all employee details, wages, and contributions for the entire six-month period are accurately compiled.
Documents/Information Required for ESI Compliance
- Employer’s login credentials for the ESIC portal.
- Digital Signature Certificate (DSC) for online filing.
- Attendance register/records.
- Wage register/payroll records showing employee wages and deductions.
- Accident records (if any).
- ESIC Challan payment details.
- Employee details (Name, IP Number, Aadhaar, Bank Account, Date of Joining/Leaving, wages).
Penalties for Non-Compliance
ESIC has stringent penalties for non-payment or delayed payment of contributions and late filing of returns
Interest
Simple interest at the rate of 12% per annum is levied for each day of delay or default in payment of contributions.
Damages (Penalties)
The Corporation can impose damages (penalties) on employers for delayed remittance of contributions. These damages are calculated as a percentage of the amount due, proportionate to the duration of the delay:
- Delay under 2 months: 5% per annum
- Delay between 2 to 4 months: 10% per annum
- Delay between 4 to 6 months: 15% per annum
- Delay over 6 months: 25% per annum (subject to a maximum of 100% of the due contribution)
Prosecution
Failure to pay contributions can also lead to legal prosecution under the ESI Act, which may include imprisonment for a term that can extend up to 3 years and fines.
Given the complexities and severe penalties, it’s highly advisable for employers to seek assistance from Taxation Portal that automates ESI compliance to ensure timely and accurate filings.