All you need to know about the penalty for late filing of an ESI return

Introduction

Employer State Insurance is denoted as ESI. It provides protection to health-related employees and also includes medical and disability benefits. The companies that are registered with ESI are responsible for collecting ESI every month, which must be paid by the employer on the 15th of the subsequent month. The employers are also responsible to file ESI return in every 6 months (twice a year), the due dates are 11th May for the period of October to March, and 11th November for the period of April to September. In this blog, we will discuss the penalty for late filing of an ESI return but in short, we will also learn the process of filing ESI returns.

What is ESI ?  

The term ‘ESI’ stands for ‘Employee State Insurance’. Employer State Insurance is a contributory insurance scheme under the Employees’ State Insurance Act, 1948, that deducts a little portion from the employee’s salary aimed at providing health and disability benefits to employees. In this blog, we will explore the penalties for late filing of ESI returns.

It is managed by the Employee State Insurance Corporation (ESIC) under the Ministry of Labor and Employment and this fund was made with contributions from both employees and employers to provide insurance coverage to the employees. The contribution amount is distributed as follows:

• Employees contribution: 0.75% of the employees salary

• Employers contribution: 3.25% of the employees salary

The employer deposits the entire amount of the employee’s ESI contribution into their account, allowing them to withdraw funds for emergencies related to health, unemployment, or disability.

Companies registered with ESI must collect monthly contributions from employees and pay them by the 15th of the following month. Employers are also required to file ESI returns twice a year: by November 11 for the April to September period and by May 11 for the October to March period.

What is the penalty for late filing of an ESI return?  

The following is the penalty for late filing of an ESI return:

1. Penalty for delay in payment of contribution

When employers do not pay contributions within the specific time limit prescribed in the regulation. They are liable to pay simple interest at the rate of 12% per year for each day to contribute to a penalty of late filing of an ESI return.

2. Penalty for late/ non-payment of employees’ contribution deducted but not paid

The employee entrusts the amount deducted from their salary as their contribution to the employer. Therefore, the employer must ensure these contributions are submitted to the Employee State Insurance (ESI) authority. Failing to make timely payments or neglecting to pay these contributions is considered a “Criminal Breach of Trust” under sections 406 and 409 of the Indian Penal Code.

Additionally, violations of sections 85(b-g) of the ESI Act can also occur. The penalties for late filings, delayed payments, or fraudulent transactions can lead to a prison sentence of up to two years, along with a fine of ₹5,000.

3. Penal provision for non-payment or delay in payment of contribution

Violation of such rules of the Employee State Insurance Corporation (ESIC) may face penalties as outlined in section 45 of the ESI Act. According to Regulation 31C, ESIC can charge damages based on the amount owed if there is a delay or failure to pay contributions. However, these damages cannot exceed the total amount of the contributions due.

Process of filing ESI return 

The following is the process of filing an ESI return:

• A 17-digit code, user ID, and password will be given to the employer while registering for ESI.

• Log in to the official website of Employer State Insurance.

• Fill in the correct information of the employee and click on “Filing monthly return”.

• Fill in the bank information to submit the monthly ESI contribution.

• Go to the “list of action” page and click on “Generate Challan”.

• Accept the declaration in the checkbox and click on “self-certification”. In case there are more than 40 employees, then upload the Chartered Accounts Certificate.

Due date of filing ESI return

The due date for filing Employee State Insurance (ESI) payments is important for both employers and employees. Usually, payments need to be made by the 15th of the month after workers receive their wages. This timeline is essential for maintaining eligibility for benefits and avoiding penalties. Employers should pay close attention to these dates to stay on track with their ESI responsibilities.

Conclusion

The Employee State Insurance Corporation (ESIC), a government organization, administers Employer State Insurance (ESI). The program primarily offers financial and medical support to the workers and their families. Employers should prioritize the timely filing of ESI returns to avoid any financial burden and legal complications related to the penalty for late filing of ESI returns.