Provident Fund (PF) and Employee State Insurance (ESI) Transactions in Tally Prime

Provident Fund (PF) and Employee State Insurance (ESI) are essential components of employee welfare in many countries. Tally Prime allows businesses to manage and record these transactions efficiently. This article will guide you through the steps of recording Provident Fund (PF) and Employee State Insurance (ESI) transactions in Tally Prime, with real-life examples.

1. Enabling Payroll Features in Tally Prime

Before recording PF and ESI transactions, you must ensure that the payroll feature is enabled in Tally Prime. Follow these steps:

• Go to Gateway of Tally → F11: Features → Payroll Settings.
• In the Payroll Settings screen, set Enable Payroll to "Yes".
• Press Enter to save the changes and enable payroll features.

2. Creating Provident Fund and ESI Ledger Accounts

To manage PF and ESI transactions, you need to create ledger accounts for both. Here’s how to do it:

• Go to Gateway of Tally → Accounts Info → Ledgers → Create.
• For Provident Fund (Employee Contribution), enter the following details:
  • Ledger Name: Provident Fund (Employee Contribution)
  • Under: Current Liabilities
  • Group: Employee Benefits
• For Provident Fund (Employer Contribution), create another ledger:
  • Ledger Name: Provident Fund (Employer Contribution)
  • Under: Current Liabilities
  • Group: Employee Benefits
• Similarly, create an ESI ledger:
  • Ledger Name: Employee State Insurance (Employee)
  • Under: Current Liabilities
  • Group: Employee Benefits
• Also, create an ESI Employer Contribution ledger:
  • Ledger Name: Employee State Insurance (Employer)
  • Under: Current Liabilities
  • Group: Employee Benefits

Example: Creating PF and ESI Ledgers

• Provident Fund (Employee Contribution): Under: Current Liabilities, Group: Employee Benefits
• Provident Fund (Employer Contribution): Under: Current Liabilities, Group: Employee Benefits
• Employee State Insurance (Employee): Under: Current Liabilities, Group: Employee Benefits
• Employee State Insurance (Employer): Under: Current Liabilities, Group: Employee Benefits

3. Recording Provident Fund and ESI Deductions

After creating the necessary ledgers, you need to record PF and ESI deductions from employees. Here’s how to do it:

• Go to Gateway of Tally → Accounting Vouchers → Journal Voucher.
• Enter the date of the transaction (e.g., end of the month).
• For each employee, enter the amount deducted for Provident Fund and ESI under the respective ledger accounts.
• For example, if the employee’s PF deduction is $200, record it under "Provident Fund (Employee Contribution)" ledger.
• Similarly, record the employer’s contribution to PF under the "Provident Fund (Employer Contribution)" ledger.
• For ESI, deduct the employee's share (e.g., $50) under the "Employee State Insurance (Employee)" ledger and the employer’s share (e.g., $50) under the "Employee State Insurance (Employer)" ledger.
• Press Enter to save the journal voucher entry.

Example: Recording PF and ESI Deductions for John Doe

• Employee Name: John Doe
• Provident Fund (Employee Contribution): $200
• Provident Fund (Employer Contribution): $200
• Employee State Insurance (Employee): $50
• Employee State Insurance (Employer): $50

4. Recording PF and ESI Payments to the Government

Once the PF and ESI amounts are deducted, the business needs to remit the amounts to the government. The steps for recording the payments are as follows:

• Go to Gateway of Tally → Accounting Vouchers → Payment Voucher.
• Select the Party Name as "Provident Fund" or "Employee State Insurance" depending on the payment.
• Enter the total amount to be paid (e.g., employee and employer contributions combined for PF and ESI).
• Under Particulars, select the respective ledger accounts (e.g., "Provident Fund (Employee Contribution)", "Provident Fund (Employer Contribution)", etc.).
• Record the payment amount and press Enter to save the payment entry.

Example: Recording Payment for PF and ESI

• Amount Paid: $500 (Provident Fund and ESI)
• Ledger Accounts: Provident Fund (Employee Contribution), Provident Fund (Employer Contribution), Employee State Insurance (Employee), Employee State Insurance (Employer)

5. Viewing PF and ESI Reports

After recording the PF and ESI transactions, you can view reports to track the amounts deducted and paid. Tally Prime allows you to generate reports for employee benefits and liabilities.

• Go to Gateway of Tally → Display → Payroll Reports → Provident Fund to view the PF report.
• Go to Gateway of Tally → Display → Payroll Reports → ESI to view the ESI report.
• You can also view the Liability Report to see outstanding liabilities for PF and ESI payments.

6. Conclusion

Managing Provident Fund (PF) and Employee State Insurance (ESI) transactions in Tally Prime is straightforward and essential for maintaining accurate employee welfare records. By creating the necessary ledgers, recording deductions and payments, and generating reports, businesses can ensure compliance and streamline their payroll processes. With the steps outlined in this guide, you can easily manage PF and ESI transactions in Tally Prime.