Payroll Compliance India: PF, ESI, TDS, PT and Labour Law Obligations (2025)
A complete payroll compliance guide for Indian businesses — covering EPF registration, monthly contributions, ESIC applicability, Professional Tax obligations, TDS on salary, and Form 16 issuance.
EPF (Employee Provident Fund): Registration and Contributions
EPF registration is mandatory when a business employs 20 or more employees. Once registered, both employee and employer contribute 12% of basic+DA each month. Employee's 12% goes to EPF. Employer's 12% is split: 8.33% to EPS (Employee Pension Scheme) and 3.67% to EPF. The monthly EPF ECR (Electronic Challan cum Return) must be filed by the 25th of each month. Arrears after 25th attract 12% per annum interest.
| Component | Employee Share | Employer Share |
|---|---|---|
| EPF | 12% of Basic+DA | 3.67% of Basic+DA |
| EPS (Pension) | Nil | 8.33% of Basic+DA (max ₹1,250/month) |
| EDLI (Insurance) | Nil | 0.5% of Basic+DA (max ₹75/month) |
| Admin charges | Nil | 0.5% of Basic+DA (min ₹500/month) |
ESIC (Employee State Insurance Corporation)
ESIC is mandatory for employees earning up to ₹21,000/month (₹25,000 for persons with disability) in establishments with 10+ employees (20+ in some states). Employee contribution: 0.75% of gross wages. Employer contribution: 3.25% of gross wages. Monthly challan must be deposited by the 15th of the following month. ESIC provides health insurance, maternity, disability, and dependent benefits to enrolled employees.
Professional Tax: State-wise Obligations
Professional Tax (PT) is a state tax levied on salaried employees and professionals. Applicable states include Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Telangana, Gujarat, West Bengal, and more (not applicable in Delhi, Rajasthan, UP, etc.). The employer deducts PT from employee salary and deposits it with the state. Maximum PT is ₹2,500 per year. Each state has different slabs — check state-specific rules.
| State | Annual PT Limit | Note |
|---|---|---|
| Maharashtra | ₹2,500/year | Deducted monthly, deposit varies by registration type |
| Karnataka | ₹2,400/year | Monthly deduction of ₹200 for income > ₹15,000 |
| Tamil Nadu | ₹1,200/year | Half-yearly payment |
| Telangana | ₹2,500/year | Monthly deduction |
| West Bengal | ₹2,500/year | Monthly deduction |
| Gujarat | ₹2,500/year | Annual payment |
TDS on Salary and Form 16
Employer must deduct TDS under Section 192 from salary every month at estimated average rate for the year. At year-end, employer issues Form 16: Part A (TRACES-generated, shows TDS deposited) and Part B (employer-prepared, shows salary and deductions). Form 16 must be issued by June 15 of the assessment year. For FY 2025-26, Form 16 must be issued by June 15, 2026.
Monthly Payroll Compliance Calendar
Every month: (1) Process payroll and compute salary, PF, ESIC, PT, TDS deductions, (2) Deposit TDS by 7th of following month (30 April for March), (3) Deposit PF ECR by 25th, (4) Deposit ESIC by 15th, (5) Deposit Professional Tax as per state schedule. Quarterly: File TDS return (Form 24Q) by 31 July, 31 Oct, 31 Jan, 31 May. Annually: Issue Form 16 by June 15.
- Salary processing and payslip generation
- TDS deduction and deposit by 7th
- PF ECR filing and deposit by 25th
- ESIC deposit by 15th
- Professional Tax deduction and payment
- Quarterly TDS return filing
- Annual Form 16 issuance
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