India payroll compliance is mostly knowable and mostly automatable. What trips up most HR teams isn’t the rules — it’s the schedule. This is the checklist we wish every new payroll operator had on day one: every statutory deduction, every regime nuance, and the actual filing deadlines.
Provident Fund (EPF) — the always-on one
- Applicability: any establishment with 20+ employees. Wage ceiling for compulsory contribution: ₹15,000 basic+DA (employers and employees can voluntarily exceed this).
- Rates: 12% employee + 12% employer of basic+DA; of the employer 12%, 8.33% goes to EPS (capped at ₹1,250) and 3.67% to EPF.
- Filing: monthly ECR upload by the 15th of the following month via the EPFO Unified Portal.
- Universal Account Number (UAN): every employee gets one; portable across jobs. Validate UAN + Aadhaar linkage on every new hire to avoid PF rejection.
ESI — only when applicable, but get it right
- Applicability: establishments with 10+ employees; covers employees earning ≤ ₹21,000 gross/month (₹25,000 for persons with disability).
- Rates: 0.75% employee + 3.25% employer. Total 4% of gross.
- Filing: monthly challan by 15th of following month; half-yearly returns by 11th May and 11th November.
- Common mistake: an employee crossing ₹21,000 mid-cycle still contributes till the end of the contribution period (April–Sep or Oct–Mar). Don’t stop deductions mid-period.
Professional Tax (PT) — the state mess
PT is a state-level levy. The slabs and deadlines vary state to state — this is where most homegrown payrolls get audited.
- Karnataka: ₹200/month for gross ≥ ₹25,000 (₹2,500 in February).
- Maharashtra: slab-based; max ₹2,500/year.
- West Bengal: slab-based; max ₹2,496/year.
- Tamil Nadu, Gujarat, Madhya Pradesh, Telangana, AP, Odisha, Kerala — each with their own slabs and filing schedules.
- States without PT: Uttar Pradesh, Rajasthan, Delhi, Haryana, Goa, Uttarakhand, Punjab, J&K.
TDS — old vs new regime, and projection mid-year
From AY 2024-25, the new regime is the default. Employees can opt for the old regime per financial year by declaring at the start of the year.
- New regime slabs (FY 2025-26): nil up to ₹3L; 5% ₹3-6L; 10% ₹6-9L; 15% ₹9-12L; 20% ₹12-15L; 30% above ₹15L. Standard deduction ₹50,000.
- Old regime slabs (FY 2025-26): nil up to ₹2.5L; 5% ₹2.5-5L; 20% ₹5-10L; 30% above ₹10L. Plus deductions: 80C (₹1.5L), 80D, HRA, LTA, home loan interest.
- Section 87A rebate: full rebate up to ₹7L taxable income (new regime); ₹5L (old regime).
- Surcharge: 10% above ₹50L; 15% above ₹1Cr; 25% above ₹2Cr (new regime caps at 25%). Plus 4% health & education cess on tax+surcharge.
- Mid-year projection: each month’s TDS is 1/12 of the projected annual tax minus the cumulative tax already deducted. Don’t use flat percentages.
Form 16 — the artefact
- Issued by employer to employee by 15th June following the financial year (so for FY 2025-26, by 15th June 2026).
- Two parts: Part A (TDS summary from TRACES) and Part B (salary breakup + deductions).
- Part A must be downloaded from TRACES after 24Q filing; cannot be self-generated.
TDS quarterly filings (24Q)
- Quarter 1 (Apr-Jun): file by 31st July.
- Quarter 2 (Jul-Sep): file by 31st October.
- Quarter 3 (Oct-Dec): file by 31st January.
- Quarter 4 (Jan-Mar): file by 31st May.
Gratuity
- Eligibility: 5 years of continuous service (waived on death/disability).
- Formula: last drawn basic+DA × 15/26 × years of service.
- Exemption: up to ₹20L lifetime tax-free.
- Accounting: actuarial valuation under Ind AS 19 / AS 15 for the P&L.
The monthly close checklist
- Compute gross + deductions for every employee.
- Compute TDS based on cumulative annual projection (don’t use flat slabs).
- Generate PF ECR file; upload by 15th.
- Generate ESI challan; file by 15th.
- State-wise PT remittance.
- NACH/NEFT bank file for salary disbursement.
- Payslip generation + employee distribution.
- Update gratuity actuarial provision quarterly.
A modern HRMS should do steps 1–7 in a single payroll-run click, with the exception queue surfacing the 4–6 records that need human review — not all 200 rows. VeloHR ships India payroll with this exception-first close model, and adds US + UK on the same data plane (our take on multi-country).