Employees' Provident Fund (EPF)
Mandatory for establishments with 20+ employees. Employer and employee each contribute 12% of basic + DA. Employers also pay 0.5% EDLI and 0.5% pension (EPS) within the 12%.
India Payroll Compliance
India Payroll Compliance Guide
Navigating PF, ESI, PT, TDS, gratuity, and bonus compliance for Indian employers.
Quick answer
India payroll compliance requires employers to deduct and remit Provident Fund (PF) at 12% each from employer and employee, ESI at 3.25% employer and 0.75% employee (gross ≤ ₹21,000/month), Professional Tax per state slab, TDS per income tax slabs, gratuity at 4.81% of basic for employees with 5+ years tenure, and statutory bonus at 8.33% of basic. OfficeKit HR automates these calculations and provides challan-ready reports.
Key regulations in India
Employees' State Insurance (ESI)
Mandatory for establishments with 10+ employees (some states 20+) where gross pay ≤ ₹21,000/month. Employer contributes 3.25%, employee 0.75%.
Professional Tax (PT)
State-level tax deducted from employee salaries. Slabs and rates vary by state (e.g., Karnataka up to ₹200/month, Maharashtra up to ₹300/month, Tamil Nadu up to ₹179/month). Employers must register and file returns per state.
Tax Deducted at Source (TDS)
Employers deduct income tax per employee's declared investment proofs and applicable tax slabs. Quarterly TDS returns and Form 16 issuance are mandatory.
Payment of Gratuity Act, 1972
Payable to employees with 5+ years of continuous service at 15 days of last drawn salary per year of service. Applicable to establishments with 10+ employees.
Payment of Bonus Act, 1965
Mandatory bonus for employees earning ≤ ₹21,000/month. Minimum 8.33% of annual salary or ₹100 per month, whichever is higher. Maximum 20% of annual salary.
Compliance checklist for India
- Register your establishment with EPFO, ESIC, and state PT authorities
- Set up salary components (basic, DA, HRA, allowances, deductions) per compliance rules
- Configure PF at 12% (employee and employer), ESI if applicable, and PT per state slab
- Collect employee investment declarations for TDS at the start of each financial year
- Run monthly payroll with auto-calculated statutory deductions
- Generate and remit PF challans (due 15th), ESI challans (due 15th), PT returns (per state schedule)
- File quarterly TDS returns and issue Form 16 to employees by June each year
- Calculate and accrue gratuity for eligible employees with 5+ years tenure
- Compute statutory bonus at minimum 8.33% for eligible employees
- Maintain audit-ready statutory registers and annual compliance reports
How OfficeKit HR helps with India compliance
OfficeKit HR centralises employee records, attendance, leave, and payroll in one system — reducing manual data transfer and compliance errors. Payroll rules for India are configured within the platform, and statutory filings are generated from the same data used for pay runs.
Multi-country groups running entities in India and the GCC can manage all payroll compliance from a single HRMS, with region-specific rules applied per entity.