Indian payroll processing, employee salary calculations, TDS on salary (Section 192), Provident Fund (PF/EPF), Employee State Insurance (ESI), employer cost calculations, CTC breakdowns, net-to-gross or gross-to-net conversions, Indian payslip structure, Form 24Q/Form 138 filings, or any question…
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Every figure is drawn from this Guide and cited to its source.
Rate
3.25% of grossESI Act
Wage ceiling
₹21,000/monthESI Act
New Tax Regime s 115BAC — 0 – ₹4,00,000
0%Finance Act 2025; s 115BAC
New Tax Regime s 115BAC — ₹4,00,001 – ₹8,00,000
5%s 115BAC
New Tax Regime s 115BAC — ₹8,00,001 – ₹12,00,000
10%s 115BAC
New Tax Regime s 115BAC — ₹12,00,001 – ₹16,00,000
15%s 115BAC
New Tax Regime s 115BAC — ₹16,00,001 – ₹20,00,000
20%s 115BAC
New Tax Regime s 115BAC — ₹20,00,001 – ₹24,00,000
25%s 115BAC
New Tax Regime s 115BAC — Above ₹24,00,000
30%s 115BAC
EPF
3.67% of Basic+DAEPF Act
EPS
8.33% (capped ₹15,000)EPF Act
EDLI
0.50% (capped ₹15,000)EPF Act
PF Admin
0.50%EPFO
Total employer PF
~13%EPF Act
Employer ESI Rate
3.25% of grossESI Act
Employer ESI Wage ceiling
₹21,000/monthESI Act
TDS deposit
7th of following month (30th April for March)ITA
PF/ESI deposit
15th of following monthEPF/ESI Acts
Form 24Q (TDS return)
Last day of the month following the end of the quarterITA
Form 16 (annual certificate)
By 15 JuneITA
Cess
Plus: 4% Health and Education Cess on total tax.
Rebate under Section 87A
Income up to INR 12,00,000 is effectively tax-free (rebate of up to INR 60,000).
Standard deduction
INR 75,000 for salaried employees (new regime).
Cess
Plus: 4% Health and Education Cess.
Old regime deductions
Section 80C (up to 1.5L), 80D (health insurance), HRA, LTA, home loan interest (Section 24b), NPS (80CCD).
Proposed floor
INR 178/day (~INR 4,628/month)
Status
Not yet notified as of May 2026
State constraint
States cannot set minimum wages below this floor once notified
Rendered from the canonical facts model · method attested Jun 6, 2026 (covers the method, not the currency of individual figures). General reference only — confirm with a qualified professional before acting.
Reviewed against the cited tax authorities by Mayur Deokar on 2026-06-06.
Items flagged for further clarification are tracked separately and excluded here.
This block is generated from verified skill_facts — edit the facts, not the prose.
Quick Reference
| Field | Value |
|---|---|
| Country | India (Republic of India) |
| Currency | INR (Indian Rupee) |
| Payroll frequency | Monthly (typically paid last working day or 1st of next month) |
| Tax year (Financial Year) | 1 April -- 31 March (FY 2025-26 = April 2025 to March 2026) |
| Primary legislation | Income Tax Act 1961 (being replaced by IT Act 2025 from 1 April 2026); EPF & MP Act 1952; ESI Act 1948; Payment of Bonus Act 1965; Payment of Gratuity Act 1972; Code on Wages 2019 |
| Tax authority | Central Board of Direct Taxes (CBDT) / Income Tax Department |
| PF authority | Employees' Provident Fund Organisation (EPFO) |
| ESI authority | Employees' State Insurance Corporation (ESIC) |
| Employee PF | 12% of Basic + DA |
| Employer PF | 12% of Basic + DA (split: 3.67% EPF + 8.33% EPS) |
| ESI Employee | 0.75% of gross wages |
| ESI Employer | 3.25% of gross wages |
| TDS on salary | Progressive slab rates (new regime default) |
| Minimum wage | State-specific (no single national minimum) |
| Filing | TDS deposit by 7th; PF/ESI by 15th; Form 24Q/138 quarterly |
| Skill version | 1.0 |
New Tax Regime Slabs -- FY 2025-26 (Default)
| Annual Taxable Income (INR) | Rate |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 -- 8,00,000 | 5% |
| 8,00,001 -- 12,00,000 | 10% |
| 12,00,001 -- 16,00,000 | 15% |
| 16,00,001 -- 20,00,000 | 20% |
| 20,00,001 -- 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Old Tax Regime Slabs -- FY 2025-26 (Optional, Employee Must Opt)
| Annual Taxable Income (INR) | Rate |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,001 -- 5,00,000 | 5% |
| 5,00,001 -- 10,00,000 | 20% |
| Above 10,00,000 | 30% |
TDS Calculation Method
| Step | Detail |
|---|---|
| 1. Estimate annual salary | Project total CTC components for the year |
| 2. Deduct exemptions | Standard deduction; HRA/LTA (old regime only) |
| 3. Deduct Chapter VIA | 80C, 80D, 80CCD etc. (old regime only) |
| 4. Apply slab rates | New regime (default) or old regime (if opted) |
| 5. Deduct rebate u/s 87A | If income ≤ 12L (new) or ≤ 5L (old) |
| 6. Add 4% cess | On computed tax |
| 7. Divide by 12 | Monthly TDS = Annual tax / 12 |
Surcharge (Higher Incomes)
| Annual Income (INR) | Surcharge |
|---|---|
| 50L -- 1 Cr | 10% |
| 1 Cr -- 2 Cr | 15% |
| 2 Cr -- 5 Cr | 25% |
| Above 5 Cr | 25% (marginal relief applies) |
Employees' Provident Fund (EPF)
| Parameter | Detail |
|---|---|
| Employee contribution | 12% of Basic wages + Dearness Allowance (DA) |
| Wage ceiling for PF | INR 15,000/month (contributions mandatory up to this; voluntary above) |
| Minimum Basic + DA | Must be ≥ 50% of total remuneration (Labour Codes) |
| Applies to | Establishments with 20+ employees (10+ in notified sectors) |
Employee State Insurance (ESI)
| Parameter | Detail |
|---|---|
| Employee contribution | 0.75% of gross wages |
| Wage ceiling | INR 21,000/month (INR 25,000 for persons with disability) |
| Applies to | Establishments with 10+ employees where employee wages ≤ ceiling |
| Coverage | Medical, sickness, maternity, disability, dependants' benefit |
Professional Tax (PT)
| Parameter | Detail |
|---|---|
| Rate | State-specific (typically INR 150-200/month; max INR 2,500/year) |
| Applicability | Varies by state (Maharashtra, Karnataka, West Bengal, etc.) |
| Deducted by | Employer at source |
| Deposited | To state government monthly (by 15th-21st depending on state) |
Employer PF Contributions
| Component | Rate | On |
|---|---|---|
| EPF (Provident Fund) | 3.67% | Basic + DA |
| EPS (Pension Scheme) | 8.33% | Basic + DA (max INR 15,000) |
| EDLI (Life Insurance) | 0.50% | Basic + DA (max INR 15,000) |
| PF Admin charges | 0.50% | Basic + DA |
| Total employer PF burden | ~13.00% | On Basic + DA |
Employer ESI Contribution
| Parameter | Detail |
|---|---|
| Rate | 3.25% of gross wages |
| Wage ceiling | INR 21,000/month |
| Applies when | Any covered employee earns ≤ INR 21,000/month |
Employer Total Statutory Cost (Typical)
| Component | Rate | Base |
|---|---|---|
| EPF + EPS + EDLI + Admin | ~13% | Basic + DA |
| ESI (if applicable) | 3.25% | Gross wages |
| Gratuity provision | ~4.81% | Basic + DA (15/26 × salary for each year of service) |
| Bonus (statutory minimum) | 8.33% | Basic + DA (min) up to 20% (max) |
| LWF (Labour Welfare Fund) | State-specific | Nominal amount |
India does NOT have a single national minimum wage. Rates are set by:
Minimum Wages Authority Table
| Authority | Coverage |
|---|---|
| Central Government | Scheduled employments (railways, mines, ports) |
| State Governments | All other employments within the state |
| Skill classification | Unskilled, Semi-skilled, Skilled, Highly skilled |
Indicative Minimum Wages (2025-26, Selected States)
| State | Unskilled (INR/month approx.) | Skilled (INR/month approx.) |
|---|---|---|
| Delhi | 17,494 | 19,279 |
| Maharashtra | 13,500 | 15,500 |
| Karnataka | 13,500 | 15,800 |
| Tamil Nadu | 12,500 | 14,000 |
| West Bengal | 10,000 | 11,500 |
Working Hours and Overtime
| Parameter | Standard |
|---|---|
| Standard working hours | 8 hours/day, 48 hours/week |
| Overtime rate | 2× the ordinary rate of wages |
| Maximum overtime | Varies by state (Factories Act: limited hours) |
| Weekly rest | 1 day per week mandatory |
| Spread-over | Maximum 10.5 hours including rest intervals |
Mandatory Benefits
| Benefit | Detail |
|---|---|
| Earned Leave (EL/PL) | 1 day per 20 days worked (Factories); varies by state Shops & Est. Act |
| Casual Leave | Typically 7-12 days/year (state-specific) |
| Sick Leave | Typically 7-12 days/year (state-specific) |
| Maternity Leave | 26 weeks (first two children); 12 weeks (third+) |
| Paternity Leave | 15 days (Central Government; private sector varies) |
| Gratuity | 15 days salary × years of service / 26 (after 5 years) |
| Statutory Bonus | 8.33% to 20% of Basic + DA (establishments with 20+ employees) |
| Leave encashment | Unused EL encashable at separation or annually (per policy) |
| National/Festival holidays | Varies by state (typically 5-10 gazetted holidays) |
Gratuity Calculation
| Parameter | Detail |
|---|---|
| Formula | (15 × last drawn salary × years of service) / 26 |
| Salary for gratuity | Basic + DA |
| Eligibility | 5 years continuous service (relaxed for death/disability) |
| Maximum | INR 25,00,000 (tax-free limit; employer may pay more) |
| Tax treatment | Exempt up to limits under Section 10(10) |
Statutory Bonus
| Parameter | Detail |
|---|---|
| Minimum bonus | 8.33% of Basic + DA |
| Maximum bonus | 20% of Basic + DA |
| Eligibility | Employees with Basic + DA ≤ INR 21,000/month |
| Calculation base | Capped at INR 7,000/month (or actual if lower) |
| Payment deadline | Within 8 months of closing of accounting year |
Indian employers MUST issue monthly payslips under the Code on Wages 2019 and various state Shops and Establishments Acts. Required elements:
Payslip Elements
| Element | Mandatory |
|---|---|
| Employer name and establishment code | Yes |
| Employee name, ID, designation | Yes |
| Pay period (month) | Yes |
| Basic salary | Yes |
| Dearness Allowance (DA) | Yes (if applicable) |
| House Rent Allowance (HRA) | Yes (if applicable) |
| Special allowances | Yes |
| Overtime earnings | Yes (if applicable) |
| Gross salary | Yes |
| PF employee deduction (12%) | Yes |
| ESI employee deduction (0.75%) | Yes (if applicable) |
| Professional Tax | Yes (if applicable) |
| TDS (income tax) | Yes |
| Other deductions (LWF, advances, loans) | Yes |
| Net salary payable | Yes |
| Employer PF contribution (shown) | Recommended |
| Leave balance | Recommended |
| YTD earnings and deductions | Recommended |
| Bank account details | Common practice |
CTC (Cost to Company) Structure -- Typical
| Component | Typical % of CTC |
|---|---|
| Basic salary | 40-50% |
| HRA | 40-50% of Basic |
| Special Allowance | Flexible component |
| Employer PF | 12% of Basic |
| Employer ESI (if applicable) | 3.25% of gross |
| Gratuity (funded) | 4.81% of Basic |
| Medical insurance (group) | Fixed premium |
Filing Obligations
| Filing | Frequency | Deadline | Authority |
|---|---|---|---|
| TDS deposit (Challan 281) | Monthly | 7th of following month (March: 30 April) | CBDT/IT Department |
| PF ECR (Electronic Challan cum Return) | Monthly | 15th of following month | EPFO |
| ESI contribution | Monthly | 15th of following month | ESIC |
| ESI employee details return | Monthly | 21st of following month | ESIC |
| Professional Tax | Monthly | State-specific (10th-21st) | State Government |
| Form 24Q / Form 138 (TDS quarterly return) | Quarterly | 31 Jul / 31 Oct / 31 Jan / 31 May | CBDT |
| Form 16 / Form 130 (TDS certificate) | Annual | 15 June | To employees |
| PF Annual Return (Form 6A/3A) | Annual | 25 April | EPFO |
| ESI Annual Return | Semi-annual | 11 May / 12 November | ESIC |
Key Filing Details
| Filing | Detail |
|---|---|
| Challan 281 (TDS) | Online payment via NSDL/TIN portal; generates BSR code for Form 24Q |
| ECR (PF) | Upload member-wise file on EPFO Unified Portal; payment via approved banks |
| Form 24Q → Form 138 | Form 24Q replaced by Form 138 under Income Tax Act 2025 (from FY 2026-27) |
| Form 16 → Form 130 | Form 16 replaced by Form 130 under IT Act 2025 |
Penalties
| Violation | Penalty |
|---|---|
| Late TDS deposit | 1%/month (from due date to deposit) + 1.5%/month (from deduction to deposit if not deducted on time) |
| Late TDS return | INR 200/day until filed (max = TDS amount); plus INR 10,000-1,00,000 under Section 271H |
| Late PF deposit | 12% p.a. interest + damages up to 25% of arrears |
| Late ESI | 12% p.a. interest + damages up to 25% |
| Non-issuance of Form 16/130 | Penalty under Section 272A: INR 500/day |
Monthly CTC breakdown:
Basic salary: INR 41,667 (50% of CTC)
HRA: INR 16,667
Special Allowance: INR 14,583
Employer PF (12% of Basic): INR 5,000
Employer ESI (if applicable): INR 0 (gross > 21,000)
Gratuity provision: INR 2,003
Medical insurance: INR 1,250
Monthly CTC: INR 83,333
Monthly deductions:
Employee PF (12% of Basic): -INR 5,000
Professional Tax: -INR 200
TDS (new regime, ~5.5%): -INR 3,750
Gross salary (excl employer PF/gratuity): INR 75,000
Net monthly salary: INR ~66,050
Gross monthly salary: INR 18,000
Basic + DA: INR 9,000
HRA: INR 4,500
Other allowances: INR 4,500
Employee deductions:
PF (12% of 9,000): -INR 1,080
ESI (0.75% of 18,000): -INR 135
Professional Tax: -INR 0 (below threshold in most states)
TDS: -INR 0 (below taxable threshold)
Net salary: INR 16,785
Employer cost:
Gross salary: INR 18,000
+ Employer PF (13% of 9,000): +INR 1,170
+ Employer ESI (3.25%): +INR 585
+ Gratuity provision: +INR 433
= Total employer cost: INR ~20,188
Gross salary: INR 15,00,000
- Standard deduction: -INR 75,000
= Taxable income: INR 14,25,000
Tax calculation:
0 -- 4,00,000: NIL = 0
4,00,001 -- 8,00,000: 5% = 20,000
8,00,001 -- 12,00,000: 10% = 40,000
12,00,001 -- 14,25,000: 15% = 33,750
Total tax: INR 93,750
+ Cess 4%: +INR 3,750
= Total annual TDS: INR 97,500
Monthly TDS: INR 8,125
Interaction with Other Skills
| Skill | Interaction |
|---|---|
| india-einvoice | No direct interaction (e-invoicing is GST/B2B; payroll is separate) |
| payroll-workflow-base | General payroll processing workflow; India-specific overrides in this skill |
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Review status
Accountant-reviewed
Reviewed by a named licensed practitioner against the stated sources, as general reference material.
Accountant-reviewed
Reviewed by Mayur Deokar · 6 June 2026
A named accountant reviewed this complete Guide version within the stated scope. It is not a guarantee.
View review record →Other India computations in the OpenAccountants Tax Library.
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