Payroll compliance in India: PF, ESI, PT, TDS & gratuity
A practical overview for HR and finance teams.
Key statutory components
| Component | Who it covers | Typical contribution |
|---|---|---|
| Provident Fund (EPF) | Establishments with 20+ employees; mandatory for wages up to ₹15,000/month | Employee 12% of basic + DA; employer 12% (split between EPF and EPS) |
| Employee State Insurance (ESI) | Employees with gross wages up to ₹21,000/month in covered establishments | Employee 0.75%; employer 3.25% of gross wages |
| Professional Tax (PT) | Varies by state | State slabs, max ₹2,500/year |
| Income Tax (TDS on salary) | Employees with taxable income | Based on slab and chosen regime (old/new) and declarations |
| Gratuity | Employees with 5+ years of continuous service (rules differ under new codes) | 15 days’ wages per completed year (15/26 formula) |
Monthly payroll compliance checklist
- Lock attendance, leave and loss of pay.
- Compute gross salary, overtime and arrears.
- Apply PF, ESI and PT based on eligibility.
- Project annual income and deduct TDS per regime and declarations.
- Approve payroll and generate bank file and payslips.
- Deposit PF, ESI, PT and TDS by due dates and file returns.
How DataqHR helps
DataqHR Payroll pulls attendance and leave automatically, applies PF, ESI, PT and TDS from your configuration, supports old and new regime declarations, and handles gratuity and leave encashment in full and final settlement.
Frequently asked questions
Is PF mandatory?
EPF applies to establishments with 20 or more employees (and voluntarily below that). Employees earning up to ₹15,000 basic + DA per month must be covered; others may join voluntarily.
Who is covered under ESI?
In notified areas, ESI generally covers employees with gross wages up to ₹21,000 per month in establishments with 10 or more employees.
Is Professional Tax the same in every state?
No. Professional Tax is levied by states, with different slabs; some states do not levy it. The constitutional maximum is ₹2,500 per year.
Does DataqHR calculate these automatically?
Yes. Once configured, DataqHR applies PF, ESI, PT and TDS every payroll run.