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How to Run Payroll in India: PF, ESI and Professional Tax Explained

By Britto Vincent · 14 July 2026 · 9 min read

A plain-English walkthrough of Indian payroll — the statutory deductions, who they apply to, the deadlines, and how to stop doing it in a spreadsheet.

Payroll is more than salary × days

Running payroll in India means calculating gross pay, applying statutory deductions correctly, paying employees on time, and depositing the deductions with the right government body before the deadline. Get the deductions wrong and the penalty lands on the employer, not the employee — which is why a spreadsheet that "mostly works" is a real risk once you cross a handful of staff.

The main statutory deductions

Provident Fund (PF / EPF). Applies to establishments with 20 or more employees (voluntary below that). The standard employee contribution is 12% of basic wages, with a matching employer contribution. It is deposited with the EPFO, and the monthly ECR return plus payment is due by the 15th of the following month.

Employees' State Insurance (ESI). Applies to covered establishments for employees earning up to the ESI wage ceiling. The employee contributes a small percentage of wages and the employer a larger one. ESI funds medical and cash benefits, and contributions are due monthly.

Professional Tax (PT). A state-level tax, so the slabs and even whether it exists at all depend on the state — Kerala, Karnataka, Maharashtra, West Bengal and others each set their own. It is a small monthly amount deducted from salary and paid to the state.

TDS on salary. If an employee's taxable income crosses the exemption limit, the employer deducts income tax at source across the year and deposits it, then issues Form 16.

A simple monthly sequence

• Finalise attendance and leave for the cycle — this decides paid days.
• Compute gross pay: basic, HRA, allowances, and any overtime.
• Apply deductions: PF, ESI (if applicable), PT for the state, and TDS.
• Pay net salary to employees.
• Deposit each deduction with its authority before the deadline and file the return.
• Keep payslips and records — employees and auditors will ask.

Where spreadsheets break

The arithmetic is not hard; keeping it correct every month is. Attendance is copied by hand and mistyped. PT slabs differ by state and change. A new joiner mid-month throws off proration. A missed EPFO deadline quietly accrues damages. None of these are visible until an audit or an unhappy employee surfaces them.

Connecting attendance to payroll

The single biggest time sink is moving attendance into the payroll calculation. If your team checks in from the field, capturing that automatically — with GPS-based attendance — and feeding it straight into the salary run removes the most error-prone manual step. VeloCrew keeps attendance, shifts, salary structure and statutory deductions in one flow, so the paid-days number the payroll uses is the same one the field captured. See how the platform fits together.

This is a general overview, not tax advice. Rates, ceilings and deadlines change and vary by state — confirm the current figures for your establishment with a qualified professional.