Payroll in India is not just about paying salaries. It is a multi-authority compliance system where the Income Tax Department, EPFO, ESIC, and state professional tax authorities each have their own portals, deadlines, forms, and penalties. Missing any single deadline-even by one day-triggers automatic interest and penalties that cannot be reversed. For businesses using professional accounting services (know more), payroll compliance is one of the highest-risk areas because the deadlines are monthly, the penalties are automatic, and the authorities are increasingly digital.
This guide covers every filing obligation: where to file, what form to use, what deadline to meet, how to track status, and what happens if you miss it. For the registration process needed before payroll begins, see our company registration (know more) and GST registration (know more) guides.
The Monthly Payroll Compliance Calendar
| By Date | Obligation | Portal / Form | Penalty for Missing |
|---|---|---|---|
| 7th | Deposit TDS deducted from salaries with government | Income Tax e-filing portal. Challan ITNS 281. | 1.5% per month interest + Rs 200/day late filing fee |
| 7th-10th | Pay salaries to employees (bank transfer) | Company’s banking system. Payslips mandatory. | Violation of Payment of Wages Act. Employee complaints. |
| 15th | Deposit EPF contributions (employee 12% + employer 12%) | EPFO Unified Portal. Electronic Challan-cum-Return (ECR). | 12% annual interest + damages up to 25% of arrears |
| 15th | Deposit ESI contributions (employee 0.75% + employer 3.25%) | ESIC portal (esic.gov.in). Online challan. | 12% interest on delayed contributions |
| 15th-30th | Deposit Professional Tax (state-specific) | State PT portal. Varies by state (Maharashtra, Karnataka, WB, etc.). | State-specific penalties and interest |
| Month-end | Generate and distribute payslips to all employees | Payroll software / manual. Show all earnings, deductions, net pay. | Labour law violation. Employee disputes. |
Quarterly and Annual Obligations
| Frequency | Obligation | Portal / Form | Deadline |
|---|---|---|---|
| Quarterly | TDS Return (Form 24Q) | TRACES portal. File online. | Q1: 31 July, Q2: 31 Oct, Q3: 31 Jan, Q4: 31 May |
| Half-yearly | ESI Return (Form 6) | ESIC portal | Within 15 days after half-year ends |
| Annual | Form 16 to employees | Generated from TRACES after Q4 Form 24Q filing | 15 June following the financial year |
| Annual | EPF Annual Return | EPFO portal | 25 April each year |
| Annual | Professional Tax annual return (state-specific) | State PT portal | Varies by state (typically April-June) |
The 4 Statutory Deductions: How to Calculate, File, and Track
1. TDS on Salary (Income Tax)
What: Employer deducts income tax from each employee’s salary based on their chosen tax regime (old or new), declared investments/deductions, and applicable slab rates.
How to calculate: Estimate annual taxable income (salary minus exemptions/deductions). Apply slab rates. Divide annual tax by 12 for monthly TDS. Adjust for investment declarations (Form 12BB) and actual investment proofs (submitted by February).
How to file: Deposit TDS monthly via Challan ITNS 281 on the income tax e-filing portal by 7th. File quarterly return Form 24Q on TRACES (tdscpc.gov.in) with details of all salary payments and TDS deductions. Generate Form 16 from TRACES after Q4 filing and issue to employees by 15 June.
How to track: TRACES portal shows challan status, return filing status, and Form 16 download availability. Employees can verify TDS in their Form 26AS/AIS on the income tax portal. Mismatches between employer’s Form 24Q and employee’s Form 26AS trigger notices. For businesses managing income tax return filing (know more), TDS reconciliation is a mandatory pre-filing step.
2. EPF (Employee Provident Fund)
Applicability: Mandatory for establishments with 20+ employees. Employee contributes 12% of basic + DA. Employer contributes 12% (split: 3.67% to EPF + 8.33% to EPS). Administrative charges: 0.50% + EDLI 0.50%.
How to file: Generate ECR (Electronic Challan-cum-Return) on the EPFO Unified Portal. Upload member-wise contribution details. Pay online via net banking. Deadline: 15th of following month.
How to track: EPFO portal shows ECR filing status, payment confirmation, and member passbook updates. Employees can check their passbook on the EPFO member portal using UAN.
3. ESI (Employee State Insurance)
Applicability: Establishments with 10+ employees (some states: 20+). Employees earning gross salary ≤ Rs 21,000/month are eligible. Employee contributes 0.75%, employer contributes 3.25%.
How to file: Register on ESIC portal (esic.gov.in). Generate IP numbers for each eligible employee. Deposit contributions monthly by 15th via online challan. File half-yearly returns (Form 6) within 15 days after the half-year ends.
How to track: ESIC portal shows contribution status, claim processing, and IP number details. Employees can track their ESI benefits through the ESIC member portal.
4. Professional Tax (State-Specific)
Applicability: Levied by states including Maharashtra, Karnataka, West Bengal, Telangana, Gujarat, Tamil Nadu, and others. Rates and slabs vary by state. Deducted monthly from employee salaries based on income slabs.
How to file: Register with the state PT authority. Deduct PT from salaries monthly per state-specific slabs. Deposit via state PT portal (monthly or quarterly per state rules). File annual PT return.
How to track: State PT portals provide challan and return filing status. Multi-state employers must track different deadlines and rates per state.
Salary Structure: What Goes Into the Payslip
| Earnings (Gross Salary) | Deductions | Employer Contributions (Not in Payslip) |
|---|---|---|
| Basic Salary (must be ≥50% of CTC under Labour Codes) | EPF (12% of basic + DA) | EPF employer (12% of basic + DA) |
| House Rent Allowance (HRA) | ESI (0.75% if eligible) | ESI employer (3.25%) |
| Special Allowance / Flexible Benefits | TDS (per tax regime) | EPF admin charges (0.50%) |
| Conveyance / LTA / Other Allowances | Professional Tax (state slab) | EDLI (0.50%) |
| Performance Bonus / Incentives | Other deductions (loan EMI, etc.) | Gratuity provision (4.81% of basic) |
| = Gross Salary | = Total Deductions | = Employer cost above CTC |
| Net Take-Home = Gross - Deductions |
Common Payroll Mistakes That Trigger Penalties
Mistake 1: Depositing TDS after the 7th. Interest: 1.5% per month (even for 1 day delay). Plus Rs 200/day late filing fee on Form 24Q. This is the most common payroll penalty-and it’s fully automatic. No discretion, no waiver.
Mistake 2: Wrong tax regime calculation. If an employee chose the old regime but TDS is calculated under the new regime (or vice versa), the Form 16 will show wrong tax, the employee’s ITR will have a mismatch, and notices follow. Collect Form 12BB declarations at the start of the year and verify investment proofs by February.
Mistake 3: Not updating employee exits in EPF/ESI. When an employee leaves, the employer must update the exit date on the EPFO and ESIC portals. Failure to do so means contributions continue to be expected for resigned employees-creating mismatches during audits.
Mistake 4: EPF on incorrect wage base. EPF is calculated on basic salary + dearness allowance. Including or excluding wrong components (like special allowance) leads to under/over-contributions that EPFO flags during inspections. Under the Labour Codes (when notified), basic must be ≥50% of CTC.
Mistake 5: Multi-state PT non-compliance. A company with employees in Maharashtra, Karnataka, and Telangana must register for PT in all three states and comply with three different rate structures, filing frequencies, and deadlines. Missing even one state attracts state-specific penalties.
For businesses using tax audit services (know more), the tax auditor verifies payroll TDS compliance in Form 3CD-errors found during audit create additional complications.
Key Takeaways
Payroll processing in India is a monthly, multi-portal compliance obligation involving 4 statutory deductions (TDS, EPF, ESI, Professional Tax), 4 government portals (Income Tax/TRACES, EPFO, ESIC, state PT), and a strict calendar where the 7th (TDS/salary) and 15th (EPF/ESI/PT) are non-negotiable deadlines every single month.
The penalties are automatic and cumulative: 1.5%/month interest on late TDS, 12% annual interest + 25% damages on late EPF, Rs 200/day on late Form 24Q, and state-specific penalties on late PT. Form 16 must be issued to all employees by 15 June annually. Multi-state employers face exponentially more complexity because each state has different PT rates, slabs, and filing frequencies.
Professional payroll management is not a luxury-it is a risk mitigation tool. A Rs 3,000/month payroll service prevents the Rs 3+ lakh in penalties that accumulate from just 6 months of missed deadlines. The portals (TRACES, EPFO, ESIC) provide tracking functionality, but someone must actually check, file, and reconcile every month. That “someone” is either your in-house HR team or your professional accounting firm.
Get Your Payroll Compliance Right Every Month
Payroll compliance is a monthly obligation with zero tolerance for delays. The penalties are automatic, the portals are multiple, and the deadlines are non-negotiable. Professional payroll management ensures every TDS deposit, EPF contribution, ESI payment, and PT filing happens on time, every time.
Explore our professional accounting services (know more) for payroll processing, statutory compliance, Form 24Q filing, Form 16 generation, and multi-state PT management.
For queries, reach out at +91 945 945 6700 or WhatsApp us directly.
