Insights
Payroll in India: EPF, ESI, TDS and Professional Tax
Insights · By Chen ChunJie · Published 8 November 2026
Indian payroll mixes central contributions, state levies and monthly tax deduction, and the Labour Codes changed how wages are defined. This guide sets out the 2026 rates, deadlines and a worked example. For the individual tax rules in more depth, see our guide to individual income tax in India.
Last reviewed in November 2026 against the four Labour Codes in force since 21 November 2025, current EPF and ESI rates and the Income-tax Act, 2025. State rules and rates change, so we confirm them for each engagement.
Contributions in 2026
| Item | Employer | Employee | Notes |
|---|---|---|---|
| EPF | 12% plus about 1% EDLI and admin | 12% | On PF wages; pension part capped at INR 15,000 a month |
| ESI | 3.25% | 0.75% | Employees earning up to INR 21,000 a month |
| Professional tax | None | Up to INR 2,500 a year | Only in states that levy it |
| Labour welfare fund | Small amounts | Small amounts | In some states |
TDS under the new regime
| Annual taxable income (INR) | Rate |
|---|---|
| Up to 4 lakh | 0% |
| 4 to 8 lakh | 5% |
| 8 to 12 lakh | 10% |
| 12 to 16 lakh | 15% |
| 16 to 20 lakh | 20% |
| 20 to 24 lakh | 25% |
| Above 24 lakh | 30% |
A 4% cess applies, and a rebate removes tax on income up to INR 12 lakh. Salaried employees get a standard deduction of INR 75,000. TDS is deposited by the 7th of the following month, quarterly returns are filed, and Form 16 is issued after the tax year ends on 31 March.
Have an Indian company and want payroll run every month? See Payroll Outsourcing in India.
Worked example: INR 1,00,000 a month
| Line | INR a month |
|---|---|
| Gross salary (basic 50,000) | 1,00,000 |
| Employee EPF (12% of basic) | 6,000 |
| Professional tax (Karnataka) | 200 |
| TDS (income within the rebate) | 0 |
| Net pay | 93,800 |
| Employer EPF, EDLI and admin | 6,325 |
| Gratuity provision (4.81% of basic) | 2,405 |
Annual salary of INR 12 lakh less the INR 75,000 standard deduction falls within the rebate, so no tax is due under the new regime. Try other salaries in our India salary calculator.
Bonus and gratuity
Establishments with 20 or more workers pay a statutory bonus of 8.33% to 20% of wages to eligible lower-paid staff. Gratuity of 15 days’ wages per year is due after five years of service, capped at INR 20 lakh.
FAQ: payroll in India
What are the EPF rates?
12% each for employer and employee on PF wages, plus employer charges.
Who is covered by ESI?
Employees earning up to INR 21,000 a month.
When is TDS deposited?
By the 7th of the following month.
Is there tax on income up to INR 12 lakh?
Not under the new regime, after the rebate.
Hiring your first employee in India?
Our Local Team employs the person, runs payroll with EPF, ESI and TDS, and handles the paperwork, while you manage the day-to-day work.
Related
How we employ your team in India.
Contracts, leave, termination and more.