Payroll in India: PF, ESI, TDS and professional tax
Running payroll in India means more than paying salaries — it means the statutory deductions that go with them: provident fund, employees' state insurance, TDS on salary and, in many states, professional tax. This guide sets out who contributes what, and the registration thresholds. Rates from the EPFO and ESIC, checked on October 28, 2026; general information, not advice.
Provident fund (EPF)
- Employee: 12% of basic pay plus dearness allowance.
- Employer: 12%, split as 8.33% to the Employees’ Pension Scheme (capped at the wage ceiling) and 3.67% to the provident fund.
- Wage ceiling: ₹25,000 a month for mandatory coverage — raised from ₹15,000 with effect from 17 September 2026 (gazette S.O. 5109(E)). Employers may contribute on higher wages voluntarily.
- Who registers: Establishments with 20 or more employees must register with the EPFO.
The employer's share is split between the pension scheme (EPS) and the provident fund; EPS contribution is calculated on the wage ceiling, not the full salary.
Employees' state insurance (ESI)
- Employee: 0.75% of wages.
- Employer: 3.25% of wages.
- Wage ceiling: ₹21,000 a month (₹25,000 for employees with a disability).
- Who registers: Establishments with 10 or more employees in most states (the threshold and establishment type vary by state notification).
ESI funds medical care and cash benefits for covered employees; it stops applying to an employee whose wages rise above the ceiling only at the start of the next contribution period.
TDS on salary and professional tax
- TDS on salary (section 192) is deducted by the employer each month and deposited against the employee’s PAN.
- Professional tax is a separate state-level deduction where the state levies it — see the professional-tax directory.
Professional tax varies by state and several states levy none — see the professional-tax directory. Estimate an employee's net pay with the take-home salary calculator.
Related
Frequently asked questions
How much PF is deducted from salary?
The employee contributes 12% of basic pay plus dearness allowance. The employer contributes 12%, split as 8.33% to the Employees’ Pension Scheme (capped at the wage ceiling) and 3.67% to the provident fund. The statutory wage ceiling for mandatory coverage is ₹25,000 a month for mandatory coverage — raised from ₹15,000 with effect from 17 September 2026 (gazette S.O. 5109(E)). Employers may contribute on higher wages voluntarily.
What are the ESI contribution rates?
The employee contributes 0.75% of wages. and the employer 3.25% of wages. ESI applies where monthly wages are within ₹21,000 a month (₹25,000 for employees with a disability). Establishments with 10 or more employees in most states (the threshold and establishment type vary by state notification).
When does a business have to register for PF and ESI?
EPF registration is mandatory for establishments with 20 or more employees. ESI registration applies to establishments with 10 or more employees in most states, though the threshold and establishment type vary by state notification. Both can also be taken voluntarily.
What else is deducted in Indian payroll?
Besides PF and ESI: TDS on salary under section 192, deducted each month against the employee's PAN; and professional tax, a state-level deduction where the state levies it. Gratuity and bonus are separate statutory obligations that are paid rather than deducted.
Did the PF wage ceiling change?
Yes. The statutory EPF wage ceiling was raised from ₹15,000 to ₹25,000 a month with effect from 17 September 2026 (gazette S.O. 5109(E)). Confirm the current figure and your contribution settings on the EPFO portal, as transition details apply.
Sources
Rates, forms, thresholds and due dates change by notification. Every figure here was checked on October 28, 2026; verify the current position on the official source before you act.
Where HelloBooks fits
Payroll — salaries, PF, ESI, professional tax and TDS on salary — is handled by the sibling product HelloTime, the payroll & attendance app in the HelloBooks suite, with the entries posting into your HelloBooks ledgers.
HelloBooks itself is the accounting and GST software — it does not run payroll or file PF / ESI returns. Those filings are made on the EPFO and ESIC portals.
This page is general information, not legal, tax or compliance advice, and does not guarantee any outcome. For your own situation, work with a qualified professional — a chartered accountant (CA), company secretary (CS) or lawyer.
Related: Income tax slabs · Professional tax · India compliance hub