Running payroll in India means more than paying salaries. Four deductions come up in almost every month-end. Here is what each one is, in simple words.
EPF: Employees’ Provident Fund
A retirement savings scheme. Both the employee and the employer contribute a share of wages each month, and the money is deposited with the provident fund authority.
ESI: Employees’ State Insurance
A health and benefits insurance scheme for eligible employees. Eligibility depends on factors such as wage level and the size of your establishment.
Professional Tax
A tax charged by state governments on salaried people. Whether it applies, and the slabs, differ from state to state.
TDS on salary
Employers deduct income tax from salaries at source and deposit it with the government. The amount depends on each employee’s estimated annual income and the tax declarations they submit.
A calm month-end
- Keep employee records and leave up to date before you run payroll.
- Run payroll from one place so deductions are calculated the same way every month.
- Export the bank file for salary transfers instead of typing amounts again.
- Keep challans and payslips together for audits.
Thresholds and due dates change. Rules change and every business is different, so please confirm the details with your chartered accountant.