⚠️ Critical Compliance Alert
Non-compliance with Indian payroll regulations can result in severe penalties, including:
- Heavy fines (up to ₹25,000 per violation)
- Interest charges on delayed payments
- Legal action and prosecution
- Business license cancellation
- Reputational damage
Essential Payroll Compliance Checklist for 2024
Indian payroll compliance involves multiple statutory requirements that vary by state and industry. This comprehensive checklist ensures you meet all legal obligations and avoid penalties. For a complete understanding of HRMS implementation, read our HRMS implementation guide and explore our automated compliance solutions.
1. Provident Fund (PF) Compliance
PF Registration & Contributions
For official PF guidelines, visit the EPFO official website and refer to our automated PF calculation features.
Establishment Registration
Register with EPFO if you have 20+ employees
Employee PF Registration
Register all eligible employees (salary ≤ ₹15,000)
Monthly Contributions
12% from employee + 12% from employer (on basic + DA)
Timely Payments
Pay by 15th of following month to avoid penalties
| Component | Employee Contribution | Employer Contribution | Due Date |
|---|---|---|---|
| EPF | 12% of (Basic + DA) | 12% of (Basic + DA) | 15th of next month |
| EPS | - | 8.33% of (Basic + DA) | 15th of next month |
| EDLI | - | 0.5% of (Basic + DA) | 15th of next month |
| Admin Charges | - | 0.65% of (Basic + DA) | 15th of next month |
2. Employee State Insurance (ESI) Compliance
ESI Registration & Contributions
Establishment Registration
Register if you have 10+ employees (20+ in some states)
Employee Registration
Register all employees earning ≤ ₹21,000 per month
Monthly Contributions
1.75% from employee + 4.75% from employer
Return Filing
File ESI return by 15th of following month
3. Tax Deducted at Source (TDS) Compliance
TDS Registration & Deductions
TAN Registration
Obtain TAN (Tax Deduction Account Number) from IT department
Salary TDS
Deduct TDS as per income tax slab rates
TDS Payment
Pay TDS by 7th of following month
TDS Returns
File quarterly TDS returns (Form 24Q for salary)
| Income Range | TDS Rate | Cess | Effective Rate |
|---|---|---|---|
| Up to ₹2,50,000 | 0% | 0% | 0% |
| ₹2,50,001 - ₹5,00,000 | 5% | 4% | 5.2% |
| ₹5,00,001 - ₹10,00,000 | 20% | 4% | 20.8% |
| Above ₹10,00,000 | 30% | 4% | 31.2% |
4. Professional Tax Compliance
State-wise Professional Tax
Professional tax varies by state. Here are the key requirements:
States with Professional Tax:
- • Maharashtra
- • Karnataka
- • West Bengal
- • Tamil Nadu
- • Andhra Pradesh
- • Telangana
Key Requirements:
- • Monthly deduction from salary
- • Annual registration
- • Quarterly returns
- • Certificate generation
5. Labor Law Compliance
Minimum Wages Act
Payment of Wages Act
6. Monthly Compliance Checklist
Monthly Compliance Tasks
By 7th of Month:
- • Pay TDS to government
- • File TDS challan
- • Update TDS records
By 15th of Month:
- • Pay PF contributions
- • Pay ESI contributions
- • File ESI returns
- • Pay professional tax
7. Annual Compliance Requirements
Annual Returns & Reports
PF Annual Returns:
- • Form 3A (Annual Return)
- • Form 6A (Annual Contribution Statement)
- • Form 12A (Annual Return)
ESI Annual Returns:
- • Annual Return (Form 5)
- • Annual Contribution Statement
- • Inspection Book maintenance
Annual Registrations
8. Best Practices for Payroll Compliance
Documentation Best Practices
- • Maintain digital records of all payroll transactions
- • Keep backup copies of all compliance documents
- • Regular audit of payroll calculations
- • Employee consent for deductions
- • Statutory register maintenance
Technology Solutions
- • Use automated payroll software for calculations
- • Implement compliance monitoring systems
- • Set up automated reminders for due dates
- • Regular software updates for law changes
- • Integration with government portals
9. Common Compliance Mistakes to Avoid
Critical Mistakes
Late Payments
Delayed statutory payments result in penalties and interest
Incorrect Calculations
Wrong PF/ESI/TDS calculations lead to compliance issues
Missing Documentation
Inadequate record-keeping causes audit failures
Ignoring State Laws
Not following state-specific labor law requirements
10. Conclusion
Payroll compliance in India is complex but manageable with proper planning and execution. By following this comprehensive checklist, you can ensure your organization meets all statutory requirements and avoids costly penalties.
Remember, compliance is not a one-time activity but an ongoing process that requires regular monitoring and updates. Invest in robust payroll software and stay updated with changing regulations to maintain compliance excellence.