Payroll Processing — Post-Registration Compliance Guide
Managing payroll in India requires strict adherence to multiple statutes including the Income Tax Act, Employees' Provident Funds and Miscellaneous Provisions Act, ESIC Act, and Minimum Wages Acts. For businesses operating in FY 2025-26, accuracy is not just a best practice but a legal necessity to avoid heavy penalties under Section 271B for TDS defaults or Section 14J of the EPF Act for late PF deposits. This guide outlines your recurring monthly obligations, critical due dates, and the specific documentation required to maintain compliance. Whether you are an MSME in Mumbai or a startup in Bangalore, understanding these timelines ensures that employee salaries are disbursed correctly while statutory deductions like TDS (Form 24Q), EPF/EDLI contributions, and ESI dues are deposited on time. PNPC Global leverages over four decades of expertise across India to streamline this process. Our partner-led teams ensure that your payroll data is reconciled with GST returns where applicable, Form 16s are generated accurately for tax season, and all statutory filings are submitted before the strict deadlines enforced by CBDT, EPFO, and ESIC portals.
Before you start
- Valid PAN and TAN numbers registered on the respective government portals (NSDL/TDS Portal).
Step-by-step
Employee Data Verification & Onboarding
Before processing payroll, verify that all employee details in your TDS portal are accurate. Ensure Form 12BB declarations for deductions like HRA and LTA are collected to claim exemptions correctly.
Salary Computation with Statutory Deductions
Calculate gross salary, including basic pay (minimum 40% of CTC), allowances, perquisites, and gratuity. Apply deductions for PF (12%), ESI (3.25% + employer share if applicable), Professional Tax, and TDS based on Form 16 Part A logic.
Net Pay Calculation & Disbursement
Deduct the calculated amounts from gross pay to determine net salary payable via bank transfer. Ensure that PF contributions are deposited within 5 days of the end of each month as per EPFO rules, not just with the employee's last date.
TDS Filing (Form 24Q)
File quarterly TDS returns by the 30th day following the quarter-end. For example, Q1 filing is due on April 30, 2026. Late filings attract a penalty of ₹200 per challan under Section 271B.
EPF & ESI Monthly Deposits
Deposit PF contributions via the EPFO portal (Form Challan) and file Form MA-3 for monthly returns. Similarly, deposit ESI dues on or before 25th of the following month to avoid interest charges under Section 76A.
Professional Tax Filing
File state-specific Professional Tax challans by the last day of each quarter (typically April, July, October, January). Failure to file attracts a penalty ranging from ₹200 to ₹1,500 depending on the state.
Annual Compliance & Form 16 Generation
By March/April of every year (e.g., April 30, 2026), file your final TDS return and generate Form 16 for all employees. This document is crucial for their income tax filing.
Common mistakes to avoid
- Delaying PF deposit beyond the 5th day of the next month attracts interest at 14% per annum under Section 77A.
- Incorrectly calculating TDS on salary without considering Form 12BB exemptions leads to tax disputes during assessment.
- Ignoring Professional Tax due dates which vary by state, leading to penalties and potential blacklisting.
Frequently asked questions
What is the deadline for depositing PF contributions?
Employers must deposit EPF dues within five days from the last day of each month. For example, if your payroll cycle ends on May 31st, you must deposit by June 5th.
How is TDS calculated for salary?
TDS on salary is deducted monthly based on the employee's Form 16 Part A details and filed quarterly. The rate depends on income slabs, but exemptions like HRA are claimed via Form 12BB.
What happens if I miss a TDS filing deadline?
A penalty of ₹200 per challan is levied under Section 271B for late filing. Additionally, interest may accrue on the unpaid tax amount from the date it was due.
Is Professional Tax mandatory for all employees?
Professional Tax applies only to wages exceeding ₹600 per month (varies slightly by state). If your employee's salary is below this threshold, no deduction or payment is required in that specific state.
When must Form 12BB be submitted?
Form 12BB should ideally be collected before the end of March every year (e.g., by April 30, 2026) to ensure accurate TDS calculation for that financial year.
Prefer we handle Payroll Processing & Salary Computation?
Our team in India & UAE completes every step above for clients daily — accurately and on time.