PF, ESI & Payroll Compliance Checklist for Indian Startups (2026)

The moment your startup puts its first employee on a payroll, you inherit a web of statutory obligations — Provident Fund, ESI, professional tax, TDS, gratuity, bonus, minimum wages and more. Miss a filing and the penalties compound quickly, and the liability usually sits with the directors personally. This guide walks through each item, who it applies to, the current rates and due dates, and how a modern HRMS keeps you compliant automatically.

1. Provident Fund (EPF)

The Employees' Provident Fund is a retirement savings scheme administered by the EPFO under the EPF & MP Act, 1952. Registration is mandatory once your establishment employs 20 or more people (voluntary coverage is allowed below that). Both employee and employer contribute 12% of 'basic wages + dearness allowance'. The employee's full 12% goes to EPF; the employer's 12% is split between EPF (3.67%) and the Employees' Pension Scheme (8.33%). A statutory wage ceiling of ₹15,000 per month applies for mandatory coverage, though many employers contribute on actual wages.

• Applies to: establishments with 20+ employees; employees earning up to ₹15,000/month must be covered, higher earners can be covered voluntarily.
• Rate: 12% employee + 12% employer (employer split 3.67% EPF / 8.33% EPS), plus small EDLI and admin charges on the employer side.
• Due date: contributions and the ECR return are due by the 15th of the following month.
• Portal: EPFO Unified Member Portal (verify current admin charge percentages, as these are periodically revised).

2. Employees' State Insurance (ESI)

ESI is a health-insurance and social-security scheme run by the ESIC. It covers medical care, sickness, maternity and disability benefits. It applies to establishments with 10 or more employees (the threshold is 20 in a few states — check your state notification) and covers employees drawing gross wages up to ₹21,000 per month (₹25,000 for employees with disabilities). The employee contributes 0.75% of gross wages and the employer 3.25%.

• Applies to: establishments with 10+ employees, for employees earning gross wages up to ₹21,000/month.
• Rate: 0.75% employee + 3.25% employer of gross wages (verify the current rate on the ESIC portal, as it has been revised before).
• Due date: contributions are payable by the 15th of the following month; half-yearly returns follow the ESIC contribution periods.
• Once an employee crosses the ₹21,000 ceiling mid-cycle, contributions continue until the end of the current contribution period.

3. Professional Tax (PT)

Professional tax is a state-level tax on employment, so there is no single national rate — it is levied and administered by individual states, and some states (for example Delhi, Haryana and Uttar Pradesh) do not levy it at all. Where it applies (Maharashtra, Karnataka, West Bengal, Telangana, Tamil Nadu and others), the employer deducts PT from salaries based on a state-specific slab and deposits it with the state government. The statutory maximum any state can charge is ₹2,500 per year per employee.

• Applies to: salaried employees in states that levy PT; the employer must register and deduct.
• Rate: varies by state and salary slab, capped at ₹2,500 per year — always check your specific state's current slab.
• Due date: monthly or annually depending on the state and the number of employees; deposit and return dates are state-specific.

4. TDS on Salary (Income Tax)

Under Section 192 of the Income Tax Act, every employer must deduct income tax at source from salaries based on the employee's estimated annual tax liability, and deposit it with the government. Employees choose between the old and new tax regimes, which changes the applicable slabs and available deductions. The employer files a quarterly TDS return (Form 24Q) and issues Form 16 — the annual salary TDS certificate — to each employee.

• Applies to: all employers, for any employee whose income exceeds the basic exemption limit under their chosen regime.
• Deposit: TDS deducted is generally payable by the 7th of the following month (with a specific extended date for March).
• Returns: Form 24Q quarterly; Form 16 issued to employees annually (typically by 15 June for the previous financial year).
• Regime and slabs change with each Union Budget — verify the current rates on the Income Tax portal.

5. Gratuity

Under the Payment of Gratuity Act, 1972, gratuity is a lump-sum reward for long service, payable when an employee leaves after completing at least five years of continuous service (the five-year condition is waived in cases of death or disablement). It applies to establishments with 10 or more employees. The formula is (15 × last drawn salary × years of service) ÷ 26, where 'salary' means basic + dearness allowance. Even though it is paid on exit, prudent employers provision for gratuity every month so the liability does not arrive as a shock.

• Applies to: establishments with 10+ employees; payable after 5 years of continuous service (waived on death/disability).
• Amount: 15 days of wages for each completed year of service, subject to the statutory tax-exemption ceiling (verify the current cap).
• Due: payable within 30 days of it becoming due on the employee's exit.

6. Statutory Bonus

The Payment of Bonus Act, 1965 requires eligible establishments (generally those with 20+ employees) to pay an annual bonus to employees drawing wages up to a specified monthly limit. The bonus ranges from a minimum of 8.33% to a maximum of 20% of annual wages, calculated on a wage ceiling. Because the eligibility and calculation ceilings under this Act have been the subject of amendments and litigation, confirm the current thresholds before computing bonus.

• Applies to: establishments with 20+ employees, for employees earning up to the notified wage limit.
• Rate: minimum 8.33%, maximum 20% of annual wages, computed on a statutory ceiling (verify current eligibility and ceiling figures).
• Due: payable within 8 months of the close of the financial year.

7. Minimum Wages

Minimum wages are fixed by both central and state governments for scheduled employments and are revised periodically (often twice a year via a variable dearness allowance). Rates differ by state, skill level (unskilled, semi-skilled, skilled, highly skilled) and sometimes by zone within a state, so there is no single number. Paying below the applicable minimum wage is an offence regardless of what an employee has 'agreed' to.

• Applies to: all employers, per the schedule and rate notified by the relevant state (or the central rate where applicable).
• Rate: state- and skill-specific — always check the latest notification for your state and employment category.

8. Labour Welfare Fund (LWF)

The Labour Welfare Fund is another state-level contribution, meant to fund welfare activities for workers. Like professional tax, it is levied only in certain states (such as Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Telangana, Gujarat and others), with small fixed contributions from both employee and employer. Amounts and deposit frequency (often half-yearly or annual) are set by each state.

• Applies to: employees in states that operate an LWF; not applicable everywhere.
• Rate: small fixed amounts from employee and employer, set per state.
• Due: usually half-yearly or annually, per state rules.

Quick reference: contributions, coverage and due dates

Note: the figures above are the commonly applied 2026 positions. Wage ceilings, admin charges and slabs are periodically revised — confirm each on the relevant official portal before you file.

Your payroll compliance checklist

Compliance is mostly about rhythm. Run these steps every month, every quarter and every year and you eliminate the vast majority of penalty risk.

Every month

1. 1Process payroll and generate payslips with a clear breakup of basic, allowances and deductions.
2. 2Deduct and deposit TDS on salary, and pay it by the 7th of the following month.
3. 3Generate and upload the EPF ECR, and deposit PF by the 15th.
4. 4Calculate and deposit ESI contributions by the 15th.
5. 5Deduct professional tax and deposit per your state's frequency.
6. 6Deduct LWF where the state requires a monthly cut, and reconcile every register.

Every quarter

1. 1File the Form 24Q TDS return for salaries.
2. 2Reconcile PF and ESI payments against the ECR and challans.
3. 3Review any employees who have crossed the ESI ₹21,000 ceiling.

Every year

1. 1Issue Form 16 to every employee for the previous financial year.
2. 2File the ESI half-yearly returns for both contribution periods.
3. 3Compute and pay statutory bonus within 8 months of financial year close.
4. 4Deposit annual professional tax and LWF where applicable.
5. 5Re-check minimum wage notifications and revise pay where rates have increased.
6. 6Review your gratuity provision and update it for the year's headcount and salaries.

What non-compliance actually costs

Statutory penalties in India are designed to hurt, and they are rarely a flat fine. Late PF payments attract interest under Section 7Q plus damages under Section 14B that scale with how long the default runs — meaning delays get more expensive the longer you leave them. Late or short ESI contributions similarly attract interest and damages. Late TDS deposits carry interest per month of delay, and late TDS returns carry a daily late-filing fee, with further penalties for non-filing. Beyond money, persistent default can lead to prosecution and personal liability for those responsible for the company's affairs.

How an HRMS automates all of this

Almost every item above is a repeatable calculation tied to a deadline — exactly the kind of work software is good at. A payroll-focused HRMS keeps the current rates and slabs configured, computes each statutory deduction as part of the payroll run, and produces the challans, returns and registers you need. The good ones do more than calculate:

• Auto-calculate PF, ESI, PT, TDS, LWF and gratuity provisions in a single payroll run.
• Generate EPF ECR files, ESI contribution files and Form 24Q-ready data.
• Apply the correct state-specific PT and LWF slabs automatically based on employee location.
• Produce compliant payslips and issue Form 16 to employees.
• Send reminders ahead of every statutory due date so nothing slips.
• Maintain the statutory registers and audit trail you need if a notice arrives.

For a growing company, this turns compliance from a monthly fire drill into a reviewed-and-approved routine. It also scales cleanly: whether you have 8 employees or 800, the same system applies the right rules to each one. Wizix builds and implements HRMS and payroll ERP tailored to Indian statutory requirements, so your team runs payroll with confidence rather than crossed fingers.

Compliance is not a once-a-year project. It is a monthly discipline — and discipline is exactly what you should be automating.

The bottom line

You do not need to memorise every rate to stay compliant — you need a reliable system and a checklist you actually follow. Register for the schemes that apply to you, deduct and deposit on time, keep clean records, and verify current rates on the official portals whenever you run payroll. Do that consistently and statutory compliance stops being a source of anxiety and becomes just another well-run part of your operation.