Payroll Compliance in India

Payroll Compliance in India

Payroll compliance or statutory compliance in India refers towards the legal system which associations should comply with regarding the treatment of their workers. The majority of the company’s time and money goes into guaranteeing compliance towards these laws. Everything to being compliant in the direction of the payment of minimum wages to provident fund or maternity benefits requires not just a whole lot of time but also experts who could guide on all of these statutory compliance measures.

There are several statutory requirements for organizations and companies that they need to spend a significant amount of time and cost in their payroll management towards ensuring that they are compliant with the lawful regulations. If organizations fail towards adhering to statutory compliances, they might have to face heavy penalties which are a few times more than complying with legitimate guidelines.

The Statutory Compliances that is required for the Indian Payroll

The common statutory requirements that organizations have to follow for their payroll management in India are:

Statutory Requirements for Minimum Wages

This act offers for fixing minimum rates of wages for skilled and unskilled laborers. It provides for not only for bare minimum survival requirements of employees yet in addition takes care of education, medical requirements, and some level of comfort of workers.
The Minimum Wages Act is a state subject, the statutory compliance of centralized Payroll management is to provide for the payment of minimum wages to the company’s workers spread out across various states in accordance with the rates in each state. 
Payment of ‘Overtime’ wages to employees is also a statutory requirement according to the Factory Act & Payment of Wages Act. It affects sectors like manufacturing and construction.

Provident Fund

The Provident Fund enables the workers to save some part of their income. The Provident Fund is a number of funds gathered through regular and monthly contributions made by an employee and their employer.

In India, the provident fund is managed by the Employees' Provident Fund Organization (EPFO) under the Ministry of Labour and Employment. As per the EPFO rules and regulations, any corporation which has 20 or more workers must register for Provident Fund. If the corporation fails towards complying with EPFO rules and regulations, then it would be charged with heavy penalties.

Employees ’ State Insurance (ESI)

The ESIC social security scheme brings reasonable healthcare towards workers and their family members.

The ESI scheme is applicable towards each and every factory and other establishments as defined in the Act with 10 or more individuals employed in such establishment and the beneficiaries’ monthly wage does not surpass Rs 21,000 are covered under the scheme

So, if the corporation falls under the ESIC Act compliance then the Employees CTC requires to be updated which includes the ESIC employer and employee contribution


Gratuity is a lump sum payment made by the company to the worker as a mark of recognition of the service rendered through him when he retires or leaves service after a continuous period of service for at least 5 years.

As per the Payment of the Gratuity Act, 1972, Gratuity is applicable to each and every establishment such as NGOs, hospitals and educational institutions with 10 or more workers.  As gratuity is a fixed contribution from the side of the corporation, it has appeared as part of the CTC. In this way, making Gratuity as part of the workers CTC is obligatory.

The Act is applicable to every factory, shop or an establishment in which ten or more individuals are employed, or were employed on any day of the preceding twelve months.

TDS and Professional Taxes

Every employer who is paying salary to workers has to deduct TDS under section 192 of the Income-tax Act, 1961 if the salary is above the maximum amount exempt from tax. The employers additionally require to file TDS return in Form 24Q and also generate Form 16 in time. 

Professional Taxes

Professional tax is a state-based tax. It is one of the statutory deductions from the gross income before computing the tax. Failure towards collecting or pay professional taxes would lead to penalties.

We at eStartIndia provide meticulous assist our clients to correctly file Payroll compliance in requirements and statutory deductions required in India.


eStartIndia Team

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