{"id":14150,"date":"2026-06-26T13:51:24","date_gmt":"2026-06-26T08:21:24","guid":{"rendered":"https:\/\/www.tankhapay.com\/blog\/?p=14150"},"modified":"2026-06-29T12:37:24","modified_gmt":"2026-06-29T07:07:24","slug":"payroll-tax","status":"publish","type":"post","link":"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/","title":{"rendered":"Payroll Tax in India | 5 Deductions Business Owes | Deadlines Most Founders Miss"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_78 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#What_Is_Payroll_Tax_in_India\" >What Is Payroll Tax in India?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#5_Payroll_Tax_Deductions_Every_Indian_Business_Must_Handle\" >5 Payroll Tax Deductions Every Indian Business Must Handle<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#1_Provident_Fund_PF\" >1. Provident Fund (PF)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#2_Employee_State_Insurance_ESI\" >2. Employee State Insurance (ESI)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#3_Tax_Deducted_at_Source_TDS\" >3. Tax Deducted at Source (TDS)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#4_Professional_Tax_PT\" >4. Professional Tax (PT)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#5_Labour_Welfare_Fund_LWF\" >5. Labour Welfare Fund (LWF)<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#What_Changed_in_2026_The_Two_Updates_That_Affect_Every_Payroll\" >What Changed in 2026: The Two Updates That Affect Every Payroll<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#Change_1_The_Labour_Codes_effective_November_2025\" >Change 1: The Labour Codes (effective November 2025)<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#Change_2_The_Income_Tax_Act_2025_effective_April_1_2026\" >Change 2: The Income Tax Act 2025 (effective April 1, 2026)<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#What_Happens_When_You_Miss_a_Deadline\" >What Happens When You Miss a Deadline<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/#The_Bottom_Line\" >The Bottom Line<\/a><\/li><\/ul><\/nav><\/div>\n<p><!-- TankhaPay Blog \u2014 TL;DR Dropdown (Payroll Tax India) | Paste after intro, before first H2 --><\/p>\n<details style=\"border: 1px solid #DCE8F7; border-radius: 10px; overflow: hidden; margin: 32px 0; max-width: 870px; font-family: inherit;\" open=\"\">\n<summary style=\"background: #004899; padding: 13px 20px; cursor: pointer; color: #ffffff; font-size: 13px; font-weight: 500; letter-spacing: 0.2px; text-transform: uppercase; list-style: none; display: flex; align-items: center; justify-content: space-between;\">\u26a1 TL;DR \u2014<br \/>\n\u25bc<\/summary>\n<div style=\"display: table; width: 100%; box-sizing: border-box; padding: 10px 20px; border-bottom: 1px solid #EFF4FB; background: #FFFFFF;\">\n<div style=\"display: table-cell; width: 30px; vertical-align: middle;\">\n<div style=\"width: 22px; height: 22px; background: #EFF6FF; color: #004899; font-size: 11px; font-weight: bold; border-radius: 50%; text-align: center; line-height: 22px;\">1<\/div>\n<\/div>\n<div style=\"display: table-cell; vertical-align: middle; padding-left: 10px;\">\n<p style=\"margin: 0; font-size: 13px; color: #1a1a1a; line-height: 1.55;\">Indian payroll tax is not one tax. It is five separate obligations \u2014 <strong>PF, ESI, TDS, Professional Tax, and LWF<\/strong> \u2014 each with its own rate, deadline, and governing authority.<\/p>\n<\/div>\n<\/div>\n<div style=\"display: table; width: 100%; box-sizing: border-box; padding: 10px 20px; border-bottom: 1px solid #EFF4FB; background: #F7FAFF;\">\n<div style=\"display: table-cell; width: 30px; vertical-align: middle;\">\n<div style=\"width: 22px; height: 22px; background: #EFF6FF; color: #004899; font-size: 11px; font-weight: bold; border-radius: 50%; text-align: center; line-height: 22px;\">2<\/div>\n<\/div>\n<div style=\"display: table-cell; vertical-align: middle; padding-left: 10px;\">\n<p style=\"margin: 0; font-size: 13px; color: #1a1a1a; line-height: 1.55;\">Employers contribute <strong>16.75% of each employee\u2019s salary<\/strong> to statutory schemes on top of CTC. Employees contribute another <strong>18.08%<\/strong> through deductions.<\/p>\n<\/div>\n<\/div>\n<div style=\"display: table; width: 100%; box-sizing: border-box; padding: 10px 20px; border-bottom: 1px solid #EFF4FB; background: #FFFFFF;\">\n<div style=\"display: table-cell; width: 30px; vertical-align: middle;\">\n<div style=\"width: 22px; height: 22px; background: #EFF6FF; color: #004899; font-size: 11px; font-weight: bold; border-radius: 50%; text-align: center; line-height: 22px;\">3<\/div>\n<\/div>\n<div style=\"display: table-cell; vertical-align: middle; padding-left: 10px;\">\n<p style=\"margin: 0; font-size: 13px; color: #1a1a1a; line-height: 1.55;\">PF and ESI are due by the <strong>15th of the following month<\/strong>. TDS is due by the <strong>7th<\/strong>. Missing any one triggers compounding interest and penalties across separate authorities.<\/p>\n<\/div>\n<\/div>\n<div style=\"display: table; width: 100%; box-sizing: border-box; padding: 10px 20px; border-bottom: 1px solid #EFF4FB; background: #F7FAFF;\">\n<div style=\"display: table-cell; width: 30px; vertical-align: middle;\">\n<div style=\"width: 22px; height: 22px; background: #EFF6FF; color: #004899; font-size: 11px; font-weight: bold; border-radius: 50%; text-align: center; line-height: 22px;\">4<\/div>\n<\/div>\n<div style=\"display: table-cell; vertical-align: middle; padding-left: 10px;\">\n<p style=\"margin: 0; font-size: 13px; color: #1a1a1a; line-height: 1.55;\">The Income Tax Act 2025 (effective April 2026) moved TDS from <strong>Section 192 \u2192 Section 392(1)<\/strong>, replaced Form 24Q with <strong>Form 138<\/strong>, and Form 16 with <strong>Form 130<\/strong>.<\/p>\n<\/div>\n<\/div>\n<div style=\"display: table; width: 100%; box-sizing: border-box; padding: 10px 20px; background: #FFFFFF;\">\n<div style=\"display: table-cell; width: 30px; vertical-align: middle;\">\n<div style=\"width: 22px; height: 22px; background: #EFF6FF; color: #004899; font-size: 11px; font-weight: bold; border-radius: 50%; text-align: center; line-height: 22px;\">5<\/div>\n<\/div>\n<div style=\"display: table-cell; vertical-align: middle; padding-left: 10px;\">\n<p style=\"margin: 0; font-size: 13px; color: #1a1a1a; line-height: 1.55;\"><strong>18 states<\/strong> levy Professional Tax at different rates and filing frequencies. Multi-state payroll means separate PT compliance for each state where your employees work.<\/p>\n<\/div>\n<\/div>\n<\/details>\n<p><!-- End TL;DR Dropdown --><\/p>\n<p><span style=\"font-weight: 400;\">Indian employers contribute an average of <\/span><b>16.75% of each employee&#8217;s CTC<\/b><span style=\"font-weight: 400;\"> to statutory schemes, on top of the salary itself. Most founders discover this number after the first payroll run, not before.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">That is before you account for <\/span><i><span style=\"font-weight: 400;\">payroll tax deductions<\/span><\/i><span style=\"font-weight: 400;\"> from the employee side, which run another 18.08%. Together, the statutory burden on an Indian payroll is closer to 35% of salary cost once you add both sides, and that figure changes if you operate in <em><a href=\"https:\/\/www.tankhapay.com\/blog\/multi-state-payroll-india\/\">multiple states<\/a><\/em>, employ more than 20 people, or have workers crossing the \u20b921,000 ESI wage threshold mid-year.<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">The Indian Payroll Tax is not a unified tax. Rather, it is a system of five different taxes that are regulated by three distinct government agencies with their own computation systems, payment deadlines, and penalties. This document will go through all the details, including precise percentages, deadlines, and penalties for non-compliance.<\/span><\/i><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What_Is_Payroll_Tax_in_India\"><\/span><b>What Is Payroll Tax in India?<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><i><span style=\"font-weight: 400;\">In India, payroll tax refers to the statutory deductions and contributions that employers must calculate, deduct from employee salaries, add their own contribution to, and deposit with the relevant government authorities every month. The primary components are the Employees&#8217; Provident Fund (PF), Employees&#8217; State Insurance (ESI), Tax Deducted at Source (TDS), Professional Tax (PT), and the Labour Welfare Fund (LWF).<\/span><\/i><\/p>\n<p><span style=\"font-weight: 400;\">Unlike income tax, which is the employee&#8217;s personal liability, <\/span><i><span style=\"font-weight: 400;\">payroll tax compliance<\/span><\/i><span style=\"font-weight: 400;\"> involves both the employer and employee contributing to schemes that fund social security, healthcare, and retirement. The employer is the responsible party in all cases. If the calculation is wrong or the deposit is late, the penalty notice comes to the company, not the employee.<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"5_Payroll_Tax_Deductions_Every_Indian_Business_Must_Handle\"><\/span><b>5 Payroll Tax Deductions Every Indian Business Must Handle<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"1_Provident_Fund_PF\"><\/span><b>1. Provident Fund (PF)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Mandatory for all establishments with <\/span><b>20 or more employees<\/b><span style=\"font-weight: 400;\">.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Both the employer and employee contribute <\/span><b>12% of basic salary plus Dearness Allowance<\/b><span style=\"font-weight: 400;\"> every month. The employer&#8217;s 12% is split: 3.67% goes to the employee&#8217;s PF account, 8.33% goes to the Employee Pension Scheme (EPS, capped at \u20b915,000 wage), and 0.5% is an administrative charge.<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">As per the 2025 Labour Codes, basic pay should be at least 50% of the total CTC. As you had earlier structured the salaries such that your basic would be less, so as not to have high PF contribution, it might be wrongly calculated now.<\/span><\/i><\/p>\n<p><b>Due date:<\/b><span style=\"font-weight: 400;\"> 15th of the following month.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"2_Employee_State_Insurance_ESI\"><\/span><b>2. Employee State Insurance (ESI)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">Mandatory for establishments with <\/span><b>10 or more employees<\/b><span style=\"font-weight: 400;\"> where any employee earns up to <\/span><b>\u20b921,000 per month<\/b><span style=\"font-weight: 400;\"> in gross wages.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Employee contribution: <\/span><b>0.75% of gross wages<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Employer contribution: <\/span><b>3.25% of gross wages<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">After gross wages exceed \u20b921,000 per month, there will be no more deductions for ESI contributions, but this applies after the period for contributions, i.e., from April to September, or from October to March ends.<\/span><\/p>\n<p><b>Due date:<\/b><span style=\"font-weight: 400;\"> 15th of the following month.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"3_Tax_Deducted_at_Source_TDS\"><\/span><b>3. Tax Deducted at Source (TDS)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">TDS provision is for all salaried individuals. The employer calculates the estimated annual income, finds out the tax slab applicable, and deducts the appropriate amount monthly.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">In the case of the new tax regime (default regime from fiscal year 2023-2024), the standard deduction is \u20b975,000, and the effective tax is \u20b90 up to \u20b912 lakh annually under Section 87A. In the old regime, the standard deduction is \u20b950,000 along with many other deductions.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Income Tax Act 2025 (effective from April 1, 2026) has shifted the TDS on salaries from Section 192 to Section 392(1). Form 24Q will be superseded by Form 138. Form 16 will be superseded by Form 130. Any payroll software giving out old form numbers from April 1, 2026 will not be compliant.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Payment deadline: 7th of the following month. TDS of March should be paid before 30th April. Filing return: Quarterly \u2013 July 31, October 31, January 31, May 31.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"4_Professional_Tax_PT\"><\/span><b>4. Professional Tax (PT)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">State tax on salaries, which is Constitutionally fixed as a ceiling of \u20b92,500 per head per annum as per Article 276. Imposed in 18 States including Maharashtra, Karnataka, West Bengal, Andhra Pradesh, Telangana, Tamil Nadu, and Gujarat. Not imposed in Delhi, Haryana, Uttar Pradesh, Rajasthan, Punjab, and Uttarakhand.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The employer deducts PT from the employee&#8217;s monthly salary and deposits it with the state PT authority. The employer also pays a separate annual enrolment fee out of company funds.<\/span><\/p>\n<p><i><span style=\"font-weight: 400;\">Maharashtra&#8217;s February quirk:<\/span><\/i><span style=\"font-weight: 400;\"> Employees earning above \u20b910,000\/month pay \u20b9200 for 11 months and \u20b9300 in February, totalling \u20b92,500\/year. This is the most commonly missed adjustment in Maharashtra payroll runs.<\/span><\/p>\n<p><b>Due date:<\/b><span style=\"font-weight: 400;\"> End of the following month (varies by state).<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"5_Labour_Welfare_Fund_LWF\"><\/span><b>5. Labour Welfare Fund (LWF)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">A state-level contribution to a fund that supports employee welfare programmes. Not all states have LWF. Rates range from <\/span><b>\u20b96 to \u20b975 per employee per period<\/b><span style=\"font-weight: 400;\"> depending on the state. Typically paid half-yearly or annually.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The state of Karnataka lowered the number of employees for applying LWF from 50 to 10 in 2025. There are many companies which may be eligible but unaware.\u00a0<\/span><!-- TankhaPay Blog \u2014 Payroll Tax Master Reference Card --><!-- Something Special: All 5 payroll tax components + penalties in one scannable card --><\/p>\n<div style=\"overflow: hidden; border-radius: 10px; border: 1px solid #DCE8F7; margin: 32px 0;\">\n<div style=\"background: #EFF6FF; padding: 13px 18px; border-bottom: 1px solid #DCE8F7;\">\n<p style=\"margin: 0 0 3px; font-size: 13px; font-weight: bold; color: #004899;\">\u2605 Payroll Tax Master Reference Card \u2014 India 2026<\/p>\n<p style=\"margin: 0; font-size: 12px; color: #666666; font-style: italic; line-height: 1.5;\">All five statutory obligations, contribution rates, deposit deadlines, and penalties in one place. Bookmark before every payroll run.<\/p>\n<\/div>\n<div style=\"overflow-x: auto;\">\n<table style=\"width: 100%; border-collapse: collapse; font-size: 12.5px; font-family: inherit; line-height: 1.5;\">\n<thead>\n<tr>\n<th style=\"background-color: #004899; color: #ffffff; padding: 11px 14px; text-align: left; font-weight: 500; width: 13%;\" scope=\"col\">Component<\/th>\n<th style=\"background-color: #004899; color: #ffffff; padding: 11px 14px; text-align: left; font-weight: 500; width: 16%;\" scope=\"col\">Who Contributes<\/th>\n<th style=\"background-color: #004899; color: #ffffff; padding: 11px 14px; text-align: left; font-weight: 500; width: 15%;\" scope=\"col\">Rate<\/th>\n<th style=\"background-color: #004899; color: #ffffff; padding: 11px 14px; text-align: left; font-weight: 500; width: 16%;\" scope=\"col\">Threshold<\/th>\n<th style=\"background-color: #004899; color: #ffffff; padding: 11px 14px; text-align: left; font-weight: 500; width: 14%;\" scope=\"col\">Deposit Due<\/th>\n<th style=\"background-color: #004899; color: #ffffff; padding: 11px 14px; text-align: left; font-weight: 500; width: 26%;\" scope=\"col\">Late Penalty<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr style=\"background-color: #ffffff; border-bottom: 1px solid #DCE8F7;\">\n<td style=\"padding: 11px 14px; font-weight: bold; color: #004899; vertical-align: top;\">PF<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">Employee + Employer<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\"><strong>12% + 12%<\/strong> of basic+DA<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">20+ employees<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top; font-weight: 600;\">15th of next month<\/td>\n<td style=\"padding: 11px 14px; color: #b91c1c; vertical-align: top;\">12% p.a. interest + up to <strong>100% damages<\/strong> (Section 14B)<\/td>\n<\/tr>\n<tr style=\"background-color: #f7faff; border-bottom: 1px solid #DCE8F7;\">\n<td style=\"padding: 11px 14px; font-weight: bold; color: #004899; vertical-align: top;\">ESI<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">Employee + Employer<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\"><strong>0.75% + 3.25%<\/strong> of gross wages<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">10+ employees; wage \u2264 \u20b921,000<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top; font-weight: 600;\">15th of next month<\/td>\n<td style=\"padding: 11px 14px; color: #b91c1c; vertical-align: top;\">12% p.a. interest + up to <strong>25% damages<\/strong> on arrears<\/td>\n<\/tr>\n<tr style=\"background-color: #ffffff; border-bottom: 1px solid #DCE8F7;\">\n<td style=\"padding: 11px 14px; font-weight: bold; color: #004899; vertical-align: top;\">TDS<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">Employer deducts from salary<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">Per income slab <strong>(0%\u201330%)<\/strong> + surcharge<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">All salaried employees<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top; font-weight: 600;\">7th of next month (30 Apr for Mar)<\/td>\n<td style=\"padding: 11px 14px; color: #b91c1c; vertical-align: top;\"><strong>1% p.m.<\/strong> (non-deduction) | <strong>1.5% p.m.<\/strong> (late deposit) + up to \u20b91L penalty<\/td>\n<\/tr>\n<tr style=\"background-color: #fffbeb; border-bottom: 1px solid #DCE8F7; border-left: 3px solid #F59E0B;\">\n<td style=\"padding: 11px 14px; font-weight: bold; color: #004899; vertical-align: top;\">Professional Tax<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">Employee (employer deducts)<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">State-specific; max <strong>\u20b92,500\/year<\/strong><\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\"><strong>18 states<\/strong> only (not Delhi, UP, Haryana etc.)<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top; font-weight: 600;\">End of next month (varies by state)<\/td>\n<td style=\"padding: 11px 14px; color: #b91c1c; vertical-align: top;\">\u20b95,000\u2013\u20b910,000 registration fine + <strong>\u20b910,000\u2013\u20b91,00,000<\/strong> per violation per state<\/td>\n<\/tr>\n<tr style=\"background-color: #f7faff;\">\n<td style=\"padding: 11px 14px; font-weight: bold; color: #004899; vertical-align: top;\">LWF<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">Employee + Employer<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\"><strong>\u20b96\u2013\u20b975<\/strong> per employee per period<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top;\">State-specific (not all states)<\/td>\n<td style=\"padding: 11px 14px; color: #555555; vertical-align: top; font-weight: 600;\">Half-yearly or Annual<\/td>\n<td style=\"padding: 11px 14px; color: #b91c1c; vertical-align: top;\">Interest + penalty per applicable state act<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n<div style=\"overflow: hidden; border-radius: 10px; border: 1px solid #DCE8F7; margin: 32px 0;\">\n<div style=\"background-color: #004899; padding: 11px 18px; display: table; width: 100%; box-sizing: border-box;\">\n<div style=\"display: table-cell; vertical-align: middle;\"><span style=\"color: rgba(255,255,255,.8); font-size: 11px;\">\u24d8 Rates current as of June 2026 \u00a0|\u00a0 Form 138 replaces Form 24Q \u00a0|\u00a0 Form 130 replaces Form 16 under the Income Tax Act 2025<\/span><\/div>\n<div style=\"display: table-cell; vertical-align: middle; text-align: right; white-space: nowrap;\"><a style=\"background-color: #208dff; color: #ffffff; font-size: 11px; font-weight: bold; padding: 5px 14px; border-radius: 5px; text-decoration: none;\" href=\"\/demo\">Request a Risk Assessment<\/a><\/div>\n<\/div>\n<\/div>\n<div>\n<h2><span class=\"ez-toc-section\" id=\"What_Changed_in_2026_The_Two_Updates_That_Affect_Every_Payroll\"><\/span><b>What Changed in 2026: The Two Updates That Affect Every Payroll<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<h3><span class=\"ez-toc-section\" id=\"Change_1_The_Labour_Codes_effective_November_2025\"><\/span><b>Change 1: The Labour Codes (effective November 2025)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The four new Labour Codes consolidated 29 old laws into one framework. For <\/span><i><span style=\"font-weight: 400;\">payroll tax compliance<\/span><\/i><span style=\"font-weight: 400;\">, the key change is the <\/span><b>50% basic wage rule<\/b><span style=\"font-weight: 400;\">: basic salary (including DA) must now be at least 50% of total CTC. Companies that structured salaries to minimise PF by keeping basic low are now non-compliant. The PF contribution base has increased for most employees, which also raises the employer&#8217;s total cost.<\/span><\/p>\n<h3><span class=\"ez-toc-section\" id=\"Change_2_The_Income_Tax_Act_2025_effective_April_1_2026\"><\/span><b>Change 2: The Income Tax Act 2025 (effective April 1, 2026)<\/b><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><span style=\"font-weight: 400;\">The Act replaces the Income Tax Act of 1961. For payroll, the critical changes are:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">TDS on salary moves from <\/span><b>Section 192 \u2192 Section 392(1)<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Quarterly TDS return changes from <\/span><b>Form 24Q \u2192 Form 138<\/b><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Annual TDS certificate changes from <\/span><b>Form 16 \u2192 Form 130<\/b><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Systems that are still producing form numbers based on the old form will be submitting a non-conforming return. Ensure your payroll software\/system is up-to-date.<\/span><\/p>\n<blockquote><p><b><i>\u201c<\/i><\/b><i><span style=\"font-weight: 400;\">Automate your computations, tax schedules, and benefit withholding \u2013 but never bypass post-run verification. Once you have completed your payroll processing, perform a review. Review payroll summary reports, examine a few employee files, and verify your figures before any disbursements are made.<\/span><\/i><b><i>\u201d<br \/>\n<\/i><\/b><em><b>BJ Anderson, Director of Payroll &amp; Leave Management, Humareso<\/b><\/em><\/p><\/blockquote>\n<\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_Happens_When_You_Miss_a_Deadline\"><\/span><b>What Happens When You Miss a Deadline<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Missing a <\/span><i><span style=\"font-weight: 400;\">payroll tax compliance<\/span><\/i><span style=\"font-weight: 400;\"> deadline is not a single cost. It is a compounding liability across multiple authorities simultaneously.<\/span><br \/>\n<!-- TankhaPay Blog \u2014 Payroll Tax Penalty Reference Table | Paste into HTML editor --><\/p>\n<div style=\"overflow: hidden; border-radius: 10px; border: 1px solid #DCE8F7; margin: 32px 0;\">\n<div style=\"background: #EFF6FF; padding: 13px 18px; border-bottom: 1px solid #DCE8F7;\">\n<p style=\"margin: 0 0 3px; font-size: 13px; font-weight: bold; color: #004899;\">\u26a0 Payroll Tax Penalty Reference \u2014 What Late Filing Costs in India 2026<\/p>\n<p style=\"margin: 0; font-size: 12px; color: #666666; font-style: italic; line-height: 1.5;\">Penalties compound independently across each authority. A single missed month can trigger simultaneous notices from EPFO, ESIC, and the Income Tax Department.<\/p>\n<\/div>\n<div style=\"overflow-x: auto;\">\n<table style=\"width: 100%; border-collapse: collapse; font-size: 13.5px; font-family: inherit; line-height: 1.5;\">\n<thead>\n<tr>\n<th style=\"background-color: #004899; color: #ffffff; padding: 12px 16px; text-align: left; font-weight: 500; width: 22%;\" scope=\"col\">Missed Obligation<\/th>\n<th style=\"background-color: #004899; color: #ffffff; padding: 12px 16px; text-align: left; font-weight: 500; width: 18%;\" scope=\"col\">Authority<\/th>\n<th style=\"background-color: #004899; color: #ffffff; padding: 12px 16px; text-align: left; font-weight: 500; width: 28%;\" scope=\"col\">Immediate Cost<\/th>\n<th style=\"background-color: #004899; color: #ffffff; padding: 12px 16px; text-align: left; font-weight: 500; width: 32%;\" scope=\"col\">Compounding Risk<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr style=\"background-color: #ffffff; border-bottom: 1px solid #DCE8F7;\">\n<td style=\"padding: 11px 16px; font-weight: 600; color: #0d1117; vertical-align: top;\">PF deposit<\/td>\n<td style=\"padding: 11px 16px; color: #555555; vertical-align: top;\">EPFO<\/td>\n<td style=\"padding: 11px 16px; color: #b91c1c; font-weight: 500; vertical-align: top;\">12% p.a. interest from due date<\/td>\n<td style=\"padding: 11px 16px; color: #b91c1c; font-weight: 500; vertical-align: top;\">+ Damages up to <strong>100%<\/strong> under Section 14B<\/td>\n<\/tr>\n<tr style=\"background-color: #f7faff; border-bottom: 1px solid #DCE8F7;\">\n<td style=\"padding: 11px 16px; font-weight: 600; color: #0d1117; vertical-align: top;\">ESI deposit<\/td>\n<td style=\"padding: 11px 16px; color: #555555; vertical-align: top;\">ESIC<\/td>\n<td style=\"padding: 11px 16px; color: #b91c1c; font-weight: 500; vertical-align: top;\">12% p.a. interest<\/td>\n<td style=\"padding: 11px 16px; color: #b91c1c; font-weight: 500; vertical-align: top;\">+ Damages up to <strong>25%<\/strong> of arrears<\/td>\n<\/tr>\n<tr style=\"background-color: #ffffff; border-bottom: 1px solid #DCE8F7;\">\n<td style=\"padding: 11px 16px; font-weight: 600; color: #0d1117; vertical-align: top;\">TDS deposit<\/td>\n<td style=\"padding: 11px 16px; color: #555555; vertical-align: top;\">Income Tax Dept<\/td>\n<td style=\"padding: 11px 16px; color: #b91c1c; font-weight: 500; vertical-align: top;\">1.5% per month from deduction date<\/td>\n<td style=\"padding: 11px 16px; color: #b91c1c; font-weight: 500; vertical-align: top;\">+ \u20b910,000\u2013\u20b91,00,000 penalty if not paid within 1 year<\/td>\n<\/tr>\n<tr style=\"background-color: #f7faff; border-bottom: 1px solid #DCE8F7;\">\n<td style=\"padding: 11px 16px; font-weight: 600; color: #0d1117; vertical-align: top;\">PT registration \/ filing<\/td>\n<td style=\"padding: 11px 16px; color: #555555; vertical-align: top;\">State PT Authority<\/td>\n<td style=\"padding: 11px 16px; color: #b91c1c; font-weight: 500; vertical-align: top;\">\u20b95,000\u2013\u20b910,000 registration penalty<\/td>\n<td style=\"padding: 11px 16px; color: #b91c1c; font-weight: 500; vertical-align: top;\">+ \u20b910,000\u2013\u20b91,00,000 per violation<\/td>\n<\/tr>\n<tr style=\"background-color: #ffffff;\">\n<td style=\"padding: 11px 16px; font-weight: 600; color: #0d1117; vertical-align: top;\">TDS return (Form 138)<\/td>\n<td style=\"padding: 11px 16px; color: #555555; vertical-align: top;\">Income Tax Dept<\/td>\n<td style=\"padding: 11px 16px; color: #b91c1c; font-weight: 500; vertical-align: top;\">\u20b9200 per day under Section 234E<\/td>\n<td style=\"padding: 11px 16px; color: #555555; font-style: italic; vertical-align: top;\">Capped at TDS amount due<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n<p><i><span style=\"font-weight: 400;\"><a href=\"https:\/\/www.tankhapay.com\/blog\/cost-of-payroll-errors-india\/\">Manual payroll compliance<\/a> costs Indian SMBs an average of \u20b92 to 8 lakh annually in penalties, interest, and accountant fees, which roughly costs what automated or managed payroll systems eliminate.<\/span><\/i><\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_Bottom_Line\"><\/span><b>The Bottom Line<\/b><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Indian <\/span><i><span style=\"font-weight: 400;\">payroll tax<\/span><\/i><span style=\"font-weight: 400;\"> is manageable when every component is tracked, calculated correctly, and deposited on time. The complication is that five separate obligations run on three different deadlines, are governed by three different authorities, and have all been updated in the last twelve months.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Businesses that have this under control have one thing in common: they are not tracking it manually. Either payroll software handles the calculations and generates the returns automatically, or a <a href=\"https:\/\/www.tankhapay.com\/payroll\/payroll-management-system\">managed payroll service<\/a> processes everything and takes on the compliance responsibility. The penalty exposure from one missed deadline typically costs more than a full year of either option.<\/span><\/p>\n<p><!-- End Penalty Reference Table --><\/p>\n","protected":false},"excerpt":{"rendered":"<div class=\"tmnf_excerpt\">\u26a1 TL;DR \u2014 \u25bc 1 Indian payroll tax is not one tax. It is five separate obligations \u2014 PF, ESI, TDS, P\u2026<\/div>","protected":false},"author":6,"featured_media":14151,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[159],"tags":[135,423],"class_list":["post-14150","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-payroll","tag-payroll","tag-payroll-tax"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.7 (Yoast SEO v27.7) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Payroll Tax in India 2026 | Rates, Dates &amp; Penalties<\/title>\n<meta name=\"description\" content=\"India&#039;s payroll tax includes PF, ESI, TDS, and Professional Tax each with different rates, deadlines, &amp; penalties. know exactly what you owe.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.tankhapay.com\/blog\/payroll-tax\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Payroll Tax in India | 5 Deductions Business Owes | Deadlines Most Founders Miss\" \/>\n<meta property=\"og:description\" content=\"India&#039;s payroll tax includes PF, ESI, TDS, and Professional Tax each with different rates, deadlines, &amp; 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