EPF, ESIC, Gratuity & Payroll Compliance Slabs
Statutory employee registrations and payroll contributions are regulated under the EPFO, ESIC, and state professional tax acts.
| Labour category | Current verified position | Key requirement |
|---|---|---|
| EPF Registration | Mandatory for establishments with 20 or more employees. | Employer contribution is 12% of basic wage (capped at Rs. 15,000/month). |
| ESIC Registration | Mandatory for non-seasonal establishments with 10 or more employees. | Contribution: 3.25% (employer) and 0.75% (employee) of gross wage (cap Rs. 21,000/month). |
| Payment of Gratuity | Applicable to establishments with 10 or more employees. | Payable to employees with continuous service of 5 years or more. Capped at Rs. 20 Lakh. |
| Professional Tax (PT) | State-specific tax on employment/profession. | Slabs and monthly filings vary by state (e.g. Karnataka cap is Rs. 200/month). |
What a serious HR/payroll expert should verify
- Shop & Establishment License: Required under state laws for commercial offices and establishments within 30 days of starting.
- POSH Compliance: Establishments with 10 or more employees must form an Internal Complaints Committee (ICC) to comply with the POSH Act.
- Salary structure optimization: Segment salary into Basic, HRA, and allowances while maintaining statutory EPF and ESIC caps.
- PF Withdrawal queries: Advise employees on Form 19, 10C, and 31 withdrawal requirements for advance or final claims.
Documents for payroll and labour audits
- Monthly payroll register showing gross salary, EPF/ESIC deductions, and PT.
- EPF/ESIC monthly challans and ECR filings.
- Employee KYC (Aadhaar, PAN, Bank account details).
- Employee contracts and establishment registration details.
EPFO Employer Registration Services: year and source check
Last fact-checked: 18 June 2026.
Direct and indirect tax laws, corporate filings, and compliance rules are subject to change by CBIC, MCA, EPFO, and RBI notifications. Always verify circulars before executing a transaction.
Use official government portals (such as GST portal, MCA V3, e-filing portal, and TRACES) first. Articles and competitor calculators should be treated as guidance, not legal advice.
FAQs
What is the salary limit for mandatory EPF contribution in India?
The statutory wage limit for mandatory EPF contribution is Rs. 15,000 per month (Basic salary + Dearness Allowance). Contributions are voluntary for wages exceeding this limit.
What are the employer and employee ESIC contribution rates?
The contribution rates are 3.25% of gross wages for the employer and 0.75% of gross wages for the employee, applicable to employees earning up to Rs. 21,000 per month.
When is an employee eligible for gratuity payment?
An employee is eligible for gratuity under the Payment of Gratuity Act, 1972 upon completing 5 or more years of continuous service with the same employer.
Frequently Asked Questions
1. How should salary components, allowances, and EPF be structured for employees working in EPFO Employer Registration?
Salary structures for EPFO Employer Registration should optimize Basic, HRA, and allowances to reduce tax liability. Employee EPF contributions are mandatory at 12% of basic pay if the company has 20 or more employees.
2. What are the tax deductions and rules for retirement benefits in the context of EPFO Employer Registration?
Employees in EPFO Employer Registration can claim HRA exemption under the Old Regime, while standard deduction (₹75,000 under the New Regime) and tax-free gratuity up to ₹20 lakh apply under rules.
3. Is HRA exemption available under the New Tax Regime?
No. Under the default New Tax Regime, all major deductions and exemptions—including HRA, LTA, and Section 80C deductions—are abolished. Salaried employees can only claim the standard deduction (₹75,000) and NPS employer contribution u/s 80CCD(2).
4. What is the standard deduction for salaried employees for FY 2025-26?
For FY 2025-26, the standard deduction is ₹75,000 under the default New Tax Regime, and ₹50,000 under the Old Tax Regime. This deduction is automatically subtracted from your gross salary income in your ITR.
5. How does EPF contribution affect my salary slip and taxes?
The employee contributes 12% of basic salary + DA to the EPF, which is deductible under Section 80C (Old Regime only). The employer matches this 12% contribution. Under Section 80CCD(2), the employer's share is exempt up to ₹7.5 lakh aggregate.
6. At what point does EPF interest become taxable?
If an employee's contribution to the EPF exceeds ₹2.5 lakh in a financial year (or ₹5 lakh if there is no employer contribution), the interest earned on the excess contribution is taxable as 'Income from Other Sources'.
7. What is Professional Tax (PT) and how is it deducted?
Professional Tax is a state-level tax levied on salaried employees, capped at a maximum of ₹2,50,0 per annum. It is deducted from your gross salary monthly and is fully deductible under Section 16(iii) under the Old Tax Regime.
8. What is a perquisite under Section 17(2)?
Perquisites are non-cash benefits provided by an employer to an employee, such as rent-free accommodation, corporate cars, club memberships, or concessional loans. The valuation of perquisites is added to your taxable salary, and the employer deducts TDS on it.
9. How is gratuity calculated and is it tax-free?
Gratuity is paid after 5 years of continuous service. It is calculated as `(15 * Last Drawn Basic Salary * Years of Service) / 26` for employees covered under the Payment of Gratuity Act. It is tax-free up to a lifetime limit of ₹20 lakh.
10. What is Form 12BB and why is it important?
Form 12BB is a mandatory declaration form submitted by employees to their HR at the end of the financial year. It details all tax-saving investments (80C, 80D, home loan interest, rent receipts) along with physical proofs, allowing the HR to calculate and deduct the correct TDS.
11. What happens if I change jobs mid-year and do not submit Form 12B?
If you change jobs and do not declare your previous salary details to your new employer in Form 12B, both employers will apply basic exemptions and standard deductions. This leads to double-benefit claims and results in a large tax liability plus interest when you file your ITR.
12. How is Leave Travel Allowance (LTA) exempt from tax?
LTA covers travel tickets for yourself and your family within India. It can be claimed tax-free twice in a block of 4 calendar years under Section 10(5) (Old Regime only). The exemption is restricted to the actual travel cost, not hotel or food expenses.
13. What is the difference between Form 16 Part A and Part B?
Part A is generated from the income tax portal and contains quarterly TDS summaries deposited under your PAN. Part B is issued by your employer and contains a detailed calculation of your gross salary, exempted allowances, deductions under Chapter VI-A, and net tax payable.
14. Why is my monthly TDS in salary slip different from month to month?
TDS is calculated by projecting your annual taxable income and dividing the estimated tax by the remaining months in the year. If you declare investments late or receive a variable bonus, your projected income changes, causing the monthly TDS to be adjusted.
15. Can I claim deductions if my employer has already deducted TDS based on full salary?
Yes. If you missed submitting investment proofs to your HR on time, you can still claim deductions like Section 80C, 80D, and HRA directly when filing your ITR, and claim a refund for the excess TDS deducted by your employer.