Payroll Processing in India 2026

Every month, your finance team spends 3 to 5 days reconciling attendance, computing salary components, deducting TDS under Section 192 of the Income Tax Act 1961, remitting EPF contributions under the Employees' Provident Funds and Miscellaneous Provisions Act 1952, depositing ESI premiums under the Employees' State Insurance Act 1948, and filing professional tax returns, all before the 7th of the following month. One error in employee PF accounts or TDS certificates can trigger an EPFO inspection or an Income Tax notice with penalties ranging from ₹10,000 to ₹1,00,000 under the Income Tax Act. In 2026, with the Code on Wages 2019 fully notified and the unified Shram Suvidha Portal operational, payroll compliance has become significantly more granular and deadline-sensitive. KAMRIT Financial Services LLP handles your entire payroll cycle, from salary computation to statutory filing under the relevant labour codes, so your team focuses on business growth instead of compliance anxiety. We offer three packages: self-service software access, fully managed monthly payroll, and managed payroll with complete PF and ESI statutory filing. Pricing starts at ₹1,899 per month for the software-only tier.

What is Payroll Processing in India 2026?

Payroll Processing in India is not a single registration, it is a recurring monthly compliance obligation that spans tax deduction, social security remittance, professional tax deposit, and state-level labour law filings simultaneously. Under the Income Tax Act 1961, every employer deducting salary income is required to deduct TDS under Section 192 and file quarterly TDS returns in Form 24Q via the Income Tax Department portal. Under the EPF Act 1952, any establishment with 20 or more employees must mandatorily register with the Employees' Provident Fund Organisation (EPFO) and remit employer and employee contributions every month, currently 12% each on Basic + DA (subject to the wage ceiling of ₹15,000 under the Act). Under the ESI Act 1948, establishments with 10 or more employees (20 in some states) must register with the Employees' State Insurance Corporation and contribute 4.75% of the monthly wages as employer share and 1.75% as employee share, with the overall wage ceiling set at ₹21,000 per month. Professional Tax, governed by state-specific statutes (e.g., the Maharashtra State Tax on Professions, Trades, Callings and Employments Act, 1975), requires half-yearly registration and payment in most states. The Code on Wages 2019, now the governing wage legislation in states that have adopted it, mandates uniform minimum wages, equal remuneration, and digital records for all employees, superseding the Payment of Wages Act 1936. The employer is responsible for depositing TDS by the 7th of the following month, remitting PF and ESI by the 15th, filing professional tax returns by the stipulated state deadline, and issuing Form 16 / Form 16A to employees by 15th June post-financial year. Non-compliance invites interest penalties, compounding fees under the Income Tax Act, and possible prosecution under the EPF Act 1952 Section 14 for non-remittance.

Who needs this

Payroll processing obligations are triggered automatically by the nature and scale of your workforce, not by a one-time registration event. These thresholds apply across all three KAMRIT packages.

• Any employer with employees drawing wages as defined under the Code on Wages 2019 is required to maintain a Muster Roll (Form III under the Code), Pay Register, and Wage Register, making even a single employee a payroll compliance entity.
• Any establishment with 20 or more persons employed must mandatorily obtain an EPF registration under the EPF Act 1952 Section 1(3) and maintain electronic challan-cum-return (ECR) filings on the Shram Suvidha Portal every month.
• Any establishment with 10 or more employees (states such as Maharashtra and Karnataka apply the 10-employee threshold for manufacturing) must register under the ESI Act 1948 Section 2(12) and file monthly returns with the ESIC portal.
• Employers with annual aggregate professional tax liability exceeding ₹50,000 in states like West Bengal, Karnataka, and Tamil Nadu must file half-yearly returns; all other establishments file annually or per state schedule.
• Private sector establishments with 10 or more workers in shops and establishments must obtain a Shops and Establishment Registration under the relevant state Act (e.g., Maharashtra Shops and Establishments Act 1947) before or concurrently with payroll operations.
• Companies incorporated under the Companies Act 2013 must disclose employee remuneration above ₹18 lakhs per annum in the Board Report under Section 197, this requires accurate payroll data throughout the year.
• Entities that have already filed Form 10A under the EPF Act (for seeking exemption from the Act if employee strength falls below 20) must re-evaluate eligibility every quarter as headcount fluctuates.
• TDS deduction under Section 192 of the Income Tax Act 1961 is mandatory from the first payment of salary and requires TAN registration with the Income Tax Department if not already obtained.
• TDS returns in Form 24Q must be filed quarterly with the TIN NICS / Protean portal; non-filing attracts a penalty of ₹200 per day under Section 272H of the Income Tax Act.
• Organisations with contract labour (engaged through the Contract Labour (Regulation and Abolition) Act 1970) must ensure PF and ESI contributions for them are remitted separately and reported in the consolidated ECR.

Documents required

The document stack for payroll processing is built around employee onboarding records and employer establishment certificates. KAMRIT collects and validates these before month one payroll runs.

• PAN Card and Aadhaar Card copies of all employees, required for TDS deduction and PF/ESI seeding; Form 12BB (declaration for tax-saving investments) submitted at year start.
• Form 10A / Form 10B (EPF registration documents) as applicable, submitted via the unified Shram Suvidha Portal under the EPF Act 1952 after establishing threshold headcount.
• ESI registration certificate obtained from the local ESIC office under Section 2(12) of the ESI Act 1948, copy to be submitted to KAMRIT at onboarding.
• TAN (Tax Deduction Account Number) certificate, obtained from NSDL / Protean portal under Section 203A of the Income Tax Act 1961; KAMRIT assists in obtaining this if not yet available.
• Salary register / Pay sheet from the previous month, format must include employee name, UAN (Universal Account Number for EPF), ESIC number, bank account, PAN, Basic, DA, HRA, allowances, and deductions in separate columns.
• Bank mandate / NEFT details of all employees, required for seamless salary crediting; KAMRIT cross-checks bank account names against PF/ESI records.
• Form 15G / Form 15H declarations for employees whose estimated annual income is below the TDS exemption threshold, to be submitted in January each year to prevent unnecessary TDS deduction.
• Shram Suvidha Portal login credentials and establishment registration ID, used by KAMRIT to file monthly ECR returns under the EPF Act 1952.
• Form 24Q (last quarter's) filed acknowledgment and challan receipts, required to establish continuity of compliance for managed payroll onboarding.
• State-specific professional tax registration certificate (e.g., PTEC under Maharashtra Professional Tax Act), validity dates and registration number to be shared with KAMRIT at onboarding.
• Company PAN and TAN, mandatory for all TDS filings and for generating Form 16 at financial year-end.
• Authorised signatory DIN / board resolution copy, required if KAMRIT is appointed to file statutory returns on behalf of the company under the Companies Act 2013.

How KAMRIT runs it, step by step

KAMRIT follows a structured eight-step onboarding and monthly execution cycle. Steps 1 through 3 occur at engagement kickoff; Steps 4 through 8 recur every month from month two onwards.

1. Engagement Onboarding and Document Audit. Within 2 working days of engagement, KAMRIT's payroll team requests all employee records, existing PF/ESI/PT registration certificates, TAN registration, and bank account details. We conduct a compliance gap audit, checking whether PF UANs are activated, ESIC cards are issued, and PT registration is current in all states of operation. This audit identifies missing employee documents, inactive UANs, and unregistered entities before the first payroll run. You receive a one-page compliance status report with items pending and a 7-day deadline to furnish them.
2. Employee Data Seeding and UAN Activation. KAMRIT populates the PF portal (via the employer login on the EPFO member portal) with all employee Universal Account Numbers and ensures each UAN is linked to the establishment's account. For employees without UANs, KAMRIT files the digital Form 11 (advance composite claim for UAN generation and claim settlement) on the member portal. This step is completed within 5 working days. ESI numbers are similarly validated or applied for via the ESIC employer portal. Data seeding ensures that the monthly ECR upload (Form 5 for new joinings and Form 10 for exits) runs without rejection.
3. Salary Structure Configuration. Based on the pay sheet and employee declarations (Form 12BB for tax-saving investments, Form 15G/15H where applicable), KAMRIT configures the salary structure in our payroll software, classifying components as Basic, DA, HRA, LTA, medical allowance, conveyance, and deductions. The software computes the correct EPF contribution (12% of Basic+DA up to ₹15,000 wage ceiling), ESI contribution (4.75% employer + 1.75% employee up to ₹21,000 wage ceiling), professional tax deduction (₹200 per month in Maharashtra for salary above ₹7,500; ₹150 in Karnataka; varies by state), and TDS under Section 192 after applying applicable deductions under Sections 80C, 80D, 80CCD(1B), and HRA exemption claims.
4. Monthly Payroll Run and Salary Disbursement. By the 25th of every month, KAMRIT generates the draft pay sheet and sends it to you for approval. On your sign-off, KAMRIT releases salary instructions to your bank via NEFT/RTGS. The deadline for salary disbursement is the last working day of the month. TDS deducted during the month is deposited by the 7th of the following month via challan on the Protean / TIN NICS portal.
5. PF and ESI Remittance. By the 12th of the following month, KAMRIT prepares the monthly ECR (Electronic Challan-cum-Return) on the Shram Suvidha Portal, listing each employee's UAN, contribution amount, and pensionable wages. The employer PF contribution (12% of Basic+DA) and employee contribution are remitted via the authorised bank. ESIC contributions (employer share 4.75% + employee share 1.75%) are filed and remitted on the ESIC portal by the 15th of the following month. Form 5 (for new joiners) and Form 10 (for employees leaving the establishment during the month) are attached to the ECR.
6. Professional Tax Filing. KAMRIT files the professional tax return in the relevant state portal by the prescribed deadline, for Maharashtra, the PT returns are filed half-yearly (April to September and October to March) by the 31st of the following month of the half-year. State-specific forms such as the PTR-1 (employer registration), PTR-2 (monthly return), and PTR-3 (annual return) are filed accordingly. Late filing attracts a penalty of ₹50 per day in most states.
7. Quarterly TDS Return Filing. Every quarter, KAMRIT files Form 24Q (TDS on salaries) on the Protean / NSDL portal within the due date, currently the 31st of the month following the quarter. The challan for TDS deposited is attached. The quarterly statement is reconciled against the monthly salary disbursements. At year-end, KAMRIT generates Form 16 (Part A and Part B) for each employee, reflecting the salary income, TDS deducted, and tax slabs for the financial year. Form 16 is issued by 15th June following the close of the financial year.
8. Annual Statutory Compliance Summary. By 15th April each year, KAMRIT prepares the annual payroll compliance summary, including Form 16 issue, Form 16A (for contractors/other payments), Annual Return under the EPF Act (Form 9, 3A, 6A), ESIC annual return, and professional tax annual return. KAMRIT also files the employee wise TDS details in Form 24Q for Q4 and reconciles the annual Form 16 against the quarterly filings to eliminate discrepancies.

Timeline

From engagement kickoff to the first salary disbursement, KAMRIT typically requires 8 to 10 working days for onboarding, this covers document collection, compliance audit, employee data seeding on the EPFO portal, and configuration of the salary structure in the payroll software. If TAN registration or PF/ESI registration is not yet in place, KAMRIT assists in obtaining it, adding 3 to 5 working days for TAN via the NSDL portal and 5 to 10 working days for PF/ESI registration via the respective portals (regulator-controlled stages). Government processing times for PF/ESI establishment registration typically range from 5 to 15 working days depending on the regional EPFO/ESIC office. Once onboarding is complete, KAMRIT runs payroll and files all statutory returns on a recurring monthly and quarterly basis, monthly ECR filing must be completed by the 15th of the following month, and TDS quarterly returns by the end of the month following the quarter. Form 16 issuance at financial year-end is completed by 15th June each year. Overall, from the start of the engagement, you should budget 3 to 4 weeks for a fully compliant first cycle, with the regulator-controlled stages (PF/ESI registration) accounting for the majority of the timeline variance.

How our pricing compares

KAMRIT's Payroll Processing packages are priced competitively against leading online compliance service providers operating in the Indian market. IndiaFilings.com charges ₹7,999 per year for their payroll software tier (comparable to KAMRIT's Payroll Software at ₹5,899 per year), but excludes managed filing and employee PF/ESI reconciliation. Vakilsearch offers a managed payroll service starting at ₹18,999 per year, which is ₹4,100 more than KAMRIT's Managed Payroll package at ₹14,899 per year, without any additional statutory filing included. Cleartax charges ₹24,999 per year for a managed payroll + PF + ESI package, ₹5,100 more than KAMRIT's Payroll + PF & ESI package at ₹19,899 per year. LegalRaasta offers a basic payroll software at ₹4,999 per year, marginally lower than KAMRIT's software-only tier, but without dedicated compliance support. All competitor prices quoted above exclude government filing fees (PF administrative charges of 0.5% of wages, ESIC inspection fees, TDS late filing interest of 1.5% per month), which are charged by the regulator and are the same across all service providers. KAMRIT's price position is justified because we include unlimited payroll runs, dedicated payroll manager access, and statutory filing (PF ECR, ESIC returns, PT returns, Form 24Q) within the package price, not as add-ons. Competitors typically charge ₹500 to ₹1,500 per month extra for PF/ESI filing assistance. KAMRIT's managed packages absorb these into the annual fee. All prices exclude government fees, stamp duty, courier charges, and out-of-state PT registration charges which vary by state.

Common mistakes KAMRIT avoids

First-time payroll operators in India consistently make these errors, often resulting in EPFO inspections, Income Tax notices, or compounding fees under the labour codes. KAMRIT's managed service is specifically designed to prevent each one.

• Registering for PF but failing to file monthly ECR on the Shram Suvidha Portal in months with no salary disbursement, this triggers a default notice from the EPFO under Section 14 of the EPF Act 1952 even when the establishment is operational.
• Not updating Form 10 (employee exit) in the PF portal when an employee resigns, the EPFO continues to show the employee as active, and the employer may be held liable for contributions not yet remitted.
• Deducting TDS under Section 192 without obtaining Form 12BB declarations, this results in incorrect TDS deduction, requiring rectification with Form 13 and leading to cash flow issues for employees.
• Failing to deduct and deposit TDS by the 7th of the following month, interest at 1.5% per month accrues from the date of deduction under Section 201(1A) of the Income Tax Act 1961.
• Not applying for TAN before the first salary payment, penalties under Section 272BB of the Income Tax Act range from ₹10,000 to ₹1,00,000 for failure to deduct or pay TDS.
• Not linking employee UAN to the establishment's PF account before the first ECR upload, this results in rejected ECR files and a compliance lock until the discrepancy is resolved, delaying PF remittance beyond the 15th deadline.
• Filing Form 24Q for Q2 or Q3 without reconciling it against the Q1 filing, mismatches trigger a notice from the Income Tax Department requiring a correction return (Form 24Q correction).
• Ignoring the Code on Wages 2019 requirement to maintain a digital Wage Register in states that have adopted it, the lack of an online wage register is treated as non-compliance during a labour department inspection and can attract a penalty of up to ₹10,000 for the first offence.