India Payroll Compliance Checklist for Foreign Companies in 2026

Introduction: Why India Payroll Compliance Demands Precision

India payroll compliance is unforgiving. Miss a PF remittance deadline by one day and you owe interest at 12% per annum plus damages up to 100% of arrears. Miss TDS filing and you face penalties of ₹200 per day with no upper limit. For foreign companies running payroll in India — whether through an entity or an EOR — understanding every deadline, form, and filing requirement is not optional.

This payroll compliance checklist India guide covers every obligation: monthly, quarterly, and annual. It includes the exact due dates, the forms involved, the penalties for non-compliance, and the registration requirements you need before processing your first payroll.

Registration Requirements: Before You Process Payroll

Before running payroll in India, your entity (or EOR) must complete these registrations:

Registration	Authority	Timeline	Threshold
PF Registration	EPFO	Within 30 days of hiring	20+ employees (voluntary below 20)
ESI Registration	ESIC	Within 15 days of applicability	10+ employees with salary ≤ ₹21,000/month
Professional Tax	State PT Authority	Before first salary payment	First employee in applicable state
Shops & Establishments	Municipal/State Labour Dept	Within 30 days of commencing business	All establishments
TAN (Tax Deduction Account Number)	Income Tax Department	Before first TDS deduction	All employers
Labour Welfare Fund	State LWF Board	As per state rules	Varies by state

Key Registration Notes

• PF is effectively universal: While technically mandatory at 20+ employees, most employers register voluntarily from day one. Not doing so raises red flags during audits and makes hiring difficult (employees expect PF)
• ESI threshold is per-employee: If even one employee earns ≤ ₹21,000/month gross, the establishment must register under ESI
• Professional Tax varies by state: Not all states levy PT. Major states with PT include Maharashtra, Karnataka, West Bengal, Tamil Nadu, Andhra Pradesh, and Telangana
• TAN is mandatory before first salary: You cannot legally deduct TDS without a valid TAN

Monthly Obligations: The Critical Deadlines

Monthly compliance forms the backbone of India payroll. These deadlines are firm — there is no grace period.

Monthly Compliance Calendar

Obligation	Due Date	Form/Challan	Payment Mode
PF contribution remittance	15th of following month	ECR (Electronic Challan cum Return)	Online via EPFO portal
ESI contribution remittance	15th of following month	Online challan	Online via ESIC portal
TDS on salary remittance	7th of following month	Challan 281	Online via TIN-NSDL/e-Pay Tax
Professional Tax remittance	Varies by state (typically 15th-20th)	State-specific form	State portal
Labour Welfare Fund	Half-yearly or annual (state-specific)	State-specific form	State portal

Provident Fund: Monthly Process

Step-by-step PF compliance:

1. Calculate PF on basic + DA (12% employee + 12% employer on salary up to ₹15,000 or actual basic, depending on trust deed)
2. Generate ECR file on EPFO Unified Portal
3. Upload ECR and verify employee-wise details
4. Generate challan and make payment by 15th
5. Download payment confirmation and receipt

PF contribution breakup (employer’s 12%):

Component	Rate	Destination
EPF (Employee Provident Fund)	3.67%	Employee’s PF account
EPS (Employee Pension Scheme)	8.33%	Pension fund (on salary up to ₹15,000)
EDLI (Deposit Linked Insurance)	0.50%	Insurance fund
PF Admin charges	0.50%	EPFO administration
EDLI Admin charges	0.00%	Waived since 2019

ESI: Monthly Process

For employees with gross salary ≤ ₹21,000/month:

Contribution	Rate
Employer	3.25% of gross wages
Employee	0.75% of gross wages
Total	4.00%

Process:

1. Calculate ESI on gross wages (including overtime, but excluding annual bonus)
2. File contribution details on ESIC portal
3. Make payment by 15th of following month
4. Generate and retain challan receipt

TDS on Salary: Monthly Process

Tax Deducted at Source (TDS) is your most complex monthly obligation.

1. Calculate estimated annual income for each employee
2. Deduct applicable tax based on regime choice (old vs new tax regime)
3. Account for investment declarations (Section 80C, 80D, HRA, etc.)
4. Remit total TDS to government by 7th of following month
5. Use Challan 281 (online via e-Pay Tax portal)

TDS rates under New Tax Regime (2026):

Income Slab	Tax Rate
Up to ₹4,00,000	Nil
₹4,00,001 - ₹8,00,000	5%
₹8,00,001 - ₹12,00,000	10%
₹12,00,001 - ₹16,00,000	15%
₹16,00,001 - ₹20,00,000	20%
₹20,00,001 - ₹24,00,000	25%
Above ₹24,00,000	30%

Standard deduction: ₹75,000 under new regime.

Professional Tax: Monthly/Half-Yearly

Professional Tax is a state-level tax on employment income. The maximum PT allowed under the Constitution is ₹2,500 per year. Common state slabs:

State	Monthly Deduction (typical for salary > ₹15,000)	Due Date
Maharashtra	₹200/month (₹300 in Feb)	30 days from end of month
Karnataka	₹200/month	20th of following month
West Bengal	₹150-200/month	21st of following month
Tamil Nadu	₹162.50/month (half-yearly payment)	Semi-annual
Telangana	₹200/month	15th of following month
Andhra Pradesh	₹200/month	15th of following month

Quarterly Obligations

TDS Quarterly Returns (Form 24Q)

The most critical quarterly filing for payroll. Form 24Q reports all salary TDS deductions to the Income Tax Department.

Quarter	Period	Due Date
Q1	April - June	July 31
Q2	July - September	October 31
Q3	October - December	January 31
Q4	January - March	May 31

Form 24Q contains:

• Employee-wise salary details
• Tax deducted and deposited
• PAN of all employees
• Challan details for each month
• Q4 includes annexure with full-year salary breakup

Critical: The Q4 return is the most complex as it includes Annexure II with complete annual salary and tax computation for every employee. This forms the basis for Form 16 generation.

ESI Half-Yearly Returns

While contributions are monthly, ESI requires half-yearly returns:

Period	Due Date
April - September	November 12
October - March	May 12

Annual Obligations: The Year-End Compliance Sprint

Indian financial year runs April 1 to March 31. Year-end compliance is intensive.

Annual Compliance Calendar

Obligation	Due Date	Form/Return
Form 16 (TDS certificate) to employees	June 15	Form 16 Part A + B
PF Annual Return	April 30	Form 3A (revised), Form 6A
ESI Annual Return	May 12 (with half-yearly)	Annual contribution statement
Bonus Payment	Within 8 months of close of accounting year	Payment of Bonus Act
Investment proof collection	January-February	Employee declarations
Income Tax Return (company)	October 31 (if audit required)	ITR-6
Tax Audit (if applicable)	September 30	Form 3CA/3CB
LWF annual contribution	State-specific	State-specific form

Form 16: The Annual TDS Certificate

Form 16 is the most important document for employees — it is their proof of salary received and tax deducted, required for filing their personal income tax returns.

Form 16 components:

Part	Contents	Source
Part A	TDS deducted and deposited details	Auto-generated from TRACES after 24Q filing
Part B	Detailed salary breakup, deductions, tax computation	Prepared by employer

Key deadline: Form 16 must be issued to employees by June 15 following the financial year. Late issuance attracts a penalty of ₹100 per day per employee under Section 272A.

Bonus Payment

Under the Payment of Bonus Act, employees earning up to ₹21,000/month are entitled to a minimum bonus of 8.33% of salary (maximum 20%). This must be paid within 8 months of the close of the accounting year.

Parameter	Details
Eligibility	Employees with salary ≤ ₹21,000/month
Minimum bonus	8.33% of salary earned during the year
Maximum bonus	20% of salary earned during the year
Calculation ceiling	Salary calculated on ₹7,000/month or minimum wage, whichever is higher
Payment deadline	8 months from close of accounting year (November 30 for March year-end)

Penalties for Non-Compliance: The Stakes Are High

India’s payroll compliance penalties are structured to be deterrent. They include financial penalties, interest, damages, and in serious cases, criminal prosecution.

PF Non-Compliance Penalties

Violation	Penalty
Late payment of contribution	Interest at 12% per annum from due date
Default in payment	Damages: 5% to 100% of arrears depending on period of default
Up to 2 months default	5% damages
2-4 months default	10% damages
4-6 months default	15% damages
Above 6 months default	25% damages (can go up to 100%)
False declaration/fraud	Imprisonment up to 1 year and/or fine up to ₹5,000
Repeat offense	Imprisonment up to 3 years, minimum 1 year

ESI Non-Compliance Penalties

Violation	Penalty
Late payment of contribution	Simple interest at 12% per annum
Non-registration	Imprisonment up to 2 years and/or fine up to ₹5,000
False statement	Imprisonment up to 2 years and/or fine up to ₹5,000
Non-payment of contribution	Recovery as arrears of land revenue

TDS Non-Compliance Penalties

Violation	Penalty
Late deduction of TDS	Interest at 1% per month from date when tax was deductible
Late payment of TDS (after deduction)	Interest at 1.5% per month from date of deduction
Late filing of TDS return (24Q)	₹200 per day until filing (no upper limit)
Failure to issue Form 16	₹100 per day per certificate
Incorrect information in return	₹10,000 to ₹1,00,000 penalty

Professional Tax Penalties

Violation	Penalty (varies by state)
Late payment (Maharashtra)	10% of amount due per month
Non-registration (Karnataka)	₹1,000 + interest
Late filing (West Bengal)	₹50 per day

Document Retention Requirements

Indian labour and tax laws require employers to maintain records for specified periods:

Document	Retention Period	Governing Law
Salary registers	8 years from last entry	Payment of Wages Act
PF records	5 years after employee exit	EPF Act
ESI records	5 years	ESI Act
TDS records	8 years from relevant assessment year	Income Tax Act
Attendance/leave records	3 years	Shops & Establishments Act
Form 16 copies	8 years	Income Tax Act
Bonus payment records	8 years	Payment of Bonus Act
Gratuity records	5 years after payment	Payment of Gratuity Act

State-Specific Compliance: What Many Companies Miss

India payroll compliance is not uniform across states. Each state has its own:

• Professional Tax rates and filing schedules
• Labour Welfare Fund rates and due dates
• Shops & Establishments Act registration and renewal
• Employment exchange notifications (though largely obsolete)
• State-specific minimum wage orders

Most Common State-Level Gaps

1. Professional Tax registration in each state where employees are located — remote employees in different states require separate PT registrations
2. Shops & Establishments registration — needed even for remote-first companies if you have employees in a state
3. Labour Welfare Fund — small amounts but non-compliance attracts disproportionate scrutiny during audits
4. Minimum wage compliance — varies by state and skill category; must be reviewed semi-annually

Compliance Calendar: Month-by-Month View

Every Month

• 7th: Remit TDS on salary (Challan 281)
• 15th: Remit PF contribution (ECR on EPFO portal)
• 15th: Remit ESI contribution (ESIC portal)
• 15th-20th: Remit Professional Tax (state-specific)
• 30th: Verify all payments reconciled with bank

Quarterly

• Q1 (Jul 31): File Form 24Q for Apr-Jun
• Q2 (Oct 31): File Form 24Q for Jul-Sep
• Q3 (Jan 31): File Form 24Q for Oct-Dec
• Q4 (May 31): File Form 24Q for Jan-Mar (with Annexure II)

Half-Yearly

• Nov 12: ESI half-yearly return (Apr-Sep)
• May 12: ESI half-yearly return (Oct-Mar)
• State-specific LWF filings

Annually (April-June)

• Apr 30: PF Annual Return
• May 31: Form 24Q Q4 filing
• Jun 15: Issue Form 16 to all employees
• Renewal of Shops & Establishments license
• Renewal of state-specific registrations
• Review and update minimum wage compliance

Annually (Other)

• Jan-Feb: Collect investment proofs from employees for final TDS calculation
• Mar: Process investment proofs, recalculate TDS for March payroll
• Nov 30: Pay annual bonus (if March year-end)
• Sep 30: Complete tax audit (if applicable)
• Oct 31: File corporate income tax return

Common Compliance Failures: Lessons from Audits

Based on common audit findings for foreign companies operating in India:

Top 10 Compliance Failures

1. PF on full basic salary: Not calculating PF on actual basic when it exceeds ₹15,000/month (employer choice, but must be consistent)
2. ESI coverage gaps: Missing newly hired employees who fall below ₹21,000/month threshold
3. TDS on perquisites: Not deducting TDS on non-cash benefits (ESOPs, rent-free accommodation)
4. PT for multi-state employees: Missing Professional Tax registration in states where remote employees work
5. Bonus applicability errors: Not paying bonus to eligible employees or miscalculating the ceiling
6. Form 16 delays: Issuing Form 16 after the June 15 deadline
7. Investment proof gaps: Allowing deductions without valid proof, leading to employer liability
8. LWF non-registration: Overlooking Labour Welfare Fund in applicable states
9. Minimum wage violations: Not tracking state-specific minimum wage updates
10. Gratuity provision: Not provisioning for gratuity liability in books

How Omnivoo Automates India Payroll Compliance

Managing this compliance checklist manually is a full-time job — and getting it wrong costs real money in penalties and interest. Omnivoo automates the entire India payroll compliance lifecycle.

Automated Monthly Processing

• PF remittance: Auto-calculated, ECR generated, payment processed by the 12th (3-day buffer before deadline)
• ESI remittance: Contribution calculated on gross wages, filed and paid on schedule
• TDS computation: Real-time tax calculation based on employee regime choice, investment declarations, and year-to-date income
• TDS deposit: Challan generated and payment made by the 5th (2-day buffer)
• Professional Tax: Auto-computed based on employee state of employment

Automated Quarterly and Annual Filings

• Form 24Q: Auto-generated from monthly payroll data, filed within deadline
• Form 16: Generated directly from TRACES after Q4 filing, distributed to employees via portal
• PF annual return: Filed based on monthly ECR data
• ESI returns: Filed based on contribution data

Compliance Dashboard

• Real-time view of all pending obligations
• Deadline tracking with advance alerts
• Payment confirmation receipts stored
• Audit-ready document repository
• State-wise compliance status for multi-state teams

Penalty Prevention

• Automated deadline monitoring with escalation
• Payment reconciliation after every filing
• Discrepancy alerts if calculations do not match government records
• Annual compliance health check with detailed report

Key Takeaways

1. Five critical monthly deadlines (7th TDS, 15th PF, 15th ESI, state-specific PT) — missing any one triggers automatic penalties
2. Penalties compound rapidly — PF damages can reach 100% of arrears; TDS late filing is ₹200/day with no cap
3. State-level compliance is where most companies fail — PT, LWF, and Shops & Establishments registrations in each employee state
4. Document retention is 5-8 years — maintain digital records from day one
5. Year-end sprint is intensive — Form 16 deadline (June 15) and Q4 24Q filing (May 31) require advance preparation
6. An EOR eliminates this burden entirely — all registrations, filings, and penalties are the EOR’s responsibility

---

Running payroll in India without dedicated compliance infrastructure is a liability waiting to happen. Omnivoo handles every registration, filing, and deadline as your Employer of Record — so you focus on your team, not your compliance calendar. Get in touch to see how we automate India payroll compliance end-to-end.