Payroll processing is one of the major functions of an organization. The statutory compliances relating to payroll in India include Provident Fund, Gratuity, ESI, PT, maternity benefits for women employees, and Tax deduction at source. Every business has to follow the law based on their location and it's also important to stay updated with the regulatory changes as well.
TDS (Tax deducted at source)- Applicable to the very first employee. Governed by section 192 Income Tax Act, businesses should obtain TAN (Tax Deduction and Collection Account Number ) from the income tax department in order to deduct tax at source from employees' salaries.
PF (Provident Fund or EPF Scheme)- The scheme was introduced in 1952 for the welfare of employees and it helps employees in their retirement. It is applicable when the number of employees exceeds 20.
ESI (Employees’ state insurance)- ESI is governed by ESI Act 1948. It is a self-financed social security scheme designed for the welfare of employees. Employees with monthly wages of INR. 21,000 or less are covered under this scheme. The scheme provides financial assistance for the period during which the employee was on leave due to any medical emergency, pregnancy, or hospitalization in any ESI hospital.
PT (Professional Tax)- Professional tax is statutory compliance for all businesses and it varies from state to state. Not all states in India impose professional tax. The employees can claim a tax deduction for the PT paid according to the Income Tax Act 1961.
LWF (Labour Welfare Fund)- LWF is statutory compliance managed by the state. It differs with every state and it is an aid for laborers in need.