India Payroll Everything You Need to Know in 2024

India Payroll: Everything You Need to Know in 2024

Managing payroll in India can be complex, with multiple statutory compliances, tax deductions, and employee benefits. Whether you're an employer, HR professional, or employee, understanding India’s payroll system is crucial for smooth salary processing and compliance.

India Payroll: Everything You Need to Know in 2024

1. What is Payroll in India?

Payroll is the process of calculating and distributing employee salaries, ensuring tax deductions, and complying with statutory regulations like EPF, ESI, and income tax. It includes:

  1. Salary Calculation – Basic pay, allowances, deductions, and net pay
  2. Tax & Compliance – Income Tax (TDS), Provident Fund (PF), Employee State Insurance (ESI), and Professional Tax (PT)
  3. Payroll Processing – Generating payslips, managing leave, and processing bonuses

2. Key Components of Indian Payroll

A. Salary Structure

  1. Basic Salary – Fixed component, usually 40-50% of CTC
  2. Allowances – HRA, travel, dearness, medical, and other benefits
  3. Deductions – Provident fund (PF), professional tax, and income tax (TDS)
  4. Bonus & Incentives – Performance-based or statutory bonus as per Payment of Bonus Act

B. Statutory Compliance in Indian Payroll

  1. Provident Fund (EPF) – 12% of Basic Pay (Employer & Employee Contribution)
  2. Employee State Insurance (ESI) – 0.75% Employee + 3.25% Employer (for employees earning ? ?21,000/month)
  3. Gratuity – Paid after 5+ years of service (4.81% of salary)
  4. Professional Tax (PT) – State-wise tax deducted from salary
  5. TDS (Tax Deducted at Source) – Deducted as per income tax slabs

3. Payroll Process in India

Step 1: Employee Onboarding – Collect PAN, Aadhaar, and bank details

Step 2: Salary Calculation – Basic pay, allowances, tax deductions, and net pay

Step 3: Compliance Deductions – EPF, ESI, PT, and TDS deductions

Step 4: Payroll Processing – Generate payslips and distribute salaries

Step 5: Statutory Filing – Monthly EPF, ESI, TDS payments, and quarterly/yearly filings

4. Latest Payroll Updates in India (2024)

  1. New EPF Withdrawal Rules – Employees can withdraw PF without employer approval
  2. Income Tax Changes – New tax slabs under the 2023-24 Budget
  3. Labour Codes Implementation – New wage, social security, and working hour regulations expected soon.