Payroll Compliance Checklist India 2026

Most payroll compliance checklists you will find are lists of deadlines. They are useful for about a month, until you have memorised them, and then they stop telling you anything. The dates are the easy half.

The half that matters is evidentiary. When an EPFO enforcement officer, an ESIC inspector or a TDS assessing officer arrives, they do not ask whether you paid. They can already see that you paid. They ask you to produce the working that shows the payment was right, and that is where payrolls that have been remitting faithfully for years discover they have nothing to hand over.

So this checklist is built the other way round. Every item has a document attached to it, and the test for whether you have done the item is whether you can produce the document. Section 5 sets all of it out in one table.

Rates, thresholds and procedural requirements are those current at August 2026. State-specific professional tax and labour welfare fund rules are summarised rather than set out in full, because they differ in every state. Verify against the relevant portal before configuring a payroll run.

What This Checklist Is For

A payroll compliance checklist is the recurring set of checks that keeps an Indian payroll lawful: the five statutory deductions of provident fund, ESI, professional tax, labour welfare fund and TDS, the returns that follow each of them, and the records that prove both. Most of it is monthly; the rest falls due each quarter and once a year.

What makes it awkward is that payroll compliance in India, which most HR teams file under statutory compliance, is really four obligations wearing one name, and they fail differently:

• Computing correctly means the right percentage on the right base for the right people, and failures here are silent and compound monthly.
• Depositing on time is cash out of the door by a date, and failures here are loud and priced immediately in interest.
• Filing the return is a separate act from paying, on a separate date. A great many establishments pay on time and file late, and are penalised for the filing rather than the payment.
• Retaining the proof is the obligation with no deadline, which is why it is the one that gets dropped.

A checklist that only covers the second of those will keep you out of trouble with your bank and in trouble with everybody else.

Two boundaries, so you know what you are reading. This is the payroll checklist: the statutory compliance that attaches to a payroll run, meaning the deductions and the filings that follow from them. The wider establishment obligations, registrations, licences, statutory registers and headcount thresholds, are a different exercise and are set out in our labour law compliance checklist. And this is a checklist rather than a diagnosis; if you already suspect something is wrong, common payroll compliance mistakes works backwards from the symptoms instead.

Before the Run: Freezing the Inputs

Almost every payroll error that survives to an inspection was an input error, not an arithmetic error. The system computed correctly on the wrong numbers.

Five things to close before anyone presses process:

• Lock attendance and leave. Not exported, locked, so that a retrospective regularisation in week three cannot silently change a run you have already deposited against. If attendance can still move after the run, your ECR and your register will disagree and you will not know which is right.
• Date every joiner and leaver. A mid-month joiner within the wage ceilings is covered for PF and ESI from the date of joining, not from the next full month. A leaver's date of exit has to be marked in the ECR in the month it happens; unmarked exits are the most common reason an establishment's ECR headcount stops reconciling to its register.
• Effective-date the structure changes. Increments, promotions and revised components need the date they take effect, not the date HR entered them. Arrears paid in August for an April revision belong to the wage months they relate to.
• Confirm the investment declarations are current. Form 12BB and regime elections drive the TDS for the rest of the year. An employee who has not declared is taxed under the default new regime, and a late declaration in February produces a February deduction large enough to generate a grievance.
• Check the minimum wage notifications. Variable dearness allowance is revised twice a year, effective 1 April and 1 October in the central sphere, with states running their own cycles. A structure that was compliant in March can be below the floor in April without anybody touching it.

The last one is worth dwelling on because it is the only item on this list that breaks by itself, with no action from you at all.

The Deduction Checks, Statute by Statute

Each of these has one base, one rate and one date, and the base is the part that goes wrong.

How provident fund is calculated

Twelve per cent from the employee on basic plus dearness allowance and retaining allowance, matched by the employer. The employer's twelve is split: 8.33 per cent to the pension scheme, capped at ₹1,250 a month because the pension scheme is capped at the ₹15,000 wage ceiling, and the balance of 3.67 per cent to provident fund. On top of that the employer pays 0.50 per cent EDLI and 0.50 per cent administrative charges, the latter subject to a minimum of ₹500 a month, or ₹75 where the establishment has no contributory member that month.

Two details that get missed. Administrative charges came down to 0.50 per cent with effect from 1 June 2018 and EDLI administrative charges were waived from 1 April 2017, so any cost model still carrying 0.85 and 0.01 per cent is eight years stale. And the ₹500 minimum is a floor on the establishment, not per employee, which small establishments discover when their admin charge does not fall as headcount does.

The wage ceiling is ₹15,000, unchanged since September 2014. Contribution above it is voluntary but not casual: once an employee contributes on wages above the ceiling with the employer's agreement, unwinding it later is not a payroll decision. See section 7, because this is one of the two things currently in flux.

ECR upload and payment are both due by the 15th of the following month. Late deposit attracts interest at 12 per cent a year under section 7Q plus damages under section 14B, and the damages are the larger number.

What ESI is charged on

0.75 per cent employee and 3.25 per cent employer on gross wages, not on the provident fund base, for employees drawing up to ₹21,000 a month, ₹25,000 for employees with disabilities. Each share rounds up to the next rupee separately. Due by the 15th.

The two checks specific to ESI are the ones a generic checklist will not catch. Coverage is fixed for a whole six-month contribution period, so an employee who crosses ₹21,000 in July keeps contributing until 30 September, on actual wages and not capped at the ceiling. And overtime is inside the contribution base but outside the coverage test, which means a heavy overtime month must not push somebody out of ESI. The mechanics are worked through in ESI calculation and contribution rates, and the reference figures sit on our ESI compliance page.

Which state's professional tax applies

A state tax with no national rule, and the only statutory deduction where the correct answer depends on where the employee sits rather than where the company is registered. Karnataka files by the 20th of the following month, Maharashtra by the last day of the month for which salary is paid, Telangana by the 10th, Gujarat by the 15th, West Bengal by the 21st. Some states are half-yearly. Several have no professional tax at all.

The check that matters for distributed teams: one employee working from a professional tax state generally obliges you to register there, and remote hiring has quietly created this exposure in a lot of companies that have never had an office outside one state. Rates and due dates by state are on our professional tax page.

When labour welfare fund falls due

Small amounts, state by state, mostly half-yearly rather than monthly, and almost always the one that is missed. A common pattern is deduction by 30 June and 31 December with the return following by 15 July and 15 January, but Kerala runs monthly for shops, Haryana runs a monthly deduction with an annual deposit, and Andhra Pradesh and Telangana deduct in December and submit by 31 January. The amounts are trivial and the non-filing is not. Our labour welfare fund page carries the state table.

TDS on salary, and the March exception

Deducted under section 192 at the average rate for the year, deposited by the 7th of the following month, with one exception that catches people every year: tax deducted on salary credited in March is due by 30 April, not 7 April. A payroll calendar that applies the 7th rule to all twelve months has one wrong date in it, and it is the highest-value month.

Form 24Q is filed quarterly, by 31 July, 31 October, 31 January and 31 May. Late filing runs at ₹200 a day under section 234E until the fee equals the tax. Form 16 must be issued by 15 June, which means the Q4 return has to be filed well inside 31 May for TRACES to generate the certificates in time. Our TDS calculator and the regime comparison in TDS on salary, old versus new regime cover the computation itself.

When the wages themselves must be paid

Under the Payment of Wages Act, wages are due before the 7th day after the wage period ends where the establishment employs fewer than 1,000 people, and before the 10th where it employs 1,000 or more. Paying on the last working day of the month is a policy choice; paying on the 12th is a contravention, whatever the reason.

After the Run: Deposit, File, Issue

The block that runs from the day after the payroll closes to the 15th. Its defining feature is that depositing and filing are separate acts, and doing one does not evidence the other.

Payslips are not a courtesy. A payslip is the employee-side evidence that the deduction you remitted is the deduction you declared, and an establishment that pays by bank transfer with no payslip has no answer to an inspector who asks how the employee could have known what was deducted. What has to be on one is in payslip format and mandatory components.

One reconciliation, monthly, that almost nobody runs: the headcount on the ECR, the headcount on the ESI return and the headcount on the wage register should be three numbers you can explain the differences between. They will not be equal, because the wage ceilings differ. But every gap should have a name attached to it.

Every Check, and the Document That Proves It

This is the table to work from. The left column is the obligation, the right column is what you hand over when asked, and if the right column is empty the item is not done however diligently you have been paying.

Two of those rows carry more weight than the rest. The TRRN against the electronic challan is what ties a specific payment to a specific month's ECR, and without it a bank statement showing money going to EPFO proves nothing about which month it settled. The provisional receipt number does the same job for Form 24Q. Keep both indexed by month; retrieving them from a portal three years later is not always possible.

The Quarterly and Annual Passes

Quarterly, four things:

• File Form 24Q and reconcile the tax deducted per the return against the tax deposited per the challans. A mismatch here becomes an employee-facing problem when Form 26AS does not show the credit.
• Check the Form 12BB position of anyone whose declarations look implausible against their deduction, while there is still time to correct the deduction rather than the employee's return.
• Confirm no new state has acquired an employee since last quarter without a professional tax registration following.
• Reconcile the ECR headcount trend. Three months of exits that were never marked show up here as a headcount that only goes up.

Annually, the pass that is genuinely an audit rather than a filing:

• Form 16 by 15 June, which means Q4 filed with room to spare.
• Bonus, where eligibility runs to employees drawing up to ₹21,000 a month, computed on ₹7,000 or the state minimum wage for that category of employment, whichever is higher, at between 8.33 and 20 per cent. Payment is due within eight months of the close of the accounting year, and the Form D return within thirty days of disbursement, with 1 February the date most establishments work to.
• Minimum wage revisions applied at both the April and the October notification, with the arrears position checked where a notification is retrospective.
• The POSH annual report, where you employ ten or more people. There is no single national deadline for this; the submission window is notified at state or district level, and 31 January is the most widely followed date rather than a statutory one. Check your own district's position instead of inheriting a date from a template.
• Gratuity provision reviewed against the register of employees crossing five years, at fifteen days' wages for each completed year and capped at ₹20 lakh. Our gratuity calculator and the calculation guide cover the arithmetic and the continuous-service rules.
• A sampled recomputation. Take ten employees across the wage range, including one below ₹15,000, one between ₹15,000 and ₹21,000 and one well above both ceilings, and compute every deduction by hand against the payslip. This is the single most useful hour in the annual pass, because it tests the configuration rather than the output, and configuration errors are exactly the kind that reconcile perfectly every month while being wrong.

Two Things That Are Unsettled Right Now

A checklist should tell you where the ground is moving. Two places, as at August 2026.

Start with the provident fund wage ceiling. In January 2026 the Supreme Court directed the Centre and EPFO to take a decision within four months on revising the ₹15,000 ceiling, which has stood since September 2014. Press reports in early August 2026 say the Finance Ministry has cleared a rise to ₹25,000, against EPFO's own proposal of ₹30,000, and that the proposal is with the Cabinet. Reports carrying 1 April 2027 as the effective date are reporting an expectation, not a notification.

What is actually decided: nothing. EPFO's notification of 29 May 2026 left the ceiling at ₹15,000, and no amendment has been issued since. Do not reconfigure payroll for ₹25,000. What is worth doing is modelling it, because the employer cost of a move from ₹15,000 to ₹25,000 is substantial for any workforce clustered between the two, and the question your finance team will ask on the day it is notified is what it costs, not whether it happened.

The second is the Code on Social Security, 2020. The Code was brought into force on 21 November 2025 and its central rules followed in May 2026, and a good deal of published guidance now describes PF and ESI as operating under the Code. ESIC's clarification of 18 December 2025 is narrower: compliance under the Code can only be implemented once the rules and regulations under it are notified, so the ESI Act, 1948 remains the operative statute for ESI.

The practical consequence for this checklist is nil today, since rates, ceilings and due dates are unchanged. The consequence when it completes is not nil, because the Code's definition of wages differs from the current one, and that changes the base for provident fund, gratuity and ESI rather than the rate. Policy documents and compliance registers should still cite the existing Acts; anything updated in anticipation of the Code is ahead of the position.

How Long to Keep What

There is no single retention period for payroll records, which is why the question gets answered badly. Three different clocks run over the same documents:

• The Companies Act, section 128, requires books of account and the vouchers behind them to be preserved for eight financial years.
• The income-tax reassessment window under section 149 currently runs to a little over three years from the end of the relevant assessment year, extending materially further where the escaped income is ₹50 lakh or more.
• State shops and establishments rules set their own periods for wage registers and muster rolls, commonly three years, and inspection powers are exercised against whatever the state period is.

The practical answer is eight years for everything payroll touches, because the longest clock governs and separating documents by clock costs more than storing them. Keep it as searchable digital records indexed by month and by employee, not as a folder of portal downloads named by the date somebody downloaded them.

The exit trail is the one to be most careful with. A gratuity or full-and-final dispute typically arrives well after the person has left and after whoever settled it has also left, and it is decided on the documents.

Questions People Ask

What is a payroll compliance checklist?

A recurring set of checks covering the statutory deductions on an Indian payroll, provident fund, ESI, professional tax, labour welfare fund and TDS, together with the returns that follow and the records that evidence them. A useful one is organised by frequency, monthly, quarterly and annual, and pairs each check with the document that proves it was done.

What are the monthly payroll compliance deadlines in India?

Salary TDS by the 7th of the following month, wages by the 7th or 10th depending on headcount, provident fund with the ECR by the 15th, and ESI by the 15th. Professional tax follows the state, ranging from the 10th to the last day of the month, and labour welfare fund is half-yearly or annual in most states rather than monthly.

When is TDS deducted on March salary actually due?

By 30 April, not 7 April. Tax deducted on any sum credited in the month of March gets an extended deposit date, and it is the one deviation from the 7th-of-the-following-month rule. Applying the general rule to March is a common and entirely avoidable default.

What documents should we be able to produce in a payroll inspection?

For each month, the salary register, the ECR file and its electronic challan receipt with TRRN, the ESI contribution statement and challan, the professional tax challan for every state you are registered in, challan 281 for TDS with the working sheet behind it, and payslips. Quarterly, Form 24Q with its provisional receipt number. Annually, Form 16, the bonus register and Form D.

Is the provident fund wage ceiling changing from ₹15,000 to ₹25,000?

Not yet, and not on any notified date. The Supreme Court asked the Centre to decide on revision in January 2026, and press reports in August 2026 describe Finance Ministry approval for ₹25,000 awaiting Cabinet. EPFO's May 2026 notification left the ceiling at ₹15,000 and nothing has superseded it. Model the cost, but do not reconfigure payroll until it is notified.

How often should we run a payroll audit?

The reconciliation checks are monthly and take minutes. The recomputation, taking a sample of employees across the wage range and calculating every deduction by hand against their payslips, is worth doing once a year and after any change to the salary structure, the payroll system or the states you employ in. That test catches configuration errors, which monthly reconciliation cannot, because a wrong configuration reconciles perfectly against itself.

How long do we have to keep payroll records?

Eight years is the safe answer. The Companies Act requires eight financial years for books and vouchers, the income-tax reassessment window can reach further where large sums are involved, and state shops and establishments rules set shorter periods of their own for registers. Keeping everything to the longest clock is cheaper than sorting documents by which clock applies.

Where This Leaves You

If you do nothing else with this page, run three checks against last month's payroll. That provident fund is computed on basic plus dearness allowance and ESI on gross wages, and that the two bases are genuinely different in your system rather than one reused for both. That every state you have an employee in has a professional tax registration behind it. And that for last month you can produce, in under five minutes, the ECR receipt with its TRRN and the challan 281 that match the register.

If the third one takes longer than five minutes, that is the finding. The payments were made; the evidence was never filed anywhere anybody could retrieve it, and an inspection is decided on retrievable evidence.

The statutory compliance reference, statute by statute, sits on our compliance pages: ESI, professional tax by state and the labour welfare fund, each kept current as figures change. For what sits inside the wage base in the first place, CTC breakup, component by component is the piece to read next.

The reason this checklist is long is that the work is not hard, only unforgiving and repetitive, which is the kind of work that belongs in a system rather than in a spreadsheet and a memory. Keeping the bases, the state registrations and the evidence trail in one place is what our payroll management system does, and a free demo run against one month of your own register is the fastest way to find out which of the fourteen rows in section 5 you cannot currently produce.

Sources

• Employees' Provident Fund Organisation, epfindia.gov.in. Contribution rates, the ₹15,000 wage ceiling, administrative charges and ECR filing.
• ESIC contribution rates, esic.gov.in. Employee and employer shares and the wage ceiling, unchanged since 1 July 2019.
• Income-tax Act, 1961, incometaxindia.gov.in. Section 192 on salary TDS, Rule 30 deposit dates, section 234E late filing fee and section 149 reassessment limits.
• India Code, the central labour legislation repository. Payment of Wages Act, 1936, Payment of Bonus Act, 1965, Payment of Gratuity Act, 1972 and the ESI Act, 1948.

The provident fund wage ceiling remains ₹15,000 as at August 2026; reports of a rise to ₹25,000 describe a proposal awaiting Cabinet approval, not a notification. ESIC's circular of 18 December 2025 clarified that compliance under the Code on Social Security, 2020 awaits notification of its rules and regulations. Confirm the current position on the relevant portal before configuring a payroll run.