How to Run Payroll in India: A Monthly Checklist for Employers

Running payroll in India means more than paying salaries. Each month, employers must calculate and deduct income tax, provident fund, ESI and Professional Tax, deposit them on time, and file returns. This checklist sets out the monthly cycle.

Before the Month Starts

• Register for TAN, and for PF, ESI, Professional Tax and Shops and Establishments where they apply.
• Set up salary structures in the payroll system.
• Collect employees' PAN, Aadhaar, bank details and UAN.
• Collect each employee's tax regime choice and, for the old regime, declared investments.

Monthly Checklist

1. Collect inputs: attendance, leave, overtime, joiners, leavers, variable pay and reimbursements.
2. Calculate gross pay, including arrears and pro-rata salaries.
3. Calculate TDS on salary, based on the estimated annual income and chosen regime.
4. Calculate PF, ESI and Professional Tax deductions and employer contributions.
5. Review a variance report against last month, and get approval.
6. Release salaries through the bank.
7. Deposit TDS by the 7th of the following month.
8. Deposit PF and ESI, and file the ECR and ESI return, by the 15th.
9. Pay Professional Tax by the state's due date.
10. Send payslips to employees.

Quarterly and Annual Tasks

• File the quarterly TDS return in Form 24Q.
• Collect investment proofs from old-regime employees before the final months of the year.
• Issue Form 16 after the year-end, by the due date.
• Pay statutory bonus, Labour Welfare Fund and other annual items.
• Update the gratuity provision.

Full and Final Settlements

When employees leave, settle their final salary, leave encashment, gratuity if due, and any recoveries. Under the Code on Wages, wages on leaving must be paid within two working days. Mark their exit date on the EPFO portal so they can withdraw or transfer PF.

Getting Help

Think Filing runs monthly payroll for employers of all sizes, including statutory deposits and returns.