Payroll Deductions & Statutory Payments in India
Updated 2026-10-30
Quick answer: A typical Indian payslip shows employee PF (12% of basic), ESI (0.75% if gross ≤ ₹21,000), professional tax (state levy, max ₹2,500 a year) and income-tax TDS. Employers also pay their PF and ESI shares, statutory bonus for eligible staff, and overtime at twice the ordinary rate where factory/OSH law applies.
Employee-side deductions
- PF: 12% of basic + DA (on wages up to ₹25,000 if your employer restricts it)
- ESI: 0.75% of gross wages when gross ≤ ₹21,000 a month
- Professional tax: state slabs, up to ₹2,500 a year
- TDS on salary: based on projected annual tax under your chosen regime
Employer-side costs
- PF: 12% (of which up to ₹2,083 to EPS)
- ESI: 3.25% of gross wages for covered employees
- Statutory bonus: 8.33%–20% for employees with salary ≤ ₹21,000
- Gratuity: 15 days' wages per year of service after 5 years
Labour Codes
The four Labour Codes came into force on 21 November 2025, replacing older Acts such as the Payment of Bonus Act and ESI Act while carrying over most of their rates. Governments can notify new ceilings, so re-check figures before payroll runs.
FAQs
Is professional tax the same in every state?
No. Each state sets its own slabs and some states and UTs, like Delhi, don't levy it on salaries at all.