Payroll Tax

What Is Payroll Tax?

Payroll tax refers to all taxes and mandatory contributions that an employer must deduct from employee wages or contribute from their own funds when processing payroll. In India, payroll taxes include both employee deductions (withheld from salary) and employer contributions (paid above the CTC or as part of it). These are remitted to various government bodies on monthly, quarterly, or annual schedules.

How It Works in India

India does not have a single “payroll tax” — instead, employers must comply with multiple statutory obligations simultaneously:

Employer-Side Contributions

Contribution	Rate	Wage Ceiling	Paid To
Provident Fund (EPF)	12% of basic + DA	₹15,000/month (statutory)	EPFO
EPS (from PF share)	8.33% of basic + DA	₹15,000/month	EPFO
EDLI	0.5% of basic + DA	₹15,000/month	EPFO
PF Admin charges	0.5% of basic + DA	No ceiling	EPFO
ESI (employer share)	3.25% of gross wages	₹21,000/month gross	ESIC
Labour Welfare Fund	₹12–₹60/employee/year	Varies by state	State LWF Board

Employee-Side Deductions

Deduction	Rate	Ceiling	Remitted To
EPF (employee share)	12% of basic + DA	₹15,000/month (statutory)	EPFO
ESI (employee share)	0.75% of gross wages	₹21,000/month gross	ESIC
TDS on salary	Slab-based (0–30%)	No ceiling	Income Tax Department
Professional Tax	₹150–₹200/month	₹2,500/year max	State Government

Total Employer Cost Example

For an employee with ₹25,000 basic + DA and ₹35,000 gross (ESI not applicable as gross > ₹21,000):

Component	Calculation	Monthly Amount
Employer PF (12%)	₹25,000 × 12%	₹3,000
EDLI (0.5%)	₹15,000 × 0.5%	₹75
PF Admin (0.5%)	₹25,000 × 0.5%	₹125
Total employer cost above salary		₹3,200

For an ESI-eligible employee (gross ≤ ₹21,000, e.g., ₹18,000 gross, ₹10,000 basic):

Component	Calculation	Monthly Amount
Employer PF (12%)	₹10,000 × 12%	₹1,200
Employer ESI (3.25%)	₹18,000 × 3.25%	₹585
EDLI + Admin		₹100
Total employer cost above salary		₹1,885

Remittance Deadlines

Obligation	Due Date	Penalty for Delay
PF contribution	15th of following month	12% p.a. interest + damages up to 100%
ESI contribution	15th of following month	12% p.a. interest
TDS deposit	7th of following month	1.5% per month interest
Professional Tax	State-specific (usually monthly)	State-specific penalties
TDS return (Form 24Q)	Quarterly (31st of month following quarter)	₹200/day late fee

How Omnivoo Handles Payroll Tax

Omnivoo manages the entire payroll tax lifecycle as the Employer of Record:

• Accurate computation — The payroll engine calculates all employer and employee contributions based on current rates, applicable ceilings, and state-specific rules (professional tax, LWF).
• Timely remittance — All statutory payments are remitted before their respective deadlines. PF and ESI by the 15th, TDS by the 7th, with automated reconciliation.
• Multi-state compliance — For teams across India, Omnivoo applies the correct professional tax rates and LWF rules per state, since these vary significantly between Karnataka, Maharashtra, Tamil Nadu, and others.
• Filing and returns — Quarterly TDS returns (Form 24Q), monthly PF ECR filings, and ESI contribution statements are filed on schedule. Form 16 is generated annually for all employees.
• Zero employer burden — Client companies pay a single invoice covering salary plus employer costs. Omnivoo handles all registrations, calculations, payments, and filings without any action required from the client.