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Payroll Audit India: The Complete Checklist for EPFO, ESIC, and Income Tax Inspections
What EPFO, ESIC, and income tax inspectors actually ask for in an India payroll audit, plus the triggers, documents, and findings to fix first.
Payroll Tax
Reviewed by Rohan Sasne on Mar 23, 2026
The collective employer-side taxes and statutory contributions deducted or contributed alongside salary payments in India, including PF, ESI, professional tax, and TDS.
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. See the How payroll works in India guide for the full month-end cycle.
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 | ₹25,000/month (statutory) | EPFO |
| EPS (from PF share) | 8.33% of basic + DA | ₹25,000/month | EPFO |
| EDLI | 0.5% of basic + DA | ₹25,000/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 | ₹25,000/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%) | ₹25,000 × 0.5% | ₹125 |
| PF Admin (0.5%) | ₹25,000 × 0.5% | ₹125 |
| Total employer cost above salary | ₹3,250 |
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.
- Statutory compliance, Omnivoo applies the correct professional tax rate and LWF rules for each employee’s work location, 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.
How Omnivoo handles Payroll Tax
SOLUTIONS
Omnivoo Payroll for India
TDS, professional tax, and Form 16 filings handled inside one payroll workflow.
Related Terms
Statutory Benefits
Employee State Insurance (ESI)
ESI is a mandatory social security and health insurance scheme for Indian employees earning up to ₹21,000 per month, funded by employer and employee contributions.
Taxation
Professional Tax
Professional tax is a state-level employment tax in India deducted from employee salaries, with rates varying by state up to a constitutional maximum of ₹2,500 per year.
Statutory Benefits
Provident Fund (PF)
PF is a mandatory retirement savings scheme in India where both employer and employee contribute 12% of basic salary plus dearness allowance each month.
Taxation
Tax Deducted at Source (TDS)
TDS is the income tax an employer withholds from an employee's salary each month and deposits with the government on their behalf.
Taxation
Estimated Taxes
Estimated taxes are the periodic payments the IRS uses to collect income tax, and other taxes such as self-employment tax, on income that is not subject to withholding. Individuals, including sole proprietors, partners, and S corporation shareholders, generally pay estimated tax in four installments across the year using Form 1040-ES when they expect to owe enough tax at filing.
Taxation
Form 16A
Form 16A is a TDS certificate issued for non-salary payments such as rent, professional fees, interest, and contractor payments where tax is deducted under Sections 194A, 194C, 194I, or 194J.
Taxation
Form 24Q
Form 24Q is the quarterly TDS return that employers in India must file with the Income Tax Department reporting tax deducted from employee salaries under Section 192.
Taxation
Form 26AS
Form 26AS is a consolidated annual tax statement showing all tax deducted, tax collected, advance tax, and self-assessment tax credited against a taxpayer's PAN, available on the income tax e-filing portal.
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