A Practical Guide to Statutory Payroll Compliance (PF, ESI, PT, TDS on Salary)
Statutory payroll compliance is four separate legal regimes running on four separate clocks, from the same monthly salary run: EPF (15th of the following month), ESI (15th of the following month), Professional Tax (varies by state), and salary TDS, historically under Section 192 of the Income-tax Act 1961 and now under Section 392 of the Income-tax Act 2025 (7th of the following month, with quarterly returns). Each has its own department, its own portal, its own penalty structure, and — for EPF and ESI — its own criminal liability provision reaching directors personally. Most employers do not experience these as four obligations; they experience them as one monthly payroll close that either goes smoothly or does not.
What This Actually Covers
Two important statutory transitions are worth flagging up front: the four labour codes, including the Code on Social Security 2020, took effect from 21 November 2025 and have repealed the EPF Act 1952 and ESI Act 1948 (subject to a savings clause that carries forward existing contribution rates, accumulations, and pending proceedings), and the Income-tax Act 1961 has been replaced, with effect from 1 April 2026, by the Income-tax Act 2025 with renumbered sections and revised form/challan series (the 1961 Act continues to govern income up to FY 2025-26). Contribution rates and coverage thresholds have largely carried over, but the wage base for contributions now follows the Code's single definition of 'wages' (see below), and the underlying statutory citations are in active transition, and PNPC tracks both for every client.
For the full scope, current process and what PNPC includes, see the dedicated Statutory Payroll Compliance (PF, ESI, PT, TDS on Salary) service page.
Signs This Applies to You
- You have crossed, or are approaching, the EPF threshold (20 employees) or ESI threshold (10 employees) — the moment these thresholds are reached, four separate compliance clocks start running simultaneously, not staggered
- You operate in more than one state — each state has its own Professional Tax regime with different slabs, different return frequencies (monthly vs Tamil Nadu's half-yearly), and different due dates, on top of the PF/ESI/TDS obligations that are uniform across India
- Your in-house HR or accounts team runs payroll software but has no dedicated statutory compliance specialist — software computes what it is configured to compute; it does not catch a wrong EPF wage base, a missed ESI ceiling transition, or a regime-mismatch in TDS
- You have received, or are concerned about, a notice, demand, or inspection from EPFO, ESIC, a state Professional Tax department, or the Income Tax Department on any payroll-related matter
When It Isn't the Right Fit
- Fewer than 10 employees, all in a single non-PT state (such as Delhi, Haryana, or Uttar Pradesh), with no employee near the EPF or ESI thresholds — only salary TDS (Section 392 of the Income-tax Act 2025, formerly Section 192 of the 1961 Act) applies at this stage, where salaries are taxable, a materially simpler single-regime obligation
- A founding team drawing no salary yet — none of the four statutory payroll obligations are triggered until salary is actually paid to an employee
- A business with a dedicated, experienced in-house payroll compliance specialist who already manages PF, ESI, PT, and TDS correctly and has bandwidth for portal filings, inspections, and multi-state coordination as headcount grows
Common Questions
What exactly is covered under 'statutory payroll compliance' — is this the same as running payroll?
No. Running payroll is computing gross-to-net salary and generating payslips. Statutory payroll compliance is the narrower but higher-stakes function of correctly deducting, depositing, and reporting the four mandatory withholdings that arise from that payroll run: Provident Fund (EPF), Employees' State Insurance (ESI), Professional Tax (PT), and Tax Deducted at Source on salary (TDS). PNPC offers both as an integrated service, but a business that already runs its own payroll computation can engage PNPC purely for the statutory compliance layer — the deposits, returns, registrations, and inspection responses across all four regimes.
Do PF and ESI still use different wage bases?
Historically they did: EPF followed the EPF Scheme's wage definition (broadly basic salary plus Dearness Allowance), while ESI used a broader gross-wage base that included HRA and overtime. That distinction has largely gone. The Code on Social Security 2020, which repealed and subsumed the EPF Act 1952 and the ESI Act 1948 with effect from 21 November 2025 (subject to a savings clause), uses a single definition of 'wages' (basic pay, Dearness Allowance and retaining allowance) that excludes items such as HRA and overtime but adds back excluded payments to the extent they exceed 50% of total remuneration, and ESIC has confirmed it applies this definition from 21 November 2025. A common compliance error now is continuing to run PF or ESI on the old wage bases without applying the Code definition and the 50% add-back; confirm the current EPFO and ESIC wage-ceiling and transition notifications before changing your payroll configuration.
Do all four — PF, ESI, PT, and TDS — apply to every business from day one?
No. TDS on salary applies from the first employee whose estimated salary income results in a tax liability under the regime that applies to them (after any rebate), so employers with salaried staff should assess it from the first hire. Professional Tax, where the state levies it, has no minimum employee threshold — it applies from the first employee above the state's nil-PT slab. ESI becomes mandatory at 10 employees under the Code on Social Security 2020; confirm coverage for your establishment with ESIC. EPF becomes mandatory at 20 employees. A small business with 5 employees in Bangalore is therefore likely subject to TDS and Karnataka PT immediately, but not yet to ESI or EPF.
Getting This Right From the Start
Speak with a PNPC Chartered Accountant about your statutory payroll compliance — not a payroll software sales representative, and not a single-regime specialist who only sees part of the picture. A practising CA who reviews your current EPF, ESI, PT, and TDS position together, identifies where the four are inconsistent with each other, and tells you exactly what an integrated engagement will cost — before any commitment.
PNPC Global has advised Chennai, Bangalore and Hyderabad businesses since 1986. Explore the full Accounting & Payroll practice for related services, or go straight to the Statutory Payroll Compliance (PF, ESI, PT, TDS on Salary) page for specifics.
Specific rates, fees, thresholds and deadlines are set by the relevant authority and change over time — this article deliberately does not quote figures that could go stale. Confirm current numbers directly with PNPC or the official source before you act.