01. Indian payroll 101 — the statutory stack
Indian payroll is a stack of statutes: Provident Fund (EPF Act 1952), Employees' State Insurance (ESI Act 1948), Professional Tax (state-specific), Tax Deducted at Source (Income Tax Act 1961), Labour Welfare Fund (state-specific), and Gratuity (Payment of Gratuity Act 1972). Each has its own calculation rules, filing dates, and authority.
Success in Indian payroll is about treating these rules as data, not code. Rate changes, slab revisions, and new contribution ceilings should be configuration — not code deployments. Any vendor whose answer to a statutory change is 'we'll release a patch' is architecturally fragile.
02. PF — the long-anticipated ceiling change
The 2026 Finance Bill revises the PF wage ceiling from ₹15,000 to ₹21,000 for statutory contributions. This is the largest material change in payroll configuration this year. Your system should allow you to roll this change with effect from the specific notified date (expected 1 April 2026), with retrospective reconciliation for employees whose CTC sits between the two ceilings.
If your system has historically hardcoded the ₹15,000 ceiling, this is the moment to audit your payroll architecture. In PeopleVizio, this is a configuration change that takes under ten minutes and is reviewable in audit logs.
03. ESIC — what most systems get wrong
ESIC contributions apply to employees earning up to ₹21,000/month in gross wages. The calculation uses actual earned wages, not basic. Most systems get this right. Where they fail is the half-yearly reconciliation — ensuring that benefit eligibility continues for an employee whose wages cross ₹21,000 mid-contribution-period.
The right behaviour: continue ESIC contribution and entitlement through the end of the contribution period in which wages crossed the ceiling.
04. Professional Tax — state by state
PT varies by state. Maharashtra, Karnataka, Tamil Nadu, Telangana, Kerala, Andhra Pradesh, Gujarat, West Bengal, and Madhya Pradesh are the major states with PT. Each has its own slab and filing cadence — usually monthly for employers over a threshold, quarterly below.
Your payroll engine should handle multi-state employment (an employee transferring from Bangalore to Mumbai mid-year), with automatic slab assignment based on the work location as of the pay date.
05. TDS on salary — Section 192
Section 192 governs TDS on salary. The complexity is in the chapter VI-A deductions (80C, 80D, 80E, 80G, 80CCD, etc.) that employees can declare to reduce their taxable income.
Best practice: enforce a declaration window in January, with proof submission by February-end. Auto-reject declarations unsupported by proof at month-end. Form 16 Part B should match the final computation, with a reconciliation footer showing declared vs accepted deductions.
06. Form 16 — generating it without drama
Form 16 has two parts: Part A (TDS certificate from the TRACES portal) and Part B (salary computation summary). Part A comes from your Form 24Q filings. Part B is computed locally.
Mismatches between Form 24Q and Form 16 are the #1 source of tax-department queries. Your payroll system should reconcile these automatically, and flag mismatches before Form 16 issuance.
07. Gratuity — accrue, don't accumulate
Under the Payment of Gratuity Act, 1972, an employee completing five years of continuous service is entitled to gratuity calculated as (15/26) × last drawn basic × years of service, capped at ₹20 lakh.
Accrue this liability in real time on your financial statements — don't compute it on separation day. Your HRMS should produce the gratuity liability figure for your auditor monthly.
08. A checklist for 2026
One: confirm your PF ceiling is configurable, not hardcoded. Two: audit your Form 24Q filing reconciliation process. Three: confirm your Form 16 template matches the AY 2027–28 format. Four: verify your state-wise PT rates are current. Five: ensure your gratuity liability accrual reconciles to your financial statements monthly.
If any of these raise anxiety, book time with our compliance team — we'll walk you through a remediation plan, regardless of whether you're on PeopleVizio.