Virevon Insights

Tag: Payroll

  • Payroll Compliance in India: PF, ESI, Professional Tax and TDS in One Calendar

    Payroll Compliance in India: PF, ESI, Professional Tax and TDS in One Calendar

    Running payroll in India means more than paying salaries on time. Every month the employer must deduct and deposit provident fund, employees’ state insurance, professional tax and income tax, and then file returns on a separate cycle. Missing any one of these can bring interest, damages or a notice, even when the amounts are small. A single calendar for payroll compliance in India is the simplest way to keep everything in order.

    This guide sets out the key statutory dates, explains what each one involves and shares a few habits that make month-end payroll smoother. It reflects the new income-tax form numbers from 1 April 2026 and the EPF wage ceiling of ₹25,000 from 17 September 2026.

    Key takeaways

    • Salary TDS is deposited by the 7th of the following month (30 April for March).
    • PF and ESI contributions are paid, and the PF ECR filed, by the 15th of the following month.
    • Quarterly salary TDS statements are now filed in Form 138 (earlier Form 24Q), and salary TDS certificates are issued in Form 130 (earlier Form 16).
    • Professional tax and labour welfare fund rules differ by State; confirm the rules where each employee works.
    • Under the labour codes, monthly wages should be paid by the 7th of the following month.

    The monthly payroll compliance calendar

    Date (following month)ComplianceNotes
    7thPay salaries (monthly wage period)Required under the Code on Wages
    7thDeposit TDS on salary30 April for deductions made in March
    15thPay PF and file the ECREmployee 12% and employer 12% of PF wages
    15thPay ESI contributionsFor employees earning up to ₹21,000 a month
    As per StatePay professional taxMonthly, quarterly or annual depending on the State and employer size
    As per StateLabour welfare fundMonthly, half-yearly or annual in States that levy it

    A practical rule: finalise payroll and statutory computations by the 1st or 2nd working day, so salaries go out well before the 7th and statutory payments before the 15th.

    Provident fund (PF)

    • Applies to establishments with 20 or more employees, and voluntarily to others.
    • Contributions are 12% from the employee and 12% from the employer on PF wages; part of the employer’s share goes to the Employees’ Pension Scheme (EPS).
    • From 17 September 2026 the wage ceiling for mandatory coverage is ₹25,000 a month, up from ₹15,000. September 2026 contributions needed a split computation in one ECR.
    • The ECR (electronic challan cum return) is filed on the EPFO portal and payment made against it by the 15th.
    • New joiners must be linked to a UAN with Aadhaar-seeded KYC.

    Late payment can attract interest and damages, so the 15th is worth treating as a hard deadline.

    Employees’ State Insurance (ESI)

    • Applies to employees earning up to ₹21,000 a month in covered establishments.
    • Contribution rates are 0.75% from the employee and 3.25% from the employer.
    • Contributions are paid monthly by the 15th through the ESIC portal.
    • Register new employees on the portal before or on the day of joining so that medical benefits are available from day one.

    Professional tax and labour welfare fund

    Professional tax is a State levy with a constitutional ceiling of ₹2,500 a year per person. Rates, slabs and payment frequency vary: some States such as Maharashtra and Karnataka levy it, while others such as Uttar Pradesh and Delhi do not. Employers with staff in several States need a separate registration and return for each State that levies it.

    Labour welfare fund contributions are similar: small amounts, but State-specific and easy to overlook.

    TDS on salary under the new Income-tax Act

    From 1 April 2026 the Income-tax Act 2025 applies to salary paid in the tax year 2026-27. The substance of salary TDS is familiar, but several form numbers have changed:

    PurposeEarlier formNew form
    Quarterly TDS statement on salaryForm 24QForm 138
    Salary TDS certificateForm 16Form 130
    Employee’s declaration of claimsForm 12BBForm 124

    Quarterly statement due dates remain 31 July, 31 October, 31 January and 31 May. The annual salary certificate is issued after the year ends, typically by mid-June. Our guide to new income-tax form numbers lists the full mapping.

    Each month, compute TDS on projected annual salary under the regime the employee has chosen, and adjust for declarations and proofs. Late deposit or late statements can bring interest and fees; our article on TDS default notices explains how these are computed.

    Annual and event-based tasks

    1. Start of the year: collect regime choice and investment declarations; update salary structures and the 50% wages test under the labour codes.
    2. January to March: collect investment proofs and finalise TDS for the year.
    3. After year-end: file the Q4 statement by 31 May and issue Form 130 certificates.
    4. Bonus: pay statutory bonus within the prescribed time after the close of the accounting year, where applicable.
    5. Exits: complete full and final settlement within two working days of the last working day, including gratuity where due.
    6. Registers and returns: maintain wage, attendance and leave records in the formats applicable in your State.

    For how the labour codes affect salary structure, PF and gratuity, see our guide on new labour codes and payroll.

    Habits that keep payroll compliance on track

    • One master calendar for every State and entity, with owners and reminder dates.
    • Monthly reconciliation of payroll register, PF ECR, ESI challan, TDS challan and the bank statement.
    • Employee master hygiene: PAN, Aadhaar, UAN, ESIC number and bank details verified at joining.
    • Maker-checker review before payments are released.
    • A compliance folder each month with challans, acknowledgements and reconciliations, ready for any inspection or query.

    Frequently asked questions

    What is the due date for PF and ESI payment?

    Both are due by the 15th of the month following the wage month.

    When should TDS on salary be deposited?

    By the 7th of the following month, and by 30 April for deductions made in March.

    Is Form 24Q still used for salary TDS?

    For the tax year 2026-27 onwards, the quarterly salary TDS statement is Form 138. Statements for earlier periods continue under the old forms.

    Is professional tax payable in every State?

    No. It is levied only by some States, and rates and due dates vary, so check the rules in each State where you have employees.

    If you would like help setting up a payroll compliance calendar or taking payroll off your plate altogether, our team is happy to support you.

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    This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

  • New Labour Codes and Payroll: What Changes for Salary Structure, PF and Gratuity

    New Labour Codes and Payroll: What Changes for Salary Structure, PF and Gratuity

    The four labour codes came into force on 21 November 2025, replacing 29 older central labour laws. For most businesses, the biggest practical effect of the new labour codes on payroll is not a new form or register, but a change in how salary itself is measured. A single definition of “wages” now drives provident fund, gratuity, bonus and other statutory amounts.

    Add to that the separate increase in the EPF wage ceiling to ₹25,000 from 17 September 2026, and many salary structures designed around a low basic pay now need a fresh look. This guide explains what has changed, shows the impact with a simple example and sets out a sensible plan for employers.

    Key takeaways

    • “Wages” means basic pay, dearness allowance and retaining allowance; most other allowances are excluded, but only up to 50% of total remuneration.
    • If excluded components exceed 50%, the excess is added back to wages, which raises the base for PF and gratuity.
    • The EPF wage ceiling moved from ₹15,000 to ₹25,000 from 17 September 2026, bringing more employees into mandatory coverage.
    • Fixed-term employees become eligible for gratuity after one year of continuous service.
    • Full and final settlement is due within two working days of exit, and monthly wages by the 7th of the following month.

    The single definition of wages and the 50% rule

    Under the Code on Wages 2019 (and the matching definitions in the other codes), wages include basic pay, dearness allowance and retaining allowance. Items such as house rent allowance, conveyance, statutory bonus, overtime, commission and the employer’s contribution to PF are excluded.

    The important proviso is the 50% cap. If the excluded items together exceed half of the total remuneration, the amount above 50% is treated as wages. In simple terms, at least half of an employee’s pay must count as wages for statutory calculations, whatever the components are called.

    Structures where basic pay was 30–40% of gross, with a large special allowance, are the ones most affected.

    Worked example: the effect on one salary

    Consider an employee with a monthly gross salary of ₹50,000.

    ComponentBefore reviewUnder the 50% rule
    Basic pay₹15,000₹15,000
    HRA₹12,000₹12,000
    Special allowance₹23,000₹23,000
    Excluded items (HRA + special)₹35,000 (70%)Capped at ₹25,000 (50%)
    Wages for statutory purposes₹15,000₹25,000
    Employer PF at 12%₹1,800 (if restricted to old ceiling)₹3,000
    Gratuity accrual per year (15/26 of monthly wages)about ₹8,654about ₹14,423

    The gross salary is unchanged, but the statutory base has risen by ₹10,000. If CTC stays fixed, the employee’s take-home pay falls slightly because their own PF deduction increases, while the retirement benefits build up faster. Employers should check the latest EPFO guidance on how the new wage definition interacts with PF computation for their specific structure.

    PF: the new ₹25,000 ceiling

    Separately from the codes, the EPF wage ceiling has been raised to ₹25,000 per month with effect from 17 September 2026. Practical points for payroll teams:

    • Employees earning up to ₹25,000 are now mandatorily covered under EPF, EPS and EDLI.
    • The employer’s 12% contribution is split between EPS (8.33%, on wages up to the ceiling) and EPF, so EPS on a ₹25,000 ceiling comes to about ₹2,083 a month.
    • September 2026 needs a split calculation for the days before and after 17 September, filed in a single ECR.
    • Employees already contributing on higher wages under existing arrangements can generally continue.

    Gratuity under the new labour codes

    The gratuity formula of 15 days’ wages for each completed year, and the tax exemption limit of ₹20 lakh, remain. What changes is:

    • The base. Gratuity is calculated on wages as now defined, so a higher wage base means higher gratuity. There is no ceiling on the wage used for gratuity.
    • Fixed-term employees. They qualify on a pro-rata basis after one year of continuous service, instead of five.
    • Accounting. The actuarial liability for gratuity (under Ind AS 19 or AS 15) should be revalued, and the impact may need disclosure in the financial statements.

    Payment timelines and paperwork

    The codes also tighten several operational points that affect the payroll calendar:

    1. Monthly wages must be paid by the 7th of the following month.
    2. Full and final settlement on resignation, termination or retrenchment must be made within two working days of the last working day. This often requires changes to clearance and approval workflows.
    3. Appointment letters are required for every employee.
    4. Overtime is payable at not less than twice the ordinary rate of wages.

    State rules are still being notified in phases. Where final state rules are pending, existing registers and returns generally continue until replaced, so it is sensible to track your State’s labour department updates.

    A practical plan for employers

    1. Run a salary audit. List every employee’s components and test the 50% rule. Flag anyone whose wages increase.
    2. Quantify the cost. Estimate the extra employer PF, EDLI and admin charges, and the higher gratuity provision.
    3. Decide on the approach. Either absorb the higher employer cost or restructure CTC transparently. Communicate clearly with employees about take-home pay and the benefit of higher retirement savings.
    4. Update payroll software for the new wage definition and the ₹25,000 ceiling, including the split September calculation.
    5. Revise exit processes to meet the two-day settlement timeline.
    6. Refresh documentation: appointment letters, salary structure policies and HR handbooks.

    A clean month-end process makes these changes easier to absorb; our month-end close checklist includes payroll and statutory accruals. For TDS on salary, see our TDS rate chart for FY 2026-27.

    Frequently asked questions

    Do the new labour codes require basic pay to be 50% of salary?

    Not exactly. They require that excluded allowances do not exceed 50% of total remuneration; anything above that is treated as wages. Many employers simply raise basic pay to meet the test.

    Will employees’ take-home pay reduce?

    If CTC stays the same and wages rise, the employee’s PF deduction increases, so take-home pay may reduce slightly, while retirement savings and gratuity increase.

    When do fixed-term employees get gratuity?

    After one year of continuous service, on a pro-rata basis.

    How soon must final dues be paid after an employee leaves?

    Within two working days of the last working day, under the Code on Wages.

    If you would like help reviewing salary structures, updating payroll for the new codes or revaluing gratuity, our payroll team is happy to help.

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    This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.

  • New Income Tax Form Numbers from 2026: Form 16, 26AS, 12BB and More Mapped

    New Income Tax Form Numbers from 2026: Form 16, 26AS, 12BB and More Mapped

    The new income tax forms 2026 are one of the most practical changes that came with the Income-tax Act 2025. Along with the new Act, the Income-tax Rules, 2026 took effect from 1 April 2026 and renumbered almost every form. The familiar Form 16 is now Form 130, Form 26AS is Form 168, and the employee investment declaration Form 12BB is Form 124.

    The purpose of most forms has not changed, so this is mainly about knowing which number now means what, and which set applies to which year. This article maps the most commonly used forms, explains the transition and lists what employers, deductors and individuals should update.

    Key takeaways

    • The Income-tax Rules, 2026 contain 333 rules and 190 forms, down from 511 rules and 399 forms, according to the Income Tax Department.
    • Form 16 is now Form 130, Form 16A is Form 131, and Form 26AS is Form 168.
    • Forms 15G and 15H are combined into a single Form 121.
    • The tax audit report in Forms 3CA, 3CB and 3CD is replaced by Form 26 for new-Act years.
    • Returns, certificates and audits for FY 2025-26 still use the old form numbers.

    Why the forms were renumbered

    The old Income-tax Rules, 1962 had grown over decades, with forms numbered in the order they were added: Form 10-IE, Form 3CEB, Form 26QB and so on. Some forms overlapped, and a few had become obsolete. The rewrite grouped forms by subject, merged similar ones and removed those no longer needed. The result is a shorter, more logical set, but one that requires everyone to relearn familiar numbers.

    The new income tax forms 2026: old to new map

    PurposeOld form (1962 Rules)New form (2026 Rules)
    TDS certificate for salaryForm 16Form 130
    TDS certificate for other paymentsForm 16AForm 131
    TCS certificateForm 27DForm 133
    Quarterly TDS statement, salaryForm 24QForm 138
    Quarterly TDS statement, other resident paymentsForm 26QForm 140
    TDS on property purchase and certain rentForms 26QB, 26QCForm 141
    Quarterly TDS statement, non-residentsForm 27QForm 144
    Annual tax statementForm 26ASForm 168
    Declaration for no TDS (individuals, senior citizens)Forms 15G, 15HForm 121
    Employee claims for HRA, LTA, deductionsForm 12BBForm 124
    Application for lower or nil TDSForm 13Form 128
    Foreign remittance information and certificateForms 15CA, 15CBForms 145, 146
    Relief for salary arrearsForm 10EForm 39
    Foreign tax credit statementForm 67Form 44
    Tax audit reportForms 3CA, 3CB, 3CDForm 26

    For any form not listed here, use the mapping utility on the Income Tax Department’s website rather than guessing. Some forms were merged, so a single new number may replace more than one old form.

    Which numbers apply to which year?

    The new forms follow the new law, which applies from tax year 2026-27. The old forms continue for earlier years.

    • Salary for FY 2025-26: employers issued Form 16 in mid-2026 under the old rules. That is correct and does not need to be reissued.
    • Returns for FY 2025-26 (AY 2026-27): filed on the old ITR forms, with the tax audit report in Forms 3CA/3CB and 3CD. See our tax audit guide for FY 2025-26.
    • Deductions made from 1 April 2026: TDS certificates and quarterly statements relating to tax year 2026-27 use the new numbers, such as Form 130 and Form 138 for salary.
    • Corrections to old quarters: correction statements for periods before 1 April 2026 continue in the old format.

    Example: a salaried employee in 2026-27

    Priya works for a Noida-based company. In April 2026 she submits her proof of rent and investments using Form 124 instead of Form 12BB. Her employer deducts TDS on salary and reports it each quarter in Form 138. After March 2027, she receives Form 130 as her salary TDS certificate and checks her tax credits in Form 168 before filing her return for tax year 2026-27. In June 2026, she also received a Form 16 for FY 2025-26, which she used for her return filed in 2026.

    What to update now

    Employers and payroll teams

    1. Replace Form 12BB templates with Form 124 in employee portals.
    2. Update payroll software to generate Form 130 and file Form 138.
    3. Revise employee communication and FAQs so staff know Form 16 is now Form 130.

    Businesses that deduct or collect tax

    1. Map each TDS return to its new form: Form 140 for resident non-salary payments and Form 144 for non-residents.
    2. Issue Form 131 and Form 133 certificates for tax year 2026-27.
    3. Update vendor onboarding checklists to request Form 121 where individuals claim no deduction.

    Individuals

    1. Submit Form 121 to banks instead of Form 15G or 15H where eligible.
    2. Use Form 168 to check tax credits before filing returns for tax year 2026-27.
    3. For foreign tax credit or salary arrears relief, note the new Forms 44 and 39.

    Practical tips for the transition

    • Keep old and new forms in separate folders, labelled by year and law.
    • When a bank, employer or client asks for Form 16 or 15G, confirm which year they need; the answer decides the form.
    • Update standard contracts and engagement letters that quote form numbers.
    • Check that your accounting or ERP system prints the correct form number on certificates generated for each period; many systems allow year-specific templates.
    • Brief your finance and HR teams with a one-page mapping sheet. Most questions in the first year come from staff who search for an old number and cannot find it on the portal.
    • Read our explainers on the tax year concept and the Income-tax Act 2025 key changes for the wider context.

    Frequently asked questions

    What is the new number for Form 16?

    Under the Income-tax Rules, 2026, the salary TDS certificate is Form 130. Form 16 continues only for FY 2025-26 and earlier years.

    Is Form 26AS still available?

    The annual tax statement continues as Form 168 for tax year 2026-27 onwards. Statements for earlier years remain available under the old name.

    What replaces Forms 15G and 15H?

    Both are replaced by a single Form 121 for declarations that tax need not be deducted on specified income.

    Do I need to redo forms already filed for FY 2025-26?

    No. Forms, certificates and returns for FY 2025-26 were correctly filed under the old rules and remain valid.

    If you would like help updating your payroll, TDS processes or personal tax filings for the new income tax forms, our team is happy to assist.

    WhatsApp +91 83687 74072
    Send an enquiry

    This article is general information based on the law as of September 2026, and is not legal or tax advice. Please check the facts of your own case with a professional before acting.