What statutory deductions are made from an employee's salary?

An employee's gross salary is subject to: EPF (12% of basic wages), ESI (0.75% of gross wages, where the employee earns up to ₹21,000 per month and the establishment is covered), Professional Tax at the applicable state slab, and TDS on salary under Section 192 of the Income-tax Act. The employer also contributes its own statutory shares to EPF and ESI.

What is Form 16 and when must it be issued?

Form 16 is the certificate the employer issues to each employee confirming the TDS deducted from salary during the financial year. It is issued on or before 15 June following the close of the financial year. Part A is generated from TRACES and Part B is prepared by the employer or the payroll CA.

Does outsourcing payroll mean losing control over employee data?

No. The business retains full ownership of all employee records. The payroll CA works with the data the business provides, prepares the computations and filings, and returns payslips and returns to the business. Access is governed by the engagement terms.

How quickly can payroll processing be set up?

The onboarding — collecting salary structures, statutory registrations, and employee details — typically takes three to five working days for a small or medium establishment. The first payroll run generally follows in the same or the next wage cycle after onboarding completes.

Compliance

HR & Payroll

Manage payroll processing along with statutory deductions and related employee compliance.

What's covered

Payroll is one of the most compliance-intensive recurring obligations for a business in India. Every wage cycle ties together income-tax deduction at source under Section 192 of the Income-tax Act, EPF contributions under the Employees' Provident Funds and Miscellaneous Provisions Act 1952, ESI contributions under the Employees' State Insurance Act 1948, and Professional Tax deductions under the applicable state Act — all in a single monthly run.
Managing this in-house requires keeping pace with frequently changing thresholds, contribution rate notifications, and Form 16 / Form 24Q obligations. Errors or delays create immediate statutory exposure in the form of TDS defaults, interest on late EPF or ESI payments, and Professional Tax penalties.
Outsourcing payroll processing to a CA firm shifts this burden while keeping the business fully compliant. The firm computes each employee's net salary, prepares payslips, ensures accurate statutory deductions, and remits the sums to the right authorities by the right dates.
The result is a clean payroll register, timely remittances, and the documentary trail needed for Form 16 issuance at year-end — with no interruption to the business's day-to-day operations.

Benefits

Accurate salary computation with all deductions validated against current statutory rates and thresholds
Timely EPF ECR filing and remittance by the 15th of each month — no late-payment interest or damages
ESI contribution deduction and remittance for covered employees, with half-yearly returns filed on schedule
Professional Tax deduction at the applicable state slab and monthly remittance to the state government
TDS on salary (Section 192) computed for each employee based on projected annual income, and timely deposit to CBDT
Payslips prepared in the required format and distributed to employees each month
Form 16 (Part A and Part B) issued to each employee at the close of the financial year
Form 24Q (quarterly TDS return on salary) filed on time to TRACES to avoid interest and late fees

How we work

01
Onboard the payroll data
Collect the salary structures, CTC breakups, and statutory registration details (EPF code, ESI code, PT registration) for the establishment and each employee. Verify that UAN and insurance numbers are linked correctly in the EPFO and ESIC portals.
02
Run the monthly payroll
Compute each employee's gross salary, TDS on salary under Section 192, EPF employee share (12% of basic wages), ESI employee share (0.75% of gross wages where applicable), and Professional Tax at the applicable state slab. Net pay is arrived at after all statutory and other deductions.
03
Remit statutory dues and file returns
Remit EPF (employer + employee) and ESI (employer + employee) contributions by the 15th of the following month; deposit TDS to CBDT by the 7th of the following month; remit Professional Tax by the state deadline. File the monthly ECR on the EPFO portal and the monthly TDS through the TIN-NSDL/TRACES system.
04
Issue payslips and close the year
Distribute payslips to employees each month. At the close of the financial year, file Form 24Q (Q4) and generate Form 16 (Part A from TRACES, Part B prepared by the firm) for every employee who was on payroll during the year.

Documents required

Salary structures and CTC letters for each employee
EPF Establishment Registration Certificate and employee UAN details
ESI registration (ESI Code) and employee insurance numbers
Professional Tax registration certificate from the applicable state
Investment declaration forms from each employee for TDS projection under Section 192
Bank account details for salary credit

Applicable laws & forms

Income-tax Act 1961, Section 192 — TDS on salary; Section 203 — Form 16 obligation; Section 206 — Form 24Q quarterly return
Employees' Provident Funds and Miscellaneous Provisions Act 1952 — EPF contribution (12% employer + 12% employee of basic wages), monthly ECR
Employees' State Insurance Act 1948 — ESI contribution (employer 3.25% + employee 0.75% of gross wages) for covered establishments
Professional Tax — governed by the applicable state Act (e.g. Telangana Tax on Professions, Trades, Callings and Employments Act 1987) — deducted by the employer and remitted monthly

Frequently asked questions

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EPF / ESI Contributions Take-Home Salary / CTC