India Payroll 2026

India Payroll 2026. Pre Payroll Actual Payroll Post Payroll.

Labour Laws. Minimum Wages Act 1948 - NOT applicable to IT industry as its not considered as scheduled employment [scheduled employment refers to jobs and industries ( like agriculture, mining, stone breaking, tobacco manufacturing, and construction) that are listed in the Minimum Wages Act's schedule requiring employers to pay government-mandated minimum wages] Employee State Insurance Act 1948 Provident Fund Act 1952 Income Tax Act 1961 / New Income Tax Act 2025 – a comprehensive legislation governing the levy, administration, collection, and recovery of direct income tax in India Statutory Bonus Act 1965 Gratuity Act 1972 Employees’ Deposit Linked Insurance Scheme, 1976 (EDLI) Employees’ Pension Scheme, 1995 (EPS) Professional Tax Act : This tax is a state subject under Article 276 of the Constitution of India, and its rules and enforcement vary by state – [Karnataka Tax on Professions, Trades, Callings and Employments Act, 1976] Labour Welfare Fund : a state-level legislation that provides for a fund to promote the welfare of workers through various facilities and benefits - Karnataka Labour Welfare Fund Act, 1965 Maternity Benefit Act 1961 (Amendment Act 2017)– Minimum 26 weeks PAID leaves Shop & Establishment Act - (differs from State to State) sets daily/weekly working hours, Mandates weekly offs and specifies paid leave, Covers rules for employment of women and restrictions on child labor.

[image] Old Vs New Tax Regimes: Effective from FY 25-26 Calculator By - AssetYogi Tax Slabs - Old Regime Income Slab ax rebate upto Standard Deduction - R50,ooo Income upto <5.5 Lakhs - O Tax Tax Slabs - New Regime Tax Rate 5% 20% 30% Income Slab ax rebate upto Standard Deduction - R75,ooo Tax Rate 5% 15% 25% # Tax Calculations are without Surcharge and Cess •Extra Deductions in OW Regime HRA Exemption Loss froln House Property Interest on Horne Loan Deductions nder Sec 80C Deductions Under Sec 800 NPS contribution from Employer (upto 10% of Basic•DA) Income Upto R12.75 Lakhs - O Tax •Extra Deductions in New Regime NPS contribution from Employer (upto 14% Of BasiC+DA).

Recent changes in Labour laws Basic Minimum 50% of CTC Gratuity 1) After 1 year for contract/Gig employees 2) After 5 years for permanent employees FnF Within 2 working days.

Income Limit New Tax Regime Old Tax Regime Up to Rs. 50 lakh Nil Nil Rs. 50 lakh to Rs. 1 Crore 10% 10% Rs. 1 Crore to Rs. 2 Crore 15% 15% Rs. 2 Crore to Rs. 5 Crore 25% 25% Above Rs. 5 Crore 25% 37%.

Feature Old Tax Regime New Tax Regime Default Regime No Yes Basic Exemption Limit Rs. 2.5 lakh Rs. 4 lakh Rebate u/s 87A Rs. 12,500 (income up to Rs. 5 lakh) Rs. 60,000 (income up to Rs. 12 lakh) Standard Deduction Rs. 50,000 Rs. 75,000 Section 80C Deductions Allowed Not Allowed HRA Exemption Allowed Not Allowed Home loan interest (Self-occupied) Allowed Not Allowed NPS Deduction Fully Allowed Only Employer Contribution Set-off of House property losses Allowed Not Allowed Section 80D Deduction Allowed Not Allowed.

Special Income Tax Rates. Income Type Tax Rate Short-term Capital Gains (Section 111A) 20% Long-term Capital Gains 12.5% Lottery or Game show winnings 30% Crypto or Virtual Digital Assets 30%.

Section 87A rebate cannot be claimed against tax liabilities on: Long-term capital gains under Section 112A of the Income Tax Act. Short-term capital gains under Section 111A. Income taxed at special rates such as winnings from lottery and game shows..

Ms. Neha has the following income for the financial year 2025-26: Salary income - Rs. 15 lakhs Interest from savings bank account - Rs. 7,000 Freelancing business income - Rs. 50,000 Home loan interest paid for self-occupied property - Rs. 1.5 lakhs Her income and tax outflow for FY 2025-26 is calculated as follows:.

TDS remittance to Govt.

ESIC [Employees' State Insurance Act 1948]. A Social Security/retirement savings scheme for employees Companies with strength of more than 10 employees Employees monthly gross salary should be less than/under Rs 21,000 The ESIC contribution is 4% [ 0.75% is Employee contribution + 3.25% is Employer Contribution ] Online registration of the employees can be made in www.esic.in Payment Due Date is 15th of the following month ESIC Return (Form 5): Filed twice a year; April-Sept due by Nov 11, Oct-Mar due by May 12 Penalties: Late filing attracts 12% p.a. interest and 5-25% damages.

What is ESIC return? An ESI return is a mandatory periodic statement filed by employers to the Employees’ State Insurance Corporation (ESIC) detailing contributions made towards employee health insurance, typically covering workers earning up to ₹21,000 per month. It records employer-employee contributions and ensures compliance with the ESI Act. Once an employer is registered under ESIC, then even if there is no contribution in a given month, still a NIL return /Declaraion should be submitted o ESIC..

Provident Fund Act 1952. A Social Security/retirement savings scheme for employees Companies with strength of more than 20 employees Mandatory for Employees earning a Basic + DA of up to on a maximum of Rs 15,000/month. If the basic wage is higher, contributions can be made on the higher amount with employer consent ( which is called UNRESTRICTED The EPF contribution = (12% of Basic + DA from Employee) + (12% from Employer [ 3.67% towards EPF contribution + 8.33% towards EPS Contribution ]) EPF Contribution =10% when: establishments classified as sick industries, industries with specific high losses, or those with fewer than 20 employees Online registration and EPF remittances of employees can be made in unifiedportal-emp.epfindia.gov.in/epfo/ A/C No. 1: PF Contribution Account: Employee's total contribution + 3.67% of the employer's share. A/C No. 2: PF Administration Account: 0.5% (administrative charges) paid by the employer. A/C No. 10: EPS Account: 8.33% of the employer's share (Pension Fund). A/C No. 21: EDLI Account: 0.5% (Employee's Deposit Linked Insurance). Payment Due Date is on 15th of the following month Penalties: Late filing attracts simple interest (Form 7Q) of 12% p.a for each day of delay and 5-25% Damages (Form 14B) based on delay duration. Damages (Penalties): Under Section 14B of the EPF Act, damages are levied based on the duration of the delay: Up to 2 months: 5% per annum. 2–4 months: 10% per annum. 4–6 months: 15% per annum. Above 6 months: 25% per annum.

Employees' Employee's Provident Contribution (Ofbasicsalary to EPF Fund .330/0 (of basic salary) to EPS Employer's 3.67% Contribution (ot base salary) to EPF paisabazaare.

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EPF Remittance Procedure Registration: Upon joining, your employer will register you for a Universal Account Number (UAN) and an EPF account. Deduction: The employer deducts 12% of your basic wages + Dearness Allowance (DA) from your salary every month. Employer Share: The employer deposits their matching contribution (12%) into your account, split between EPF (3.67%), Pension Scheme (8.33%), and EDLI/Admin charges (0.5% each on Contribution amount). Log in to the unifiedportal-emp.epfindia.gov.in/epfo/. Select the Payment tab, then ECR (Electronic Challan-cum-Return) to upload the salary file. Click Verify and then Prepare Challan. Generate the challan, verify details, and click Finalize. Click Pay to reach the banking portal to complete the transfer..

Statutory Bonus Act 1965. Payment of Bonus Act, 1965 - a mandatory payment that employers must provide to eligible employees Mimimum of 20 employees should be working in company The bonus amount is calculated within a range of Minimum Bonus of 8.33% to Maximum Bonus of 20% of the employee's (Basic + DA), subject to certain limits. Eligibility : Employees earning a Basic + DA of up to Rs.21,000/month are eligible for the bonus, and they must have worked for at least 30 working days in the accounting year. Exceeding Basic of Rs 21000 NO Bonus Statutory bonus is generally included in an employee's Cost to Company (CTC). Statutory bonus is Taxable Example: Employee earning Rs 5,000 (Basic + DA) Bonus = 5,000 * 8.33% (min percentage considered) = 416.5 per month (or 4,998 per year) Bonus Payment : Should be made within 8 months after the closure of Accounting year. Hence last date 30th November by all companies. Maximum Bonus Wage ceiling is Rs 7000/month : means if the Basic + DA is less than Rs 7000 for any employee then this Rs 7000 should be considered for calculation of Bonus Exemption - IF the startups are running under loss, then NO need to pay even the Min Bonus also for first 5 years,. Whereas after 5yrs even if the startups are under loss, still they will have to pay Min Bonus of 8.33% to employees..

House Rent Allowance (HRA) under Sec 10(13A). Exemption Limit: Metro Cities (Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune and Ahmedabad): 50% of basic salary. Non-Metro Cities: 40% of basic salary. Calculation Example: Lowest of: Actual HRA received from employer 50% of basic salary (Metro cities) or 40% of basic salary (Non-Metro cities) Rent paid minus 10% of Basic salary New Tax Regime: If you choose the new tax regime, the full HRA amount is treated as taxable income. Documentation: Required to provide rent receipts and PAN of the landlord if annual rent exceeds ₹1 Lakh..

[image] HRA EXEMPTION CALCULATION Actual HRA received 50% Of basic salary for those living in metro cities Lowest is Exempt of basic salary for those living in non-metros Actual rent paid 10% of basic salary.

HRA Exemption Calculation Mr. Bala, employed in a company, has taken up an accommodation on rent for which he pays Rs. 18,000 per month during the FY 2025-26. He receives a basic salary of Rs. 27,000 monthly. He also gets an HRA of Rs. 1.62 lakh from his employer during the year. Situation -1: Mr. Bala living in Delhi [Metro city] HRA exemption would be the lowest of the following:.

Situation -2: Mr. Bala living in a Tier 2 City (not metro cities). HRA exemption would be the lowest of the following:.

Documents Required to Claim HRA Exemption There is no necessity to submit all the supporting documents along with the income tax return. But for submission of proofs to the employer, and to respond to the department in case of any notices, the following documentation is recommended. The following are the important documents required to claim HRA. Rent Receipts Rental Agreement Form 12BB Bank payment proof for rent Salary slip where HRA is incorporated PAN of landlord - if the rent exceeds Rs.1 Lakh per annum. Else, you may lose out on the HRA exemption. Landlords without a PAN must sign a self declaration stating he does not have a PAN, as per circular No. 8/2013 dated 10 October 2013..

Transport Allowance & Children Education Allowance Section 10(14).

Home Loan Section 24(b) & Section 80C. Home loan deductions are primarily available under the Old Tax Regime, allowing up to ₹2 lakh on interest (Section 24b) and up to ₹1.5 lakh on principal (Section 80C). In the New Tax Regime (default 2026), interest deduction is restricted to "let-out" properties, where it can be set off against rental.

Home Loan Tax Deductions Interest Paid On The Home Loan Principal Paid On Home Loan Self-Occupied Old Regime Up To Rs. 2 Lakhs New Regime No Deduction Let-Out Old Regime Unlimited Deduction New Regime Unlimited Deduction Old Regime Deduction Up To New Regime No Deduction Available.

Health Insurance Section 80D and Section 80DDB. Section 80D are available only under the old tax regime.

Education Loan Exemption under Section 80E. Allows exemption (in Taxable Income) on ONLY the interest portion paid on loans taken for higher education NO EXEMPTION on Principal amount repayment. Education loan taken for Self, Spouse, Children or legal wards NO maximum limit on the deduction amount Deduction is available up to 8 years.

Donations Exemption under Section 80G. Allows exemption (in Taxable Income) on ONLY the interest portion paid on loans taken for higher education NO EXEMPTION on Principal amount repayment. Education loan taken for Self, Spouse, Children or legal wards NO maximum limit on the deduction amount Deduction is available up to 8 years.

Form 16 [ New Form 130 ]. Form 16 (TDS Certificate issued by Employer) - consists of two parts Form A and Form B Issued usually by June 15th of the assessment year following the financial year in which tax was deducted Part A: Details of the deductor, employee, and TDS deposited (PAN, TAN, Name, Address). Part B: Detailed breakdown of salary, exemptions, and deductions under the Income Tax Act. Only Provisional Form 16 (i.e, Form A of Form 16) can be downloaded from https://www.incometaxindia.gov.in Actual or Original Form 16 will be issued by employer(HR or Payroll department) through ESSP Employee Self Service Portal or HRMS portal i.e, HR Management System Portal Steps to download Provisional Form 16: Login into https://www.incometaxindia.gov.in using PAN number and password e-File > Income Tax Returns > View Form 26AS > Confirm > goes to TRACES > view Tax Credit Form 26AS/Annual Tax Statement > Select Assessment Year > View and download.

Form 24Q. Form 24Q is a quarterly statement filed by employers in India to report TDS (Tax Deducted at Source) on salaries paid to employees under Section 192 of the Income Tax Act 1961 Annexure I: Contains details of the employer (deductor), employee (deductee), and deposit challans (required for all 4 quarters). Annexure II: Contains comprehensive employee salary breakdown, tax computation, and deductions (required only in the 4th quarter). Due Dates (For Financial Year 2026-27) Q1 (Apr-Jun): July 31, 2026 Q2 (Jul-Sep): October 31, 2026 Q3 (Oct-Dec): January 31, 2027 Q4 (Jan-Mar): May 31, 2027 Late Filing Fee: Section 234E imposes a fee of ₹200 per day for late filing, up to the total amount of TDS. Penalty: Non-compliance can lead to penalties ranging from ₹10,000 to ₹1 Lakh.

OLD Act 1961 NEW Act 2025 TDS Certificate for Salary Form 16 Form 130 Quarterly TDS returns (Salaries) Form 24Q Form 138 Tax Credit & AIS Annual Tax Statement Form 26AS Form 168 Declaration to avoid TDS Form 15G/H Form 121 Employee Investment & Investment declaration Form 12BB Form 124 TDS Certificate for NON-Salary Form 16 A Form 131.

LTA [Leave Travel Allowance]. LTA is a salary component that employers provide to employees to cover travel expenses while on leave,. Under the Income Tax Act, an employee can claim tax exemption on eligible travel costs, making it a popular tax saving benefit. What Expenses are covered ? ONLY DOMESTIC travel costs WITHIN INDIA of employee and his family. Actual fare by Air, Train or recognized Public transport. [Hotel stay, meals, local taxi transport, personal expenses are not covered] Rules to claim LTA Exemption Exemption is allowed only for Actual travel taken during leave. Allowed for 2 journeys in a block of 4 calendar years (current block : 2026-2029) If you miss using it in one block, you can carry forward 1 journey to the next block. Mode of travel should be via recognized Public transport: Air : Economy First class fare for the shortest route Rail : AC First class fare for the shortest route. Public Transport : Equivalent First class or Deluxe fare.

Gratuity Act 1972. Gratuity is a financial reward or lump-sum payment given by an employer to an employee for services rendered Eligibility: Employees typically qualify after completing at least five continuous years (4yrs + 240 days) of service with the same employer. From April 2026 onwards, applicable / payable for trainees/interns/gig workers on completion of 1 year Note: Unlike a Provident Fund, the money comes entirely from the employer and is not deducted from the employee's monthly paycheck Tax-free up to ₹20 lakh under the Income Tax Act Number of years in service is rounded off to the nearest full year. For example – if you have worked in an organization for 12 years and 2 months, the number of years in employment shall be considered to be 12 years. And in case you have worked for 12 years and 7 months, the number of years in employment shall be considered to be 13 years. Gratuity Forms: Form F: Used by employees to nominate one or more persons to receive gratuity after their death. Form I: Application to claim gratuity upon resignation, retirement, or superannuation..

Karnataka Labour Welfare Fund Act 1965 – Amendment Act 2025.

Karnataka Professional Tax - 1976. is a state-based tax - The power to levy professional tax has been given to the states by way of clause (2) of Article 276 of the constitution of India maximum Professional Tax that can be levied by any State in India till date is Rs.2500/- annually. Rs 200 every month deduction + Rs 300 in Feb month Employees whose Gross Salary must be more than Rs.25000 per month for this payment. Employees earning a gross monthly salary of less than ₹25,000 are exempt from Professional Tax. Professional Tax (Rs 2500) is exempted under Old Tax Regime only. Due Date for remittance of PT in Karnataka is 20th of subsequent month Remittance to be processed in E-Prerana website. Annual return (Form 5) should be filed within 30th April. Late Remittance leads to : Interest for late payment of 1.25% per month (on whole of PT amnt) – NOT exceeding 50% of due tax amount Rs.250 Penalty per month.