How to Run Payroll in India: PF, ESI, TDS & Payslips (2026)
A step-by-step guide to running payroll in India — salary components, PF, ESI, professional tax and TDS deductions, payslips, and the deadlines you cannot miss.
Running payroll in India means more than paying salaries — you also have to calculate and deposit several statutory deductions on time. Here is a clear, practical guide to how to run payroll in India without falling foul of compliance.
Step 1: Break down the salary structure
A typical monthly salary (CTC) is split into components:
- Basic pay — usually 40–50% of CTC; drives PF and gratuity
- HRA — house rent allowance, partly tax-exempt
- Allowances — conveyance, special allowance, etc.
- Employer contributions — PF and ESI on top of gross
Step 2: Apply the statutory deductions
| Deduction | Rate (typical) | Applies when |
|---|---|---|
| Provident Fund (PF) | 12% employee + 12% employer of basic | Most establishments with 20+ staff |
| ESI | 0.75% employee + 3.25% employer | Wages up to the ESI wage ceiling |
| Professional Tax (PT) | State-specific slab | States that levy PT |
| TDS | As per income-tax slab | Salary above the exemption limit |
Step 3: Calculate net pay
Net pay = Gross salary − (PF + ESI + PT + TDS + other deductions). This is what actually lands in the employee's bank account.
Step 4: Issue a compliant payslip
A good payslip shows earnings, each deduction, net pay, and year-to-date figures. Employees increasingly expect a self-service portal to download payslips themselves.
Step 5: Deposit dues and file on time
- PF (ECR): by the 15th of the next month
- ESI: by the 15th of the next month
- TDS: by the 7th of the next month (plus quarterly returns)
- PT: as per your state's schedule
Missing these means interest and penalties — the same trap we cover in our GST filing guide.
Make payroll a 10-minute job
Payroll software calculates PF/ESI/TDS automatically, generates payslips, runs an employee portal, and can post the salary journal straight to your books. That is exactly what ForkOST Payroll does — see payroll pricing.
Frequently asked questions
Is PF mandatory for every business?
PF generally applies to establishments with 20 or more employees, though smaller firms can opt in voluntarily.
What is the difference between CTC, gross and net salary?
CTC is the total cost to the company, gross is CTC minus employer contributions, and net is gross minus employee deductions — the take-home amount.
Stop dreading the 1st of the month. Run payroll with ForkOST — payslips, PF/ESI/TDS and a staff portal in minutes.