Payroll in India

Payroll in India means calculating gross-to-net salary, deducting the employee’s 12% Provident Fund contribution and a small state Professional Tax, withholding income tax under the new tax regime, paying employer Provident Fund and related contributions of about 13% of PF wages, issuing payslips and filing the monthly Provident Fund return and quarterly TDS return with the authorities. The key local issue is the basic-wage split: most Indian payroll contributions are calculated on the “basic” portion of pay rather than the full gross, so how a salary is structured into basic, allowances and benefits changes both the employee’s take-home and your employer cost.

Total employer cost for a ₹1,500,000 annual salary is about ₹1,578,000, around 5% on top of gross.

Our verdict: Fewer than 3 employees and no local entity in India: use an EOR at $199 to $650 per employee per month. At 3 or more, opening a Pvt. Ltd. (roughly $6,500 in setup costs and 8 to 14 weeks to complete) usually works out cheaper. Already running a local entity: standard payroll outsourcing is the cheaper route.

Use this page if you already have, or plan to set up, a local entity in India and want to know what running payroll actually involves. If you want to hire in India without becoming the legal employer, an Employer of Record is the faster route.

No local entity yet? See our guide to EOR in India.

Payroll in India at a Glance

How Does Payroll Work in India?

Indian payroll runs on a monthly rhythm. You calculate each employee’s gross salary, strip out their Provident Fund contribution, Professional Tax and income tax to reach net pay, add the employer contributions on top, then report and pay what is owed to the two authorities that govern Indian payroll.

The first authority is the Income Tax Department, run by the Central Board of Direct Taxes (CBDT). It is India’s equivalent of HMRC or the IRS: the body that collects income tax and to which you remit the tax you withhold from salaries. The second is the EPFO, the Employees’ Provident Fund Organisation, the government body that runs the national retirement savings scheme and collects Provident Fund money.

The employer’s cost in India sits at roughly 13% of PF wages (basic pay plus dearness allowance), almost all of it Provident Fund. The Employees’ Provident Fund (EPF) is a mandatory retirement savings scheme: you contribute on the employee’s behalf into their fund, on top of the matching amount you withhold from their pay.

A quirk worth knowing early is that contributions are usually calculated on “basic” wages rather than total gross. How a package splits between basic pay and allowances therefore drives the real cost.

The employee’s side carries their own 12% Provident Fund deduction, a small state Professional Tax, and income tax. Professional Tax is a minor levy charged by most Indian states on people who earn a salary, capped at INR 2,500 a year, so it barely moves the net figure.

Income tax is withheld at source under a system called TDS, short for Tax Deducted at Source. TDS means you deduct the employee’s estimated annual tax in monthly instalments from their salary and pay it to the Income Tax Department, rather than leaving them to settle it later.

Two filings carry the compliance load. The monthly EPF ECR (Electronic Challan-cum-Return) reports and pays Provident Fund to the EPFO. The quarterly TDS return, Form 24Q, reports the income tax you have withheld to the Income Tax Department.

Both have to match your actual payroll, and both are covered in detail below.

What Payroll Taxes Apply in India?

Three charges sit on a typical Indian salary: the employer’s Provident Fund and related contributions, the employee’s own Provident Fund and Professional Tax, and income tax under the new regime. Most of them are calculated on basic wages rather than full gross, which is what makes Indian gross-to-net different from a flat percentage of pay.

Employer Payroll Contributions in India

The employer pays Provident Fund and a few small related charges totalling about 13% of PF wages (basic pay plus dearness allowance). The bulk is the matching EPF contribution of 12%, paid into the employee’s Employees’ Provident Fund account; the remainder covers the linked pension and administration charges that ride alongside it.

The statutory wage ceiling for EPF is INR 15,000 a month, but many employers contribute on actual basic pay above that. Whether you cap at the ceiling or contribute on full basic is a policy choice that directly changes your employer cost, so decide it before you set salaries.

Compared with Western Europe, where employer loading often runs 20% to 45% on top of gross, India’s roughly 13% on PF wages is moderate. The thing to watch is not the rate but the base it applies to.

The true cost of employing in India

Statutory employer rates; items can apply to different wage bases or carry conditions, so lines do not always sum to the total.

Statutory profit-sharing applies: Payment of Bonus Act 1965: 8.33% minimum to 20% maximum of annual salary for establishments with ≥20 employees.

Sources: taxsummaries.pwc.com (employer contributions), indiacode.nic.in (bonuses).

Employee Payroll Deductions in India

You withhold two non-tax deductions from the employee. The first is their own EPF contribution at 12% of basic wages, which goes into their retirement fund alongside your matching amount. The second is Professional Tax, a small state-level levy on salaried income capped at INR 2,500 per year, which a handful of states do not charge at all.

There is also a contributory health and insurance scheme called ESI (Employees’ State Insurance), an employee deduction of 0.75%, but it only applies to lower-paid workers earning under INR 21,000 a month gross. Above that threshold, which covers most professional salaries, ESI does not apply and you can leave it out of the calculation.

These are the employee’s deductions, but you are responsible for calculating, withholding and remitting them. If your provider miscalculates EPF, the employee’s fund is short and your monthly EPF ECR will not reconcile against what you actually paid in.

Income Tax on Salary in India

India now defaults to the new tax regime, a simplified set of income tax slabs with fewer exemptions than the older system. Under FY2025-26 rates, income up to INR 4,00,000 is nil, then 5% to INR 8,00,000, 10% to INR 12,00,000, 15% to INR 16,00,000, 20% to INR 20,00,000, 25% to INR 24,00,000, and 30% above that, with a 4% health and education cess added on top of the tax.

Two reliefs soften the bill. A standard deduction of INR 75,000 is subtracted from salary income before tax, and a Section 87A rebate cancels the tax entirely for anyone whose total income is up to INR 12,00,000, making salaries up to that level effectively tax-free under the new regime.

The standard deduction is a flat amount every salaried employee can subtract without proof of expenses. The 87A rebate is a credit that wipes out the calculated tax for lower and middle earners, so tax only bites once income climbs above the INR 12,00,000 line.

Payroll Tax Example: Gross Salary to Net Pay

Here is how the charges stack up for a representative salary. The figures come from the contribution and tax rates above, with EPF applied to an assumed basic pay rather than full gross.

Simplified illustration: FY2025-26 new tax regime. PF wages (Basic+DA) are assumed at INR 6,00,000 (40% of gross); both the employee EPF (12%) and the employer statutory contributions are computed on this Basic+DA base, not on full gross. Employer side: EPF 12% (INR 72,000, split 3.67% EPF + 8.33% EPS with EPS capped at INR 15,000/month wages) + EDLI 0.5% + EPF admin charges 0.5% (together INR 6,000, simplified as uncapped on the assumed Basic+DA), totalling INR 78,000 (~13% of Basic+DA, ~5.2% of gross). Employer ESI (3.25%) does not apply as gross exceeds INR 21,000/month. Professional Tax simplified to INR 2,500/year. Income tax INR 97,500 = slab tax INR 93,750 plus 4% cess INR 3,750. INR 75,000 standard deduction plus a Section 87A rebate making total income up to INR 12,00,000 effectively tax-free.

Read the two bold rows together. A worker on INR 15,00,000 gross takes home about INR 13,28,000, while your total cost as employer is INR 15,78,000.

The gap between gross and net is modest, because tax bites lightly until income passes INR 12,00,000 and EPF is capped to basic pay. The gap between gross and your cost is the employer Provident Fund loading. That split is the Indian payroll signature, and it is why how you structure basic pay matters as much as the headline salary.

What Payroll Filings Are Required in India?

India splits monthly payroll reporting across two systems rather than one unified declaration. The monthly EPF ECR handles Provident Fund, and the quarterly TDS return handles income tax, so your compliance calendar runs on two clocks at once.

What the EPF ECR and Form 24Q Report

The EPF ECR, the Electronic Challan-cum-Return, is the monthly Provident Fund filing every employer submits to the EPFO. It lists each employee, their wages and the employee and employer Provident Fund contributions, and it generates the challan you use to pay the money in.

Form 24Q is the quarterly TDS return filed with the Income Tax Department. It reports the income tax you have deducted from salaries over the quarter, employee by employee, and reconciles it against what you actually paid the tax authority. Both filings have to match your payroll run, and a mismatch is the most common trigger for a compliance query.

When They Are Due

The two filings run on different clocks. The EPF ECR is monthly, with Provident Fund due by the 15th of the month after the wages relate to. Form 24Q is quarterly, due 31 July for Q1, 31 October for Q2, 31 January for Q3, and 31 May for the final quarter.

The withheld income tax itself is paid monthly, by the 7th of the following month, with March deductions due by 30 April. Your provider therefore needs each run finalised early enough to pay tax monthly and file the TDS return at quarter end.

Who Files Them

The legal obligation sits with the employer. In practice your payroll provider or accounting firm prepares and submits the EPF ECR through the EPFO portal and files Form 24Q with the Income Tax Department on your behalf, or your in-house team files directly if you run your own Indian entity.

Either way, confirm in writing who presses submit on each filing and by when. The liability for a late or wrong filing stays with you as employer regardless of who does the keying.

What Happens If Payroll Filings Are Wrong

Late payment of TDS draws interest at 1.5% per month, and a late TDS return adds a fee of INR 200 per day until it is filed. Late Provident Fund payment is worse over time: the EPFO charges interest at 12% a year plus damages that can run from 5% to 25% a year of the arrears depending on how long the default lasts. Beyond the money, filings that do not reconcile invite scrutiny of the whole payroll, which is why getting EPF and TDS right the first time matters more than the headline fee suggests.

What Are the Payroll Deadlines in India?

Indian payroll obligations land on two cycles: Provident Fund and tax payments are monthly, while the TDS return is quarterly. The new-hire registration is event-driven, due within ten days of the start date rather than at month end.

Late filing: Late payment of Tax Deducted at Source (TDS) incurs interest at 1.5% per month. Late filing of TDS returns incurs a fee of ₹200 per day. Late payment of social contributions (EPF/ESI) incurs interest (12% p.a.) and potential damages (for EPF, this can range from 5% to 25% p.a. of arrears depending on the length of default).

Payroll Operations Risk in India

Employers in India file with 4 separate agencies.

Sources: labour.gov.in (compliance), rbi.org.in (payments).

What Are the Payslip and EPF Enrolment Rules in India?

India requires you to issue a payslip to every employee each pay run, showing gross pay, each deduction and net pay. Your payroll provider should produce compliant payslips automatically and keep the Provident Fund records in step with every change.

The enrolment step that catches foreign employers is the UAN. Every employee covered by the Provident Fund needs a Universal Account Number, a permanent twelve-digit identifier that follows them across jobs and ties together all their Provident Fund accounts.

You enrol a new hire by linking or generating their UAN and registering them for EPF through the EPFO portal, normally within ten days of their start date. Until that is done, you cannot file Provident Fund contributions for them correctly.

When you assess a provider, treat UAN and EPF enrolment as seriously as the tax filing. A clean TDS return with a neglected Provident Fund registration still leaves the employee’s retirement contributions stranded and your EPF ECR unable to reconcile.

How Much Does Payroll Outsourcing Cost in India?

There are two separate numbers in Indian payroll cost, and confusing them is the most common budgeting mistake. The first is your statutory employer cost, which is the roughly 13% Provident Fund loading on PF wages (basic pay plus dearness allowance).

11 of the 15 EOR providers we track publish India fees; they range from $199 to $650 per employee per month.

Published list prices in USD: EOR fees are per employee per month, contractor fees per contractor per month. Providers that publish neither fee for India are not shown.

According to Whichapp’s July 2026 analysis of EOR fees across 40 countries, providers charge $199 to $650 per employee per month in India.

11 of the 15 providers we track publish India EOR fees. The lowest published rate is $199 per employee per month and the highest is $650.

Contractor management fees in India run from $6 to $49 per contractor per month.

The second is the fee you pay a provider to run the payroll for you. They are unrelated, and only the second is negotiable.

Managed Payroll Provider Fees

Managed payroll in India is normally priced per employee per month, and most providers quote rather than publish a rate. The price turns on headcount, on whether you also need accounting or HR support, and on local complexity: a workforce that spans multiple states with different Professional Tax rules takes more calculation than a single-state headcount.

The fee buys the calculation, the EPF ECR and TDS filings, UAN and EPF enrolment and payslip production. It does not include the statutory contributions themselves, which you fund on top, so gather two or three quotes before committing.

What Payroll Provider Fees Usually Include

A standard managed payroll fee in India should cover the monthly gross-to-net calculation, EPF and Professional Tax withholding, monthly TDS computation, the EPF ECR filing, the quarterly Form 24Q return, UAN and EPF enrolment, and monthly payslips. Ask for that list in writing. If any of it sits outside the headline fee, you want to know before the first run, not after.

Extra Payroll Costs to Ask About

The gaps tend to appear at the edges of the standard cycle. Ask specifically about year-end Form 16 issuance, multi-state Professional Tax registration and filing, ESI handling if you employ lower-paid staff, full-and-final settlement and gratuity calculations on exit, correction filings when something has to be restated, and onboarding setup fees for taking on your entity. These are the line items that turn a tidy per-head quote into a larger annual number.

When Payroll Outsourcing Becomes Cheaper Than EOR

The choice between running your own payroll and using an EOR is mostly about headcount and how long you plan to stay. An EOR carries a higher monthly fee per person because the provider is the legal employer and absorbs the entity, but it saves you setting one up.

Running your own payroll through an Indian private limited company is cheaper per head once you are past a handful of employees and committed to staying, because the entity and provider fee spread across more people. In our assessment, the more people you hire and the longer the horizon, the more the economics favour your own entity with outsourced payroll.

Payroll in India vs EOR in India

The line between the two routes is simple: standard payroll assumes you are the legal employer through an Indian entity, while an EOR makes the provider the legal employer so you do not need one.

Use payroll outsourcing if you already have a local entity (an Indian private limited company) or are hiring enough people to justify one. Use an EOR if you need to hire before setting up an entity.

If that second case is you, our guide to EOR in India covers the providers, licensing and costs in full. EOR pricing and provider ranking live there, not on this page.

Best Payroll Providers for India

These providers all run payroll in India, but they are built for different situations. Below is where each one fits and the local point to check before you sign. We do not list EOR prices here; for unpriced managed payroll, treat the fee as by quote and confirm it during your shortlist calls.

8 providers in Whichapp’s independent index cover India. The top 5 by composite score:

1. Deel (9.1/10). From $599/month. Best for scale, automation and contractor volume. Runs its own India entity.
2. Multiplier (8.5/10). From $400/month. Best for APAC expansion and mid-market value. Runs its own India entity.
3. Papaya Global (8.2/10). From $650/month. Best for multinational payroll consolidation. Serves India through a partner.
4. Remote (8.0/10). From $599/month. Best for IP protection and owned-entity purity. Runs its own India entity.
5. G-P (7.6/10). Best for established enterprise M&A compliance. Runs its own India entity.

Rankings come straight from Whichapp’s provider index (coverage 30%, pricing transparency 25%, security and compliance 25%, integration depth 20%); see how we score.

Only 7 of 8 major EORs run their own India entity; 1 more serves it via a partner.

Entity model as reported on provider websites, last checked 2026-06-06. An own entity means the provider is the direct legal employer; a partner model adds a third party to the chain.

Deel for Payroll in India

Deel is a strong fit if India sits alongside other Asia-Pacific hires you want on one platform, with a single dashboard and API across markets. India watch-out: confirm whether your Indian payroll runs on Deel’s own local entity or a partner bureau, and that it files the EPF ECR and Form 24Q directly rather than handing them to a third party. Read our Deel review.

Remote for Payroll in India

Remote runs much of its payroll through owned entities, which gives a cleaner compliance chain than a partner-network model. That suits employers who want a direct line of accountability for EPF and TDS filings.

India watch-out: confirm Indian payroll is on Remote’s owned entity rather than a local partner, and that UAN and EPF enrolment for new hires is handled inside the platform within the ten-day window. Read our Remote review.

Papaya Global for Payroll in India

Papaya Global is built for consolidating payroll across many countries with finance-grade reporting and audit trails, so it earns its place when India is one market in a larger stack. Its weakness is the opposite case: for a single Indian entity with no multi-country reporting need, the platform is heavier than the job requires.

India watch-out: Papaya leans on local partners in some markets, so confirm whether your Indian payroll runs on its own entity or a third-party bureau, and how directly it owns the EPF ECR and 24Q filings. Read our Papaya Global review.

Rippling for Payroll in India

Rippling appeals when you want payroll wired into the same system as HR, IT and device management, with automated journal entries. India watch-out: it is platform-first, so confirm the depth of its Indian statutory handling, specifically the basic-wage EPF split and multi-state Professional Tax, against what a local specialist would offer. Read our Rippling review.

Multiplier for Payroll in India

Multiplier is the value option for multi-country payroll where price predictability matters, which fits smaller Indian teams. The trade-off for that price is depth: in markets with state-by-state variation it tends to carry less local specialist weight than a Papaya or an in-country bureau.

India watch-out: confirm it files the EPF ECR and Form 24Q directly rather than through a reseller, and that its gross-to-net engine models the basic-wage EPF split and the new-regime slabs accurately before you anchor any salary offers on it. Read our Multiplier review.

Safeguard Global for Payroll in India

Safeguard Global is a payroll-led specialist rather than an HR platform with payroll bolted on, which appeals when running the payroll correctly is the whole point and you do not need a wider people stack. That focus is also its limit: if you want integrated HR, devices and onboarding in one tool, it does less than Rippling or Deel.

India watch-out: confirm its Indian coverage is run in-house rather than subcontracted, and that the service includes the ESI threshold check for lower-paid staff and EPFO correspondence, not just the monthly calculation. Read our Safeguard Global review.

How to Choose a Payroll Provider in India

The questions below separate a provider that genuinely runs Indian payroll from one that resells a local bureau without owning the detail. Ask them before you sign, not after the first run.

Can They Handle the EPF ECR and Form 24Q?

Confirm the provider prepares and submits the monthly EPF ECR through the EPFO portal and files Form 24Q with the Income Tax Department each quarter, and that both reconcile against the actual payroll and bank payments. Ask who presses submit and by when.

Do They Manage UAN and EPF Enrolment?

Check that new-hire registration is handled within the statutory deadline, including generating or linking each employee’s UAN and enrolling them for the Provident Fund within ten days of their start date. A provider that treats enrolment as an afterthought leaves the employee’s contributions stranded.

Can They Model Gross-to-Net Salary Accurately?

India’s basic-wage split and new-regime slabs mean a net-pay request does not translate into a simple percentage of gross. A capable provider models gross-to-net both ways, handles the basic versus allowance structure, and helps you frame offers rather than just processing whatever number you hand over.

How Do They Update for Payroll Law Changes?

Indian tax slabs, the choice between old and new regime, and state Professional Tax rules change often. Ask how the provider tracks Income Tax Department and EPFO changes and how quickly updates reach your payroll runs.

Who Is Liable for Payroll Errors?

The statutory liability stays with you as employer, but the contract should set out what the provider is accountable for if a miscalculation or late filing is their fault. Get the indemnity and correction process in writing.

Can They Support Multi-Country Reporting?

If India is one of several markets, confirm the provider can consolidate reporting across them in a single view, so your finance team is not stitching country files together by hand.

What Support Do They Offer During Terminations or Audits?

Full-and-final settlements, gratuity and EPFO or Income Tax Department queries are where weak providers show their limits. Ask what support you get during an exit calculation or an audit, and whether a named contact handles it or you are routed through a ticket queue.

What Does Terminating an Employee Cost in India?

Severance: 15 days’ average pay for every completed year of continuous service or any part thereof in excess of six months.

Statutory leave: 12 days of paid annual leave plus 14 public holidays a year.

Sources: indiacode.nic.in (severance), labour.gov.in (leave).

India Payroll Checklist Before Hiring

• Confirm whether you need payroll or an EOR
• Check your local entity status
• Model gross-to-net salary for your offers
• Confirm employer contribution rate (employer EPF)
• Confirm employee deductions (EPF, Professional Tax)
• Confirm income tax treatment
• Check who files EPF ECR / 24Q and by when
• Confirm UAN / EPF registration is handled
• Confirm the payslip process
• Check leave, sick pay and termination workflows
• Ask who carries liability for calculation errors
• Confirm provider pricing and any extra fees

Work through this before your first hire. The UAN and EPF registration at point eight is the one foreign employers miss most often, because it falls due within ten days of the start date and the employee’s Provident Fund cannot be filed until it is done.

FAQs About Payroll in India

Methodology and Disclosure

Contribution rates, the income tax slabs, filing deadlines and penalty figures on this page come from Whichapp’s India statutory dataset, grounded in EPFO Provident Fund rules and Income Tax Department (CBDT) FY2025-26 new-regime rates, and refreshed as rates change. The worked example is calculated from those rates and reconciles by construction.

Provider assessments reflect our independent editorial view of payroll fit for India; we do not sell payroll, EOR or contractor services. Some provider links may carry affiliate referrals, which never affects our editorial judgement or the figures above.

Already hiring contractors instead of employees? See contractor management in India, or start from the India hiring hub for the full picture.

Primary sources

• Income tax and employee contributions: taxsummaries.pwc.com
• Employer contributions: taxsummaries.pwc.com
• Minimum wage: labour.gov.in
• Payroll filing deadlines: labour.gov.in
• Notice periods and leave: labour.gov.in
• Severance rules: indiacode.nic.in
• Entity setup benchmark: investindia.gov.in