Statutory Payroll Compliance in India
Payroll in India is not merely an administrative function — it is a statutory obligation. Every pay cycle must reflect accurate deductions under the Income Tax Act, the Employees' Provident Funds Act, the Employees' State Insurance Act, applicable state Professional Tax legislation, and the Labour Welfare Fund Acts. Errors in any one of these create compounding problems: short TDS deduction attracts interest and penalty under the Income Tax Act; incorrect PF contributions generate EPFO reconciliation notices; underpayment against minimum wage notifications is a criminal offence.
DYSEN LLP manages payroll compliance as a structured monthly programme — integrating statutory inputs, computing every deduction accurately, generating compliant payslips, remitting contributions on time, and maintaining the documentation trail required for audits and inspections.
Statutory Deductions We Compute & Manage
- TDS (Tax Deducted at Source) — Monthly tax computation under Section 192 of the Income Tax Act based on each employee's estimated annual income, declared investments, and applicable slab rates. Includes mid-year revisions for salary changes, regime switches, and arrear computations
- Provident Fund (EPF) — Employee and employer contributions computed on basic wages: 12% employee contribution and 12% employer contribution split between EPF, EPS, and EDLI
- Employee State Insurance (ESI) — 0.75% employee and 3.25% employer contributions on gross wages for employees within the ₹21,000 wage ceiling
- Professional Tax (PT) — State-specific slab-based deductions under applicable state Professional Tax Acts — currently levied in Karnataka, Maharashtra, West Bengal, Andhra Pradesh, Telangana, Tamil Nadu, Kerala, and several other states
- Labour Welfare Fund (LWF) — Bi-annual or annual contributions under the applicable state Labour Welfare Fund Act, deducted from employee wages and remitted together with the employer's share
Payslip Generation & Wage Compliance
- Monthly payslip generation in formats that reflect all earnings, allowances, and deductions in compliance with the Payment of Wages Act and applicable state rules
- Minimum wage compliance verification every pay cycle — ensuring gross pay meets or exceeds the notified minimum wage for each employee category and state, including Variable Dearness Allowance revisions
- Salary structure review to ensure allowances are structured compliantly — particularly HRA, conveyance, and special allowances relevant for TDS optimisation and PF computation
- Overtime wage computation at rates prescribed under the Factories Act and applicable state legislation
- Leave encashment computation for earned leave and privilege leave during service and at exit
- Arrear salary computation and TDS impact calculation for prior-period revisions
- Payroll register maintenance in formats prescribed under the Payment of Wages Act
Full & Final Settlement Compliance
- Full & final (F&F) payroll computation covering last working month salary, unpaid leave encashment, notice period recovery or payment, and gratuity eligibility check
- Gratuity computation under the Payment of Gratuity Act, 1972 — applicable for employees completing five or more years of continuous service
- PF withdrawal and transfer assistance — issuing UAN-linked Form 19 and Form 10C details and guiding employees through the online claim process
- ESI final contributions and insurance number closure coordination where applicable
- TDS on F&F components — computation of tax on gratuity, leave encashment, and ex-gratia payments and inclusion in Form 16
- F&F settlement letter and relieving documents in statutory formats
Governing Legislation
The Payroll Compliance Risk That Is Most Overlooked
Minimum wage non-compliance is a criminal offence under the Minimum Wages Act — not merely a civil penalty. Many organisations inadvertently fall short when state governments revise minimum wage notifications mid-year, particularly when Variable Dearness Allowance is updated. DYSEN LLP monitors state minimum wage revisions continuously and flags payroll adjustments the moment notifications are issued.
Our Monthly Payroll Process
- Inputs collection — Receive attendance data, leave records, new joiner details, salary revisions, and other pay inputs by the agreed cutoff
- Gross-to-net computation — Process all earnings and compute every statutory deduction with accuracy checks against previous month and threshold validations
- Pre-disbursement review — Send payroll summary to the client for sign-off before salary disbursement
- Payslip generation — Issue fully compliant payslips through the agreed delivery channel (email, portal, or PDF)
- Statutory remittances — PF ECR and ESI returns filed and challans generated by the 15th; PT remitted per state schedule; LWF deposited at applicable intervals
- TDS deposit — Monthly TDS remitted by the 7th of the following month (30 April for March); quarterly returns filed on schedule
- Payroll register update — Statutory wage register updated and maintained in prescribed format