Hiring your first employee is a milestone — and the moment payroll stops being "just salaries". Every month you owe PF, ESI, TDS and sometimes professional tax, each with its own rate, wage limit and due date. Here is how it all works, in plain language.
The three big deductions
For most employers, monthly payroll means three statutory deductions on top of the salary itself.
| Deduction | Who pays | Rate / limit |
|---|---|---|
| EPF (provident fund) | Employee 12% + Employer 12% | Applies up to ₹15,000 basic wages; EPS takes 8.33% (capped ₹1,250) |
| ESI (medical/insurance) | Employee 0.75% + Employer 3.25% | Applies to gross wages up to ₹21,000/month |
| TDS on salary | Withheld from employee | Per income-tax slabs, new regime default |
Who must register: PF applies once you have 20+ employees (you can join voluntarily below that). ESI applies from 10+ employees, and once registered it stays. Verify your status on the EPFO and ESIC portals — the rules here are the ones that trip small employers up.
PF, broken down
The employee contributes 12% of basic wages and the employer matches it: 8.33% goes to the Employees' Pension Scheme (EPS, capped at ₹1,250 since the ceiling is ₹15,000) and the balance to the PF itself, plus 0.5% EDLI insurance. Contributions are filed monthly through the electronic challan-cum-return (ECR) by the 15th of the following month.
ESI, broken down
ESI covers employees earning up to ₹21,000 per month gross (₹25,000 for employees with disabilities) and funds medical care and sickness/disability benefits. The employee's 0.75% and the employer's 3.25% are paid by the 15th of the following month via monthly contributions.
TDS on salary
Employers withhold income tax from salary under Section 192 every month, deposit it by the 7th of the next month, file the quarterly TDS return (Form 24Q), and issue Form 16 by 15 June each year. For FY 2025-26 (AY 2026-27), the standard deduction under the new regime is ₹75,000, and taxable income up to ₹12 lakh is effectively tax-free after the rebate.
Professional tax (yes, Manipur levies it)
About 21 states — including Manipur — charge professional tax on salary income, capped by law at ₹2,500 per year. In Manipur, the slabs start at nil for annual salaries up to ₹50,000 and reach the ₹2,500 maximum above ₹1,25,001. A small amount, but it is deducted monthly and must be remitted on time.
Your monthly payroll calendar
- By the 7th: deposit TDS deducted last month.
- By the 15th: pay PF (with ECR) and ESI for last month.
- Quarterly: file Form 24Q (TDS return).
- By 15 June: issue Form 16 to employees.
Miss any of these and late fees and interest stack up — and every month restarts the clock. A proper payroll system (Tally has a built-in payroll module) computes all of it from one salary register.
Payroll eating your evenings?
We run payroll for businesses across Manipur and Mizoram — salary processing, PF/ESI registration and returns, TDS, and Form 16 — so every month closes on time.
Disclaimer: This article is general information, not professional advice. Rates, wage limits and due dates are set by statute and change with notifications — always confirm current figures on the EPFO, ESIC and income-tax portals before relying on them.