Payroll Guide: India

OS HRS takes care of your multi-country payroll with local regulatory expertise. From India, across Asia Pacific and beyond, we are the payroll partner of global leaders. Not sure where to start when it comes to multi-country payroll? Here’s our quick payroll guide for your India business operations.

Overview of payroll in India

What are the steps to set up payroll in India?

Payroll in India involves a number of compliance requirements, including the calculation and withholding of taxes, social security contributions, and other deductions. Here are the steps to set up payroll in India:

1. Obtain a PAN Card: The first step in setting up payroll in India is to obtain a Permanent Account Number (PAN) card. This is a 10-digit alphanumeric code issued by the Indian Income Tax Department, and it is required for all tax-related transactions.

2. Register for Tax Deduction Account Number (TAN): To deduct taxes from employee salaries, you need to register for a Tax Deduction Account Number (TAN). This is a 10-digit alphanumeric code that is used to identify your company when you deduct and deposit taxes with the Income Tax Department.

3. Decide on Payroll Frequency: The next step is to decide on the frequency of payroll processing, which can be monthly, bi-monthly, or weekly, depending on your company's policies.

4. Collect Employee Information: To set up payroll, you need to collect employee information, such as name, address, PAN card details, bank account details, and salary structure.

5. Calculate Salary and Deductions: Once you have collected employee information, you need to calculate salaries and deductions based on the salary structure. Deductions can include income tax, provident fund (PF), and employee state insurance (ESI).

6. Obtain ESI and PF Registration: If your company has more than 20 employees, you need to obtain ESI and PF registration. This is a mandatory requirement, and you need to contribute a certain percentage of employee salaries to these funds.

7. Generate Payslips and Bank Transfer: After calculating salaries and deductions, you need to generate payslips for employees and transfer their salaries to their bank accounts.

8. File Monthly Returns: Finally, you need to file monthly returns with the Income Tax Department and ESI and PF authorities. These returns report the tax and other deductions made from employee salaries.

It is important to note that setting up payroll in India can be complex, and it is recommended to seek professional advice or engage a payroll outsourcing company like OS HRS to ensure compliance with local regulations.

What do you need to know about India Payroll?

Employer Contributions in India

What do you as an employer need to make in employer contributions?

Employee Contributions in India

What do your employees need to set aside in contributions?

Employee Income Taxes in India

What are the income tax rates in India for the Assessment Year 2024-25?

Old Regime

New Regime

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Last updated September 2024