PF, ESI, PT & TDS — payroll compliance basics every Indian employer should know
By the PeopleNova Team · Last updated
For any Indian employer running payroll, four acronyms come up constantly: PF, ESI, PT, and TDS. Here's the structural basics — not exact current rates, which are revised periodically and should be confirmed with a compliance advisor or chartered accountant, not a guide like this one.
What PF is
Provident Fund (PF), administered by the Employees' Provident Fund Organisation (EPFO), is a retirement savings scheme. Both employer and employee contribute a percentage of the employee's basic wage each month into the employee's PF account, accessible on retirement, resignation (under certain conditions), or specific circumstances like a home purchase. PF registration becomes mandatory once an organization crosses a defined employee-count threshold; smaller organizations can register voluntarily.
What ESI is
Employee State Insurance (ESI), administered by the Employees' State Insurance Corporation (ESIC), is a social security and health insurance scheme for employees earning below a defined wage ceiling. It covers medical care and cash benefits during sickness, maternity, and employment injury, funded by employer and employee contributions.
What Professional Tax and TDS are
Professional Tax (PT) is a state-level tax on salaried income — rules and slabs are set by each state government individually, not centrally, which is part of why it trips up multi-state employers. TDS (Tax Deducted at Source) is income tax the employer withholds from salary each month and remits on the employee's behalf, reconciled at year-end via Form 16. Unlike PF and ESI, neither is optional based on organization size — they follow the employee's income and location.
Where payroll usually actually breaks
Contribution rates, wage ceilings, and applicability thresholds are revised periodically and vary by organization structure and state — but the common failure mode isn't employers not knowing the rules. It's the data. UAN numbers, ESI numbers, and PAN details get collected once at onboarding, then re-typed by hand into a spreadsheet every payroll cycle — and that's where numbers get transposed, employees get missed, and payslips need reissuing.
Where PeopleNova fits in: PF (via UAN), ESI, Professional Tax, and PAN details are captured once at onboarding and reused automatically every payroll cycle, so the data entered on day one is what's still in use in month forty. TDS is calculated and Form 16 summary data is available, payslips generate from that record, Tally exports include TDS ledger mapping, and salary disbursement exports as a bank-ready file. See payroll features →