Updated 16 October 2026. Payroll combines wage calculations, employee records, statutory contributions, tax withholding and timely payment. The correct calculation depends on the establishment’s coverage, each employee’s status and the rules that apply to the payroll period. The summary below is a control framework; verify every rate, ceiling and due date against the current official source before processing.
India’s Labour Codes took effect on 21 November 2025. Tax withholding for events from 1 April 2026 is governed by the Income-tax Act, 2025 and Income-tax Rules, 2026. During implementation, check the current Central and Kerala notifications and the relevant portal instructions rather than carrying forward old forms by habit.
Start with the right salary base
Do not assume every contribution is calculated on “basic salary” or on gross cash pay. Identify the statutory wage definition, exclusions, applicable ceiling, membership history and any valid higher-wage option for each employee. Keep the employee’s signed salary structure and the calculation basis with the payroll record.
| Item | Payroll treatment | Timing / key check |
|---|---|---|
| EPF and EPS | For covered establishments and eligible members, calculate the employee share and employer allocation under the EPF scheme and current wage rules. The employer allocation may be apportioned to EPS for eligible members; do not treat 3.67% as a universal employer rate or assume every employee’s wage base is identical. | ECR and payment are generally due by the 15th of the following month. Verify the applicable contribution ceiling and date-specific rules; the notified EPF/EPS/EDLI wage ceiling changed to ₹25,000 from 17 September 2026. |
| ESIC | The standard contribution rates are 0.75% for the employee and 3.25% for the employer on ESI contribution wages, where coverage and wage limits apply. Do not substitute “gross salary” without checking the statutory wage definition. | Regulation 31 allows 15 days after the end of the calendar month for payment. Check current eligibility, wage ceiling and any employee-specific exception on ESIC’s official portal. |
| Kerala Professional Tax | Apply the local body’s half-yearly assessment to half-yearly income. Revised Kerala slabs effective 1 October 2024 range from nil below ₹12,000 to ₹1,250 at ₹1,25,000 or more per half-year. | Payment and return instructions vary by local body. A monthly payroll deduction may be an employer’s method of collecting the half-yearly amount; it is not a universal monthly tax assessment. |
| Salary TDS | Estimate tax on the employee’s annual taxable income using the applicable tax regime, declarations and current tax year rules. | For salary events from 1 April 2026, use the Income-tax Act, 2025. Deposit TDS generally by the 7th of the next month (March deductions by 30 April for non-government deductors). Salary TDS statements use Form 138, earlier Form 24Q, under the new Act. |
| Kerala welfare funds | Determine coverage separately for the Shops and Commercial Establishments Workers’ Welfare Fund Board and the Kerala Labour Welfare Fund Board. They are different boards and schemes. | Use the applicable board’s current contribution schedule, coverage rules and payment route; do not assume a flat monthly amount or a universal due date. |
The revised Kerala Professional Tax half-yearly bands are ₹0 below ₹12,000; ₹320 for ₹12,000–₹17,999; ₹450 for ₹18,000–₹29,999; ₹600 for ₹30,000–₹44,999; ₹750 for ₹45,000–₹99,999; ₹1,000 for ₹1,00,000–₹1,24,999; and ₹1,250 for ₹1,25,000 and above. The annual ceiling is ₹2,500. See the Kerala State Audit Department summary of the revised schedule and confirm procedure with the responsible local body.
A reliable monthly payroll sequence
- Close the period: reconcile attendance, leave, overtime, new joiners, exits, unpaid leave, variable pay and corrections with approved source records.
- Validate employee setup: check UAN/IP details, establishment coverage, wage components, tax declarations and any change in contribution eligibility.
- Calculate and review: apply each statutory wage definition and threshold separately. Compare month-on-month changes and investigate unusual deductions before payroll approval.
- Pay salary and issue payslips: keep a clear record of gross earnings, each deduction, employer contribution and net amount paid.
- File and remit: prepare the EPF ECR, ESIC contribution and salary TDS payment using current portal workflows and their statutory due dates. Follow local-body and board schedules for Kerala taxes and funds.
- Reconcile: match payroll totals to bank proof, challans, acknowledgements, employee-level contribution records and the general ledger. Resolve differences in the same period where possible.
Payroll checks that prevent repeat errors
- Keep employee wages, statutory contribution wages and taxable salary as separate fields; they are not interchangeable.
- Review wage-ceiling changes by effective date and member history rather than applying one figure to every period.
- Keep PT as a half-yearly assessment and use the correct local body. Do not use old slabs or monthly thresholds.
- Use current Income Tax Department forms. Form 138 is the salary TDS statement under the Income-tax Act, 2025; Form 24Q remains the name associated with the previous Act and earlier periods.
- Do not use a single Kerala LWF amount for every establishment. Record the board, scheme, coverage basis, contribution calculation and proof of payment.
- Retain payroll and statutory records for the period required by each applicable law and rule. A blanket “six years” statement is not a substitute for checking the applicable retention rule.
Official sources and calculators
- EPFO: EPF Scheme and Ministry of Labour: September 2026 wage-ceiling announcement.
- ESIC: ESI Regulations and ESIC employer services.
- Income Tax Department: Form 138 guide and TDS payment FAQ.
- Kerala Labour Commissionerate: welfare boards and Kerala LSGD Profession Tax FAQ.
Use the CTC to In-Hand Salary Calculator, EPF calculator, ESIC calculator and Kerala PT calculator for estimates. Results depend on the data and assumptions entered. For payroll support, see payroll services or contact GHR Consultancy.