Salary slip › PF, ESI and professional tax

PF, ESI and professional tax basics

Four deductions appear on most Indian salary slips: provident fund, ESI, professional tax and TDS. Each has its own rule on who is covered and how much is cut. Here are the basics for a small employer.

Provident fund (PF)

• Who: businesses with 20 or more employees must register with EPFO. Smaller ones may join on their own.
• Employee's share: 12% of basic + DA, cut from salary.
• Employer's share: another 12%, paid on top. Of this, 8.33% goes to the pension scheme (on pay up to ₹25,000, so at most ₹2,083 a month) and the rest to the PF account. Small admin and insurance charges are also paid by the employer.
• Wage ceiling: contributions can be limited to ₹25,000 of basic + DA (the wage ceiling, raised from ₹15,000 on 17 September 2026). Employers may also pay on the full basic. Employees earning up to ₹25,000 must now be covered.
• Example: basic ₹30,000 → employee PF ₹3,000 when limited to ₹25,000, or ₹3,600 on full basic.

ESI (Employees' State Insurance)

• Who: generally businesses with 10 or more employees in areas where ESI applies. It covers employees whose gross pay is ₹21,000 a month or less (₹25,000 for persons with disability).
• Employee's share: 0.75% of gross pay, rounded up to the next rupee.
• Employer's share: 3.25% of gross pay.
• Example: gross ₹18,000 → employee ESI ₹135, employer ESI ₹585.
• Crossing ₹21,000 mid-way: an employee covered at the start of a contribution period (April to September, October to March) stays covered until it ends, even after a raise. Keep cutting ESI till then and change the line by hand; the maker's button looks only at this month's gross.

Professional tax

A state tax on earning a living. Each state sets its own slabs, and the Constitution caps it at ₹2,500 a year per person. Many states charge around ₹200 a month at higher salaries, sometimes with a larger amount in one month to reach the yearly total. Some states and union territories, such as Delhi, Haryana and Uttar Pradesh, have none. Check your state's current slabs, since they change.

TDS on salary

The employer estimates the employee's tax for the year, under the regime the employee chose, and cuts it in equal parts each month. In the new regime (the default), salary up to about ₹12.75 lakh a year usually has no tax after the standard deduction and rebate, so many small-business slips show TDS as nil. In the old regime, deductions and HRA exemption (with rent receipts) change the figure. After the year ends, the employer gives a TDS certificate.

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