Payroll · 18 min read
The complete guide to running payroll in India
From CTC structures to PF, ESI, PT, LWF and TDS - the full monthly payroll cycle explained.
1. Design the salary structure
Split CTC into basic, HRA, allowances and employer contributions. Keep basic at 40–50% of CTC for PF and gratuity planning.
2. Collect inputs
Attendance, leave, joiners, leavers, bonuses, reimbursements and recoveries.
3. Calculate statutory deductions
- PF: 12% of basic up to the wage ceiling, with the employer share split into EPS and EPF.
- ESI: 0.75% employee and 3.25% employer, for gross up to the ceiling.
- Professional tax: state slabs, some half-yearly.
- LWF: fixed amounts in specific months.
- TDS: projected annual tax spread over remaining months.
4. Verify, lock, pay and file
Review variances against last month, lock the run, upload the bank file, then file ECR, ESI and pay PT and TDS by their due dates.