A big part of payroll management in an organization is to make sure to comply with tax laws, compensation requirements, and employment regulations. But apart from these, payroll compliance meets on various other crucial aspects, such as following the deadlines for reporting and submitting and withholding the payroll taxes or making payroll compliant. Ensuring payroll compliance is critical for running a business, as organizations must stay proactive to avoid penalties and ensure smooth operations. As we move into 2024 and beyond, it’s essential for businesses to update their payroll processes in line with the latest regulatory changes.

Let’s have a closer look at what payroll compliance entails and how businesses can ensure by ticking all the checkboxes on their payroll compliance checklist. This blog presents a comprehensive payroll compliance checklist to help Indian businesses navigate the complexities of payroll management and highlights key updates to be aware of in 2024 and 2025.

Read more:(Why Payroll Compliance Services Are Essential for Your Business?)

Payroll compliance checklist

As we’ve seen, there are many factors that influence for the payroll errors.But what can businesses do to prevent payroll compliance issues from arising?

If you are a company operating in India, there are several Acts set by the Government for the safety, welfare, and wellbeing of the employees that every company must follow. Here is a payroll compliance checklist that you must follow-

1. Employee Provident Fund (EPF) Act, 1952
2. Employees’ State Insurance (ESI) Act, 1948
3. Professional Tax (PT)
4. Income Tax Act, 1961
5. Payment of Gratuity Act, 1972
6. Payment of Bonus Act, 1965
7. Minimum Wages Act, 1948
8. The Equal Remuneration Act, 1976
9. Maternity Benefit Act, 1961

Understanding the Payroll compliance framework

Central and State Laws:

Payroll compliance in India is governed by a combination of central and state-specific labour laws. Key legislations include:

• Payment of Wages Act, 1936
• Minimum Wages Act, 1948
• Payment of Bonus Act, 1965

In addition to these, state-specific regulations also apply, making it essential for businesses to stay updated with both central and state laws relevant to their location.

Industry-specific regulations

Different industries have specific payroll-related regulations. For instance, sectors like manufacturing, IT, and retail may have varied requirements regarding employee benefits, working hours, and leave policies.

Payroll compliance checklist

Employee Provident Fund (EPF) Compliance

• Contribution: Ensure both employers and employees contribute to the EPF scheme.
• Interest payment: Ensure timely payments of interest on EPF contributions.
• Record-keeping: Submit forms (EPF-2, EPF-5) and maintain accurate records.
• Digitalization: Use the Unified Portal for Employee-centric Services (UPES) for online filings.

Employees’ State Insurance (ESI) Act Compliance

• Eligibility: Check if employees are eligible based on salary and location.
• Contribution: Calculate and remit contributions to the ESI fund.
• Record-keeping: Submit forms (ESIC-1, ESIC-2) and use the ESI portal for filings.

Professional Tax (PT) Compliance

• State-specific regulations: PT rates vary across Indian states.
• Filing requirements: File necessary PT returns and make timely payments.

Minimum Wages Act Compliance

• State-specific rates: Ensure employees receive at least the minimum wage based on the state and industry.
• Record-keeping: Maintain records of wages paid and working hours.

Payment of Gratuity Act Compliance

• Eligibility: Determine eligibility based on tenure and salary.
• Gratuity payment: Calculate and disburse gratuity as per the Act.

Code on Wages, 2019 Compliance

• Wage components: Understand wage breakdowns (basic, allowances).
• Payment: Ensure timely and accurate wage disbursements.
• Record-keeping: Maintain comprehensive payroll records.

Income Tax Act Compliance

• TDS deductions: Deduct TDS from employee salaries where applicable.
• Form issuance: Issue Form 16 to employees and file TDS returns like Form 24Q and 26Q.
• Employee declarations: Obtain declarations from employees for tax purposes.

Labor Laws Compliance

• Working hours & Overtime: Adhere to statutory limits and pay overtime as required.
• Leave policies: Grant statutory leaves and maintain records.
• Other laws: Comply with other relevant laws like the Maternity Benefit Act and Contract Labor Act.

Recent Updates to Payroll compliance regulations (2024-2025)

Income tax changes:

• Revised tax slabs under the New Regime:

• • ₹0 – 3,00,000: 0%

• • ₹3,00,001 – 7,00,000: 5%

• • ₹7,00,001 – 10,00,000: 10%

• • ₹10,00,001 – 12,00,000: 15%

• • Above ₹15,00,000: 30%

Corporate tax updates:

• Domestic companies: No change, remaining at 25%.
• Foreign companies: Corporate tax rate reduced from 40% to 35%.

TDS provisions:

• Revised TDS rates:

• • Section 194D (Insurance Commission): 5% to 2%

• • Section 194H (Commission/Brokerage): 5% to 2%

• • Section 194-O (E-commerce Payments): 1% to 0.1%

Changes to EPF rules:

• Automatic account transfers: Starting April 1, 2024, EPF accounts will automatically transfer when employees change jobs.
• Withdrawal rules: Employees can withdraw 90% of their EPF balance at age 54 and other provisions for unemployment and emergencies.

ESI updates:

• Contribution rate: Set at 0.75% for employees and 3.25% for employers.
• Contract expenditure limit: Increased from ₹5 crores to ₹25 crores.

A well- designed payroll processing checklist will not only make sure that your payroll compliance is in place, but can also streamline your payroll process, minimize errors, and increase the efficiency of your payroll team.

As a leading payroll company in India, TalentPro has helped various 500 companies with their payroll challenges. If you are looking for someone to handle your payroll efficiently, contact us today, and we will provide you with the right payroll solution for your business.