Once you hire your first salaried employees, part of every payslip stops belonging to you. Provident Fund, ESI, professional tax, and TDS are amounts you either deduct from an employee or add on top as an employer, and then deposit with the government by fixed monthly deadlines. Getting the thresholds and rates right from your first hire protects you from penalties, interest, and the messy back-pay problem that shows up during due diligence. Here is what a first-time Indian founder actually needs to run.
Provident Fund (EPF)
The Employees' Provident Fund is a retirement savings scheme run by the EPFO. Registration becomes mandatory once you employ 20 or more persons, though you can register voluntarily earlier.
- Contribution rate: 12 percent from the employee and 12 percent from the employer, calculated on Basic pay plus Dearness Allowance.
- Wage ceiling: the statutory ceiling is 15,000 rupees per month. You must contribute at least on this amount; contributing on full salary above it is optional and is your policy choice.
- Where the employer 12 percent goes: 8.33 percent to the Employees' Pension Scheme (capped at 15,000 rupees, so a maximum of 1,250 rupees per month) and 3.67 percent to the PF account.
- Extra employer costs: 0.50 percent administrative charges (minimum 500 rupees per month) and 0.50 percent EDLI insurance (capped at 75 rupees per employee). So your true employer cost is roughly 13 percent, not 12.
File the Electronic Challan cum Return (ECR) and remit payment by the 15th of the following month. Note that proposals to raise this wage ceiling have been discussed from time to time, but none is yet in force, so continue to use 15,000 rupees.
Employees' State Insurance (ESI)
ESI is a medical and cash-benefit scheme run by ESIC. It applies to establishments with 10 or more employees (20 in Maharashtra and Chandigarh), and it covers every employee whose gross wages are 21,000 rupees per month or less (25,000 rupees for employees with disability).
- Employee contribution: 0.75 percent of gross wages.
- Employer contribution: 3.25 percent of gross wages, giving a combined 4 percent.
- An employee earning above 21,000 rupees is outside ESI, so higher-paid staff do not attract this deduction.
ESI runs on two fixed contribution periods, April to September and October to March, and monthly payment is due by the 15th of the following month.
Professional Tax
Professional tax is levied by state governments, not the centre, so it does not exist everywhere. States such as Maharashtra, Karnataka, West Bengal, Tamil Nadu, Telangana, and Gujarat charge it, while states like Delhi, Haryana, Uttar Pradesh, and Rajasthan do not. Under Article 276 of the Constitution, the annual amount can never exceed 2,500 rupees per person.
The exact slab depends on your state and the employee's salary. In Maharashtra, for example, it works out to 200 rupees a month with 300 rupees in the final month, reaching the 2,500 rupee annual cap, and some categories of workers can be exempt under the state's own rules. As the employer, you deduct professional tax from salary and deposit it with the state, so always check the current slab and exemptions for the state where the employee works.
TDS on Salary
Under Section 192 of the Income Tax Act, you must deduct tax at source from salaries. Unlike PF or ESI, there is no flat rate: you estimate each employee's annual income, apply their income tax slab under their chosen regime, and spread the resulting tax evenly across the twelve months. Deposit the deducted TDS by the 7th of the following month, file the quarterly return in Form 24Q, and issue Form 16 to each employee after year end.
The founder's monthly checklist
- By the 7th: deposit salary TDS for the previous month.
- By the 15th: remit PF (ECR) and ESI for the previous month.
- Monthly or as your state requires: deposit professional tax.
- Quarterly: file Form 24Q for TDS; keep PF and ESI numbers active for every eligible hire.
A note on timing: the four new Labour Codes, including the Code on Social Security, took effect on 21 November 2025, but the existing EPF and ESI rates and ceilings above continue to apply until the detailed rules are fully rolled out. Missing these deposits triggers interest and penalties, and unpaid PF or ESI liabilities are among the first things investors flag in diligence, so build these deductions into your payroll from your very first hire.