PF ESI TDS Compliance India: Employer Guide 2026

Meta description: PF ESI TDS compliance India employer guide for 2026: coverage thresholds, deposit dates, quarterly forms, penalties and practical payroll checks.

Missing one payroll date can create three separate defaults. A delayed PF or ESI payment attracts interest and possible damages; a late TDS statement costs ₹200 per day under section 427 of the Income-tax Act, 2025. This PF ESI TDS compliance India employer guide gives business owners one practical system for deciding coverage, closing payroll and proving every payment.

India's payroll law changed recently. The four labour codes took effect on 21 November 2025, and the Social Security (Central) Rules, 2026 were notified on 8 May 2026. TDS on payments made from 1 April 2026 is governed by the Income-tax Act, 2025. Old form names and section numbers still appear in payroll software, historical records and some government material, so an employer must match the law, form and portal to the correct period. Sources in this guide were checked on 13 September 2026; always check a later notification before changing payroll settings.

Which employers must register for PF and ESI?

Do not begin with the salary register. Begin with the establishment, headcount and location. PF and ESI coverage attach to the legal tests, not to whether the owner considers the team "permanent".

The First Schedule to the Code on Social Security, 2020 sets these central thresholds:

• Chapter III, Employees' Provident Fund, applies to every establishment with 20 or more employees.
• Chapter IV, Employees' State Insurance Corporation, applies to every establishment with 10 or more persons, other than a seasonal factory.
• ESI may also apply to a notified hazardous or life-threatening occupation even where only one employee works in the establishment.

The 10-person ESI test does not mean every person will pay a contribution. Establishment coverage and employee contribution coverage are separate questions. Official ESIC guidance continues to use a monthly wage ceiling of ₹21,000 for ordinary employees. EPFO guidance continues to use ₹15,000 a month as the statutory wage ceiling for mandatory member contribution, subject to the scheme rules and the employee's existing membership.

That distinction catches growing companies. An employer may cross the establishment threshold because it has 23 people, even if several earn above the contribution ceiling. An existing EPF member does not automatically stop being a member merely because wages later rise above ₹15,000. Likewise, a new hire above a ceiling, an international worker, a contractor's worker and an employee with a disability can require a separate analysis.

Count people before classifying them

Build a monthly headcount reconciliation containing:

1. employees on the payroll;
2. probationers, trainees and fixed-term employees;
3. people supplied through contractors or manpower agencies;
4. employees who joined or left during the month;
5. employees working at branches, warehouses or factories; and
6. anyone excluded, with the legal reason and supporting document.

Do not let the vendor invoice hide contract labour. The principal employer has direct compliance exposure under social-security law even when an immediate employer or contractor processes wages. Obtain the contractor's employee list, UAN or insurance numbers, contribution records and paid challans before releasing the monthly bill.

Treat central and state obligations separately

PF and ESI are central social-security obligations. Professional tax, labour welfare fund, minimum wages, payslips, attendance, leave and Shops and Establishments requirements can be state-specific. A company with staff in Gujarat, Maharashtra and Karnataka needs three state checks even if payroll is run from one Bengaluru office.

This guide therefore does not replace a state payroll register. It gives you the central PF, ESI and TDS spine around which state obligations should be mapped.

What must be paid each month for PF and ESI?

The payment calculation begins with wages, not gross cost-to-company. Use the wage definition and scheme rules applicable to the period. Do not assume that renaming regular salary as an allowance removes it from the base.

PF contribution and ECR control

The EPFO employer portal states the standard operational contribution as:

• employee contribution: 12% of applicable wages;
• employer EPF share: 3.67%;
• employer EPS share: 8.33%, subject to pension eligibility and the wage ceiling;
• Employees' Deposit Linked Insurance contribution: 0.50%; and
• EPF administration charge: 0.50%, subject to the applicable minimum.

Some notified establishments have a 10% rate, and higher-wage or voluntary contribution cases need separate treatment. Do not force every employee into the 12% and ₹15,000 template.

File the Electronic Challan-cum-Return, or ECR, and pay the contribution by the 15th of the following month. For August 2026 wages, the normal deadline is 15 September 2026. EPFO's revamped ECR applies from wage month September 2025. Circular No. Compliance/ECR Revamp/2025/12997 dated 26 September 2025, available through the official EPFO portal, separates return approval from payment, validates data and requires month-wise sequential filing. Uploading a file is not payment. Preserve the approved return, challan and bank confirmation.

Under sections 127 and 128 of the Code on Social Security, 2020, arrears can attract notified interest and damages that may reach the amount of the arrears. EPFO's system also calculates legacy section 7Q interest and may apply section 14B damages to periods governed by the earlier law. The safe control is simple: approve ECR early enough to resolve validation errors before the 15th.

ESI contribution and employee mapping

The ESIC guide for employers states the current combined rate as 4% of wages:

• employer share: 3.25%; and
• employee share: 0.75%.

An employee whose daily average wage is up to ₹176 is exempt from the employee's share, but the employer must still pay its own share. The employer must pay online through the ESIC portal within 15 days after the last day of the calendar month in which the contribution falls due. In normal monthly processing, that means the 15th of the following month.

For every new covered employee, complete registration and verify the insurance number before the contribution file is finalised. Duplicate identities, wrong dates of joining and omitted days create benefit problems later. Reconcile paid days and wages to the attendance register instead of merely copying the payroll total.

How does TDS fit into the payroll calendar in 2026?

PF and ESI are employee social-security contributions. TDS is income tax withheld by the employer and deposited for the employee. They use different laws, portals, identifiers and returns, even though all three begin with the same payroll.

For salary paid on or after 1 April 2026, section 392 of the Income-tax Act, 2025 governs salary TDS. The employer estimates the employee's taxable salary for the tax year, considers valid declarations and evidence, calculates tax at the applicable rates, and deducts it across the remaining payroll months. Do not apply one flat percentage to every employee.

The Income Tax Department's transition guidance confirms that the normal TDS deposit deadline remains the 7th of the following month under rule 218 of the Income-tax Rules, 2026. For a non-government deductor, TDS deducted in March is normally due by 30 April.

Salary TDS reporting also has a new name. Form 138, previously Form 24Q, is the quarterly statement for salary deductions under the 2025 Act. The official Form 138 manual gives these deadlines:

Quarter | Payroll period | Form 138 deadline

Q1 | April to June | 31 July

Q2 | July to September | 31 October

Q3 | October to December | 31 January

Q4 | January to March | 31 May of the following year

For periods up to 31 March 2026, use the Income-tax Act, 1961, its section 192 and Form 24Q. A correction for an old quarter does not become a Form 138 filing merely because you submit it after April 2026.

What does a TDS delay cost?

The Income-tax Act, 2025 separates deposit default from statement default:

• Section 398 provides interest for failure to deduct or pay TDS: 1% per month or part of a month for delayed deduction and 1.5% per month or part of a month after deduction until payment.
• Section 427 charges ₹200 per day for a late quarterly TDS statement, capped at the tax deductible or collectible for that statement.
• Section 461 permits a penalty from ₹10,000 to ₹1,00,000 for a late or incorrect prescribed statement. The statutory protection for delay requires payment of tax, fee and interest and filing within one month of the prescribed time; it does not excuse an incorrect statement.

Example: if a quarterly statement carrying ₹80,000 of TDS is filed 20 days late, the section 427 fee is ₹4,000. That is separate from interest on a late deposit. Filing on time with an unpaid challan, or paying on time without filing the statement, solves only half the problem.

What is the monthly PF ESI TDS compliance calendar?

A useful calendar starts before payday. If your team closes payroll on the last working day and begins compliance on the sixth of the next month, one leave day or portal error can cause a default.

Working date | Control | Evidence to retain

20th-24th | Freeze joiners, exits, attendance, leave and contractor headcount | Approved change list

25th-27th | Test PF/ESI coverage and wage bases; estimate salary TDS | Exception report

28th-payday | Approve payroll and deductions | Signed payroll register

By 3rd | Reconcile payroll, general ledger and prior-month corrections | Reconciliation sheet

By 7th | Deposit normal monthly TDS | Challan and bank confirmation

By 10th | Upload and validate EPF ECR and ESIC contribution data | Portal validation reports

By 12th | Clear rejected records and fund statutory bank account | Exception closure record

By 15th | Pay EPF and ESI contributions | Paid challans and portal receipts

Quarterly | File Form 138 by 31 Jul, 31 Oct, 31 Jan or 31 May | Filed statement and acknowledgement

Set internal dates three working days before the legal date. A Sunday, bank outage or portal queue is predictable operational risk, not a legal extension.

Use one employee-level reconciliation

Create one row per employee with payroll ID, PAN, UAN, ESIC insurance number, joining and exit dates, paid days, applicable wages, PF, ESI, taxable salary and TDS. Then run four tests:

• payroll deduction equals the employee-wise statutory file;
• employer contribution equals the payroll expense and payable ledger;
• challan amount equals the approved file and bank debit; and
• quarterly TDS statement equals all three monthly challans and employee PAN records.

Investigate differences before filing. A ₹500 mismatch spread across 200 employees is not immaterial when it blocks individual credits or benefits.

How do you make the process audit-ready?

Ownership matters more than another spreadsheet. Assign a preparer, reviewer and payer. No person should be able to change employee master data, approve the statutory file and release payment alone.

Keep a monthly evidence pack containing:

• approved payroll register and bank-transfer total;
• joiner, leaver and wage-change approvals;
• contractor headcount and paid contribution evidence;
• PF ECR, challan and payment receipt;
• ESIC contribution history and paid challan;
• TDS computation, challan and booking details;
• portal acknowledgements and error-resolution notes; and
• one signed reconciliation showing that payroll, ledger, filings and bank agree.

Retain correction statements and their reason separately. Never overwrite the original file. An auditor or inspector needs the chain from error to correction, not a folder that looks as though the error never happened.

This is where a generic calendar usually fails. It tells every business that the 7th and 15th exist, but it does not decide which employees, states, contractors or regulations apply to your establishment. Compliance Radar creates a business-specific compliance timeline across central, state, municipal and sector authorities. Check the pricing if missed applicability, not data entry, is the real risk in your current process.

Frequently asked questions

Is PF mandatory once an establishment reaches 20 employees?

Chapter III and the First Schedule to the Code on Social Security, 2020 apply to every establishment with 20 or more employees. Employee-level contribution treatment can still differ based on wages, prior membership and the applicable scheme. Document both the establishment test and each exception.

Is ESI mandatory at 10 employees across India?

The Code's First Schedule applies Chapter IV to establishments with 10 or more persons, other than a seasonal factory, subject to the benefit commencement and notifications contemplated by the Code. Coverage can also extend to notified hazardous activities below that threshold. Verify the establishment's location, activity and current ESIC implementation notification.

Are PF and ESI both due on the 15th?

In the normal monthly cycle, yes. EPFO requires monthly ECR payment by the 15th of the following month. ESIC requires online payment within 15 days after the end of the calendar month. Treat the 12th as the internal deadline so rejected records can be repaired.

Is Form 24Q still used for salary TDS in 2026?

Only for periods governed by the Income-tax Act, 1961, including corrections for those periods. For salary TDS from 1 April 2026 under the Income-tax Act, 2025, the quarterly statement is Form 138. The filing dates remain 31 July, 31 October, 31 January and 31 May.

What if an employee's wage rises above the PF or ESI ceiling?

Do not stop deductions automatically. EPF membership can continue after wages rise above the entry ceiling. ESI has contribution-period rules that can continue coverage after a wage increase during the period. Check the scheme and effective date, record the decision and change payroll only after review.

Who is responsible when a contractor does not pay PF or ESI?

The principal employer cannot safely treat the contractor's statutory duties as somebody else's problem. Collect employee-level contribution data and paid challans, reconcile them to attendance, and make compliance evidence a condition for invoice approval.

Can paying the challan cure a late TDS return?

No. Deposit and statement filing are separate duties. Section 427 can charge ₹200 per day for the late statement even where the tax was deposited. Section 461 can also apply to a late or incorrect statement, subject to its specific relief conditions.

Close payroll with proof, not assumptions

Good PF ESI TDS compliance in India is not three reminders on a phone. It is one employee-level record that decides coverage, calculates the right base, pays through the correct portal and preserves proof that payroll, challans, returns and bank entries agree.

Set internal deadlines before the 7th and 15th, review contractor workers, use Form 138 for salary TDS from April 2026 and keep state obligations beside the central calendar. Then make the calendar specific to your business instead of copying a generic list. Check your compliance posture free at complianceradar.in and get every applicable deadline, scheme and regulatory change in one accountable timeline.