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Ananya Shrivastava
Ananya Shrivastava is a Content Writer specialising in finance-focused news, blogs, and long-form articles on Indian markets, RBI policy, personal finance, and lending. She has authored over 450 blogs and 250 news pieces, combining technical knowledge with rigorous research to simplify complex financial concepts into clear, engaging content. With a marketing-driven lens and sharp editorial judgment, she consistently achieves top Google rankings while ensuring every claim is backed by verified data.
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Payroll is the process a company uses to calculate and pay its employees’ salaries, including applicable deductions such as EPF, ESI, and TDS. The process runs from gross pay through deductions to the final net amount, plus the government filings that follow.
Key Takeaways
Each company requires payroll for the timely payment of salaries. HR or a finance team usually manages it. The work includes salary calculation, applicable tax and statutory deductions, and payslip generation, usually on a monthly basis. Where applicable, missed deductions or late filings can result in interest, penalties, or other consequences
Payroll is how a company pays its employees each month, from calculating salary and applying statutory deductions to transferring net pay into each employee's bank account.
Payroll is not a single bank transfer. It starts with attendance and salary data, moves through deduction calculations for EPF, ESI, and TDS, and ends with a payslip and government filing. One incorrect figure at any stage can lead to a compliance notice.
A payroll structure has three parts, which are earnings, deductions, and net pay, and together these decide how much money an employee actually receives each month.
Basic pay is determined by the employer's salary structure. EPF contributions are generally calculated on basic wages plus applicable dearness allowance and retaining allowance, subject to the statutory wage ceiling.
Payroll calculation follows one formula. Net pay equals gross pay minus EPF, ESI, professional tax, and TDS.
Example: Priya Sharma is a content writer in Delhi. She earns a gross monthly salary of ₹35,000, and her basic pay is fixed at ₹15,000.
This EPF amount matches the cap set under the EPF Scheme, 2026 notification. Her ₹35,000 monthly gross salary is above the ESI wage ceiling. However, if she was already covered and crossed the threshold during a contribution period, coverage may continue until that period ends.
Common payroll deductions in India include EPF, ESI, professional tax and TDS, depending on the employee's eligibility and applicable rules. Each one has a different wage limit and a different purpose.
EPF is governed by EPFO. ESI is administered by ESIC. Both bodies change limits and rates only through official gazette notifications.
Gross salary is what an employer agrees to pay before any deductions are made. Net salary is the amount that actually lands in the employee's account after EPF, ESI, tax, and other cuts.
*T&C Apply
This gap between the two figures often confuses job seekers reading an offer letter. It also matters for loan applications, since most lenders on marketplaces like LoansJagat check net salary and bank credits, not the gross figure on a CTC sheet.
Here are the three steps in the payroll process:
A missed post-payroll deadline draws interest and penalties from EPFO or the tax department.
Employers must deposit EPF, ESI, and TDS within fixed monthly deadlines. Missing any deadline attracts penalties under labour or tax law.
Payroll decides how much money reaches an employee's account each month. It rests on rules set by EPFO, ESIC, and the Income Tax Department, and any error in these calculations affects both compliance and take-home pay. Anyone comparing a job offer or a loan eligibility figure should check the net salary on a payslip, not the gross number on a CTC sheet.
1. What is payroll?
Payroll is the process a company uses to calculate and pay employee salaries along with required deductions.
2. Who handles payroll in a company?
HR or the finance team runs payroll, sometimes with the help of payroll software.
3. What is the difference between payroll and salary?
Salary is the amount paid to an employee. Payroll is the process used to calculate and release that amount.
4. Is EPF applicable for all employees?
No. EPF applies to eligible employees of covered establishments. The statutory contribution is generally calculated up to the ₹15,000 monthly wage ceiling, although higher-wage contributions may be permitted in certain circumstances.
5. What is the ESI salary limit for 2026?
In 2026, people earning a monthly gross salary of ₹21,000 will be covered under the ESI scheme. This limit increases to ₹25,000 for disabled people.
6. What is the procedure for TDS deduction on salary?
Each month, employers estimate the employee's likely annual income and tax liability, then deduct TDS in proportion to the income tax slab the employee falls into.
7. What documents does payroll require?
Payroll needs attendance data, PAN, bank details, investment declarations, and salary structure records.
8. What is a payslip?
A payslip is the monthly statement containing the gross salary and all other deductions.
9. Is registration necessary for EPF and ESI for all companies?
Registration for EPF is usually required for companies having 20 or more employees. ESI applies to establishments covered under the ESI Act and applicable notifications when the prescribed employee-count and wage conditions are met.
10. Why does net salary differ from the offered salary?
Net salary is lower than the offered gross salary because of EPF, ESI, professional tax, and TDS.
