How to Calculate PF, ESI and TDS in Payroll (India, 2026)
A plain-language guide to statutory deductions in Indian payroll — PF, ESI, Professional Tax and TDS — and how to automate them.
Indian payroll carries statutory deductions that are easy to get wrong by hand. Here is how PF, ESI, PT and TDS work at a high level — and why most growing businesses automate them.
Provident Fund (PF)
PF is typically 12% of basic (plus applicable allowances) from both employee and employer, within statutory wage limits. Contributions and returns must be filed monthly.
Employee State Insurance (ESI)
ESI applies to eligible employees below the wage threshold, with employee and employer contributions at prescribed rates, filed monthly.
Professional Tax (PT) and TDS
PT is a state-level slab deduction; TDS on salary depends on the employee’s projected annual income and chosen tax regime. Both need accurate, timely deduction.
Why automate
Rates, thresholds and slabs change and vary by state. Payroll software computes PF, ESI, PT and TDS every cycle and produces ready-to-file registers — removing the risk from month-end.
Frequently asked questions
Can software calculate PF, ESI and TDS automatically?
Yes. MyGroce Payroll computes PF, ESI, Professional Tax and TDS automatically for Indian employers and generates ready-to-file registers.
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