Complete List of Indian Labour Law Penalties in 2026: Fines, Imprisonment, and Compliance Deadlines
If you run a business in India with even one employee, you are subject to at least 6 different labour and tax laws, each carrying its own set of penalties for non compliance.
The problem? There is no single government document that lists all these penalties in one place. The Employees’ Provident Fund Act has its own penalty structure. The ESI Act has a different one. TDS penalties are under the Income Tax Act. Gratuity has its own Act. Minimum wages, bonus, professional tax, and the Factories Act each have separate penalty provisions.
This means business owners, HR managers, and payroll teams are often unaware of the exact penalty they face until a notice lands on their desk.
This guide consolidates every major labour law penalty applicable to Indian employers in 2026. We have included the exact fine amounts, imprisonment terms, applicable sections, due dates, and real penalty scenarios so you know precisely what is at stake.
Bookmark this page. You will need it.
1. Provident Fund (PF/EPF) Penalties
The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952 carries some of the heaviest penalties in Indian labour law. Enforcement has become stricter since EPFO moved to digital filings and real time tracking of ECR submissions.
Due Date
PF contributions must be deposited by the 15th of the following month. For example, September 2026 PF is due by October 15, 2026.
PF Contribution Rates
| Component | Employer | Employee |
|---|---|---|
| EPF | 3.67% of basic | 12% of basic |
| EPS (Pension) | 8.33% of basic (capped at ₹15,000) | Nil |
| EDLI (Insurance) | 0.50% of basic | Nil |
| Admin charges | 0.50% of basic | Nil |
Penalty for Late PF Deposit
Section 14B damages apply when an employer fails to deposit PF by the 15th.
Since June 15, 2024, EPFO has simplified the damages structure to a flat rate:
| Penalty Type | Rate | Section |
|---|---|---|
| Interest on delayed payment | 12% per annum (simple) | Section 7Q |
| Damages (post June 15, 2024) | 1% per month (equivalent to 12% per annum) | Section 14B, Para 32A |
Before June 15, 2024, the damages followed a sliding scale:
| Delay Period | Damages Rate (Per Annum) |
|---|---|
| Up to 2 months | 5% |
| 2 to 4 months | 10% |
| 4 to 6 months | 15% |
| More than 6 months | 25% |
Other PF Penalties
| Violation | Penalty | Section |
|---|---|---|
| Non registration with EPFO | Up to ₹5,000 + ₹500 per day of continuing default | Section 14 |
| Filing incorrect ECR returns | Up to ₹5,000 | Para 36B |
| Non compliance with EPFO orders | Imprisonment up to 3 years + fine | Section 14(1A) |
| Wilful non payment of PF | Imprisonment of 1 to 3 years + fine up to ₹10,000 | Section 14(1) |
| Repeat offence of non payment | Imprisonment of 2 to 5 years + fine up to ₹25,000 | Section 14(2) |
Real Penalty Scenario: Late PF Deposit
Company: 80 employees, average basic salary ₹18,000 per month Monthly PF contribution: ₹1,44,000 (employer) + ₹1,72,800 (employee) = ₹3,16,800 Delay: 5 months (forgot during a busy quarter)
Under the current (post June 2024) rate:
- Damages at 1% per month for 5 months: ₹15,840
- Interest at 12% per annum for 5 months: ₹15,840
- Total penalty: ₹31,680 on top of the ₹3,16,800 you still owe
Under the old slab rate (for defaults before June 2024):
- Damages at 15% per annum for 5 months: ₹19,800
- Interest at 12% per annum for 5 months: ₹15,840
- Total penalty: ₹35,640
And this is just the financial penalty. Persistent defaults can trigger prosecution and imprisonment.
EPFO Vishwas Scheme 2025: In October 2025, EPFO launched the Vishwas settlement scheme at the 238th CBT meeting, allowing employers with long pending damages disputes to settle at reduced rates. Check with your regional EPFO office for current availability.
Related: PF and ESI Compliance: What Every Employer Needs to Know
Related: PF Calculator
2. ESI (Employees’ State Insurance) Penalties
The ESI Act, 1948 applies to establishments with 10 or more employees (in some states, 20 or more) where employees earn up to ₹21,000 per month in gross wages.
Due Date
ESI contributions must be deposited by the 15th of the following month.
ESI Contribution Rates
| Component | Rate |
|---|---|
| Employer contribution | 3.25% of gross wages |
| Employee contribution | 0.75% of gross wages |
| Total | 4% of gross wages |
ESI Penalties
| Violation | Penalty |
|---|---|
| Late payment of contribution | 12% interest per annum for each month of delay |
| Non registration | Up to ₹5,000 |
| Non filing of returns (beyond 3 months late) | Up to ₹1,000 per day of delay |
| Non compliance / prosecution | Imprisonment up to 2 years, or fine up to ₹5,000, or both |
| Repeat offence | Enhanced penalties under ESIC Act |
Real Penalty Scenario: Missed ESI Registration
Company: 25 employees, all earning below ₹21,000 per month Situation: Company was unaware ESI registration is mandatory. Discovered 8 months later.
- Employer contribution due: 3.25% × ₹15,000 average × 25 employees × 8 months = ₹97,500
- Employee contribution due: 0.75% × ₹15,000 × 25 × 8 = ₹22,500
- Total arrears: ₹1,20,000
- Interest at 12% for 8 months: ₹9,600
- Non registration penalty: Up to ₹5,000
- Total liability: ₹1,34,600+
The worst part? The employer must pay both the employer and employee share for the missed period, because you cannot retrospectively deduct from employees’ old salaries.
Related: ESI Calculator
3. TDS (Tax Deducted at Source) Penalties
TDS penalties are governed by the Income Tax Act, 1961 and are among the most commonly triggered penalties for employers. Every employer deducting salary TDS is a “deductor” and must comply with strict deadlines.
Due Dates
| Task | Due Date |
|---|---|
| TDS deposit (salary deduction) | 7th of the following month |
| TDS return filing (Form 24Q) | Quarterly: July 31, Oct 31, Jan 31, May 31 |
| Form 16 issuance to employees | June 15 of the assessment year |
TDS Penalty Structure
| Violation | Penalty | Section |
|---|---|---|
| Late deposit of TDS | 1% per month (or part of month) from deduction date to deposit date | Section 201(1A) |
| Non deduction of TDS | 1% per month from date when TDS was deductible to actual deduction date | Section 201(1A) |
| Late filing of TDS return (Form 24Q) | ₹200 per day until return is filed (capped at TDS amount) | Section 234E |
| Penalty for late/incorrect TDS return | ₹10,000 to ₹1,00,000 | Section 271H |
| Late issuance of Form 16 | ₹100 per day of delay per employee | Section 272A(2) |
| Failure to deduct TDS | Penalty equal to TDS amount | Section 271C |
Real Penalty Scenario: Form 16 Delayed by 30 Days
Company: 100 employees Situation: Form 16 was due by June 15 but issued on July 15 (30 day delay)
- Penalty: ₹100 × 30 days × 100 employees = ₹3,00,000
This is one of the most devastating penalties for small businesses because it scales with employee count and delay duration. A company with 200 employees facing a 45 day delay would owe ₹9,00,000 in penalties alone.
Real Penalty Scenario: TDS Return Filed 6 Months Late
Company: Quarterly TDS of ₹2,50,000 Delay: 180 days
- Section 234E late fee: ₹200 × 180 = ₹36,000 (but capped at ₹2,50,000)
- Section 271H penalty: ₹10,000 to ₹1,00,000 (at officer’s discretion)
- Total: ₹46,000 to ₹1,36,000
Note: If TDS is deposited with interest within one month of the due date and the return is filed, Section 271H penalty is not imposed.
Related: TDS Calculator
Related: TDS Penalties and Consequences of Non Compliance
4. Gratuity Penalties
The Payment of Gratuity Act, 1972 applies to every establishment with 10 or more employees. Gratuity becomes payable when an employee completes 5 years of continuous service and leaves the organisation (through resignation, retirement, death, or disability).
Due Date
Gratuity must be paid within 30 days of it becoming due (i.e., from the date of separation).
Gratuity Amount
Gratuity = (Last drawn basic salary + DA) × 15 / 26 × Years of service
Maximum limit: ₹25,00,000 (as per the 2024 amendment)
Gratuity Penalties
| Violation | Penalty | Section |
|---|---|---|
| Non payment of gratuity | Imprisonment of minimum 6 months (extendable to 2 years) | Section 9 |
| Contravention of any provision | Imprisonment of minimum 3 months, or fine of minimum ₹10,000, or both | Section 9 |
| Delayed payment beyond 30 days | Interest at 10% per annum from due date | Section 7(3A) |
Key Point About Gratuity Imprisonment
Gratuity carries one of the harshest penalty provisions in Indian labour law. The minimum imprisonment for non payment is 6 months. This is not “up to 6 months” but “not less than 6 months.” Courts have the discretion to reduce it only for “adequate and special reasons” recorded in the judgment.
This means an employer who refuses to pay gratuity can potentially face mandatory jail time, not just a fine.
Related: Gratuity Calculator
5. Minimum Wages Penalties
The Minimum Wages Act, 1948 (and the Code on Wages, 2019 where notified) requires every employer to pay at least the minimum wage prescribed by the state government for the relevant category of work.
Minimum Wages Penalty Structure (Code on Wages, 2019)
| Violation | First Offence | Repeat Offence (within 5 years) |
|---|---|---|
| Underpayment of wages | Fine up to ₹50,000 | Imprisonment up to 3 months, or fine up to ₹1,00,000, or both |
| Other wage violations | Fine up to ₹20,000 | Imprisonment up to 1 month, or fine up to ₹40,000, or both |
| Failure to maintain records | Fine up to ₹10,000 | Enhanced penalty |
Under the Older Minimum Wages Act, 1948
| Violation | Penalty |
|---|---|
| Payment below minimum wages | Imprisonment up to 6 months, or fine up to ₹500, or both |
| Repeat offence | Imprisonment up to 1 year, or enhanced fine |
Important: Many states have amended their minimum wages penalties to be more stringent. For example, Delhi amended the Minimum Wages Act in 2025 to increase the maximum fine to ₹50,000 and imprisonment to 3 years for certain violations.
Check your state’s specific minimum wage rates using a professional payroll system that keeps rates updated automatically.
Related: Salary Calculator
6. Bonus Penalties
The Payment of Bonus Act, 1965 applies to every factory and establishment with 20 or more employees. Bonus is payable to employees whose monthly salary does not exceed ₹21,000.
Due Date
Bonus must be paid within 8 months of the close of the accounting year.
Bonus Rates
| Component | Rate |
|---|---|
| Minimum bonus | 8.33% of salary (even if there’s no profit) |
| Maximum bonus | 20% of salary |
Bonus Penalties
| Violation | Penalty | Section |
|---|---|---|
| Non payment of bonus | Imprisonment up to 6 months, or fine up to ₹1,000, or both | Section 28 |
| Contravention of any provision | Imprisonment up to 6 months, or fine up to ₹1,000, or both | Section 28 |
Note on the Bonus Penalty Amount
The ₹1,000 maximum fine under Section 28 may seem small, but the imprisonment provision of up to 6 months makes this a criminal offence. In practice, labour courts often order the employer to pay the full bonus due with interest, in addition to the penalty.
7. Professional Tax Penalties
Professional tax is a state level tax deducted from employee salaries. Each state has its own rules, rates, and penalties. The maximum professional tax in India is capped at ₹2,500 per year per the Constitution (Article 276).
Professional Tax Penalties (Major States)
| State | Due Date | Penalty for Late Payment |
|---|---|---|
| Maharashtra | Last day of the month | 1.25% per month of outstanding amount |
| Karnataka | 20th of the following month | 1.25% per month + penalty equal to 10% of dues |
| West Bengal | 21st of the following month | 1% per month of outstanding amount |
| Tamil Nadu | Varies by local body | Penalty as determined by municipal authority |
| Andhra Pradesh | 10th of the following month | 2% per month of outstanding amount |
| Telangana | 10th of the following month | 2% per month of outstanding amount |
| Gujarat | Last day of the month | 1% per month of outstanding amount |
| Madhya Pradesh | Monthly/Quarterly | Penalty as per state rules |
| Kerala | Half yearly | ₹100 per day of delay |
Important Note
Many business owners forget that professional tax is a dual obligation. The employer must:
- Deduct professional tax from employee salaries
- Pay the employer’s own professional tax
- Obtain a professional tax registration certificate
- File regular returns
Failure to register for professional tax can attract a penalty of 2% to 5% per month of the tax due, depending on the state.
Related: Professional Tax Calculator
8. Factories Act, 1948 Penalties
The Factories Act applies to premises where 10 or more workers (with power) or 20 or more workers (without power) are employed in manufacturing.
Factories Act Penalties
| Violation | Penalty | Section |
|---|---|---|
| General contravention of the Act | Imprisonment up to 2 years, or fine up to ₹1,00,000, or both | Section 92 |
| Continuing offence after conviction | Additional fine up to ₹1,000 per day | Section 92 |
| Accident causing death or serious injury | Fine of minimum ₹25,000 | Section 92 |
| Conviction for accident causing death | Imprisonment up to 3 years + fine of ₹10,000 to ₹2,00,000 | Section 94 |
| Obstruction of inspector | Imprisonment up to 6 months, or fine up to ₹10,000, or both | Section 95 |
| Worker contravening the Act | Fine up to ₹500 | Section 97 |
| Using false fitness certificate | Imprisonment + fine up to ₹1,000 | Section 97 |
OSH Code, 2020 (Where Notified)
The Occupational Safety, Health and Working Conditions Code, 2020 replaces the Factories Act in states where it has been notified. It introduces updated penalties:
| Violation | Penalty |
|---|---|
| General safety violations | Fine up to ₹2,00,000 |
| Incident causing serious injury or death | Imprisonment up to 1 year |
| Non payment of penalty within 90 days | Additional fine of ₹25,000 to ₹2,00,000 |
| Illegal strikes or lockouts | Fine up to ₹50,000 |
| Record maintenance failures | Fine of ₹10,000 to ₹1,00,000 |
9. New Labour Codes: Updated Penalty Framework
India’s four new labour codes (Code on Wages 2019, Industrial Relations Code 2020, Social Security Code 2020, and OSH Code 2020) introduce a revised penalty framework. The Code on Social Security came into force on November 21, 2025.
Key Changes in Penalty Structure
| Area | Old Laws | New Labour Codes |
|---|---|---|
| PF/ESI non compliance | Varied by Act | Fine up to ₹1,00,000 |
| Wilful non payment of social security | Varied | Imprisonment up to 3 years |
| Non registration of employees | Not standardised | ₹50,000 + ₹30,000 per day continuing violation |
| Wage underpayment (first offence) | ₹500 fine | Fine up to ₹50,000 |
| Wage underpayment (repeat offence) | Enhanced fine | Imprisonment up to 3 months + fine up to ₹1,00,000 |
Compounding of Offences
The new codes allow certain offences to be compounded (settled without prosecution):
| Code | Compounding Rate |
|---|---|
| Code on Wages | 50% of maximum fine (not for repeat offences within 5 years) |
| OSH Code | 50% for penalties, 75% for offences punishable with up to 1 year imprisonment |
| IR Code | 50% for fine only offences, 75% for offences with imprisonment up to 1 year |
Master Penalty Reference Table
Here is every major penalty in one table for quick reference:
| Law / Regulation | Violation | Fine / Damages | Imprisonment | Due Date | Section |
|---|---|---|---|---|---|
| EPF Act | Late PF deposit | 12% interest + 1% per month damages | None (civil) | 15th of next month | 7Q, 14B |
| EPF Act | Wilful non payment | Up to ₹10,000 | 1 to 3 years | 15th of next month | 14(1) |
| EPF Act | Repeat PF offence | Up to ₹25,000 | 2 to 5 years | 15th of next month | 14(2) |
| EPF Act | Non registration | ₹5,000 + ₹500/day | None | At threshold | 14 |
| ESI Act | Late contribution | 12% per annum interest | None (civil) | 15th of next month | ESI Act |
| ESI Act | Non registration | Up to ₹5,000 | None | At threshold | ESI Act |
| ESI Act | Prosecution | Up to ₹5,000 | Up to 2 years | Various | ESI Act |
| Income Tax Act | Late TDS deposit | 1% per month interest | None | 7th of next month | 201(1A) |
| Income Tax Act | Late TDS return | ₹200/day (capped at TDS) | None | Quarterly | 234E |
| Income Tax Act | TDS return penalty | ₹10,000 to ₹1,00,000 | None | Quarterly | 271H |
| Income Tax Act | Late Form 16 | ₹100/day per employee | None | June 15 | 272A(2) |
| Gratuity Act | Non payment | Min ₹10,000 | Min 6 months, up to 2 years | Within 30 days | 9 |
| Gratuity Act | Delayed payment | 10% per annum interest | None | Within 30 days | 7(3A) |
| Bonus Act | Non payment | Up to ₹1,000 | Up to 6 months | 8 months after year end | 28 |
| Minimum Wages | Underpayment (1st) | Up to ₹50,000 | None | Monthly | Code on Wages |
| Minimum Wages | Underpayment (repeat) | Up to ₹1,00,000 | Up to 3 months | Monthly | Code on Wages |
| Factories Act | General violation | Up to ₹1,00,000 | Up to 2 years | Ongoing | 92 |
| Factories Act | Death/serious injury | ₹10,000 to ₹2,00,000 | Up to 3 years | Ongoing | 94 |
| Prof. Tax | Late payment | 1% to 2.5% per month (state wise) | None | State specific | State Acts |
Monthly Compliance Calendar: Every Deadline You Cannot Miss
| Date | Task | Applicable Law |
|---|---|---|
| 7th | TDS deposit for previous month | Income Tax Act |
| 10th | Professional Tax deposit (AP, Telangana) | State PT Acts |
| 15th | PF deposit for previous month | EPF Act |
| 15th | ESI deposit for previous month | ESI Act |
| 20th | Professional Tax deposit (Karnataka) | Karnataka PT Act |
| 21st | Professional Tax deposit (West Bengal) | WB PT Act |
| Last day | Professional Tax deposit (Maharashtra, Gujarat) | State PT Acts |
| Quarterly | TDS return (Form 24Q) | Income Tax Act |
| Half yearly | ESI return | ESI Act |
| June 15 | Form 16 issuance | Income Tax Act |
| Annual | PF annual return | EPF Act |
Related: Payroll Compliance Checklist for Indian SMEs
How to Avoid These Penalties: A Practical Checklist
The most common reason small businesses get penalised is not ignorance of the law. It is missed deadlines. The accountant was busy with GST, or the person who handles payroll went on leave, or a payment simply slipped through the cracks.
Here is how to make sure that does not happen:
1. Automate your statutory calculations. Manual PF, ESI, and TDS calculations in Excel are where errors begin. A payroll system like SalaryBox calculates these automatically with the correct rates and caps.
2. Set up compliance reminders. You need alerts at least 3 days before every deadline. SalaryBox has built in compliance reminders that notify you before PF, ESI, and TDS due dates.
3. Generate ECR files directly. If you are manually formatting ECR files for EPFO upload, you are wasting time and creating room for rejection. Payroll software generates these in the correct format with one click.
4. Issue Form 16 on time. This is the penalty most employers underestimate. At ₹100 per day per employee, a 30 day delay for 100 employees costs ₹3 lakh. SalaryBox generates Form 16 with one click, well before the June 15 deadline.
5. Keep records for at least 8 years. Labour law records (attendance, wages, PF challans, ESI contributions) must be maintained for inspection. Digital records in a payroll system are searchable and always available, unlike Excel files on someone’s laptop.
6. Register for all applicable schemes. If you cross 10 employees, check whether PF, ESI, and gratuity registration is required. Non registration itself carries penalties, and the liability is retrospective.
7. Track state level compliance. If you have employees across multiple states, professional tax slabs, LWF requirements, and shops and establishments rules differ. A payroll system with multi state support handles this automatically.
Related: 10 Payroll Mistakes That Can Haunt Your Business
What to Do If You Have Already Received a Penalty Notice
If a penalty notice has already arrived, do not ignore it. Here is what to do:
For EPFO notices (7Q / 14B): Respond within 15 days. Deposit the pending contribution immediately to stop further damages from accruing. If the damages amount is significant, check whether the EPFO Vishwas Scheme applies to your case, as it allows settlement at reduced rates for long pending disputes.
For TDS notices (234E / 271H): File the pending return immediately. Pay the late fee along with the return. If TDS was deposited within one month of the due date, you may be exempt from Section 271H penalty.
For ESI notices: Deposit all arrears with 12% interest. Contact your regional ESIC office to discuss a payment schedule if the amount is large.
For gratuity complaints: These are serious because of the mandatory imprisonment provision. Settle the gratuity amount immediately and obtain a receipt. If there is a dispute about the calculation, use the Gratuity Calculator to verify the correct amount.
In all cases, consult a labour law practitioner if the penalty amount exceeds ₹50,000 or if imprisonment is a possibility.
Frequently Asked Questions
What is the penalty for late PF deposit in India?
Since June 15, 2024, EPFO charges damages at 1% per month of the overdue amount under Section 14B (Para 32A). In addition, interest at 12% per annum applies under Section 7Q. For defaults before June 2024, the old slab rate of 5% to 25% per annum applies depending on the delay period. Persistent non payment can also lead to prosecution with imprisonment of 1 to 3 years.
Can an employer go to jail for not paying gratuity?
Yes. The Payment of Gratuity Act, 1972 prescribes a minimum imprisonment of 6 months for non payment of gratuity under Section 9. This is one of the strictest penalty provisions in Indian labour law, as the court must impose at least 6 months of imprisonment unless “adequate and special reasons” exist for a lighter sentence.
What is the fine for late filing of Form 16?
Under Section 272A(2) of the Income Tax Act, the penalty for late issuance of Form 16 is ₹100 per day of delay per employee. Form 16 is due by June 15 of the assessment year. For a company with 100 employees and a 30 day delay, this amounts to ₹3,00,000 in penalties.
How much is the ESI late payment penalty?
ESIC charges interest at 12% per annum for delayed contribution payments. The contribution (3.25% employer + 0.75% employee) must be deposited by the 15th of the following month. Non registration of an eligible establishment can attract a penalty of up to ₹5,000 and prosecution with imprisonment up to 2 years.
What happens if I don’t pay minimum wages?
Under the Code on Wages, 2019, the first offence of underpaying wages attracts a fine of up to ₹50,000. A repeat offence within 5 years can lead to imprisonment up to 3 months, or a fine up to ₹1,00,000, or both. Under the older Minimum Wages Act, 1948, the penalty is imprisonment up to 6 months, or a fine up to ₹500, or both.
What is the penalty for not paying bonus?
Under Section 28 of the Payment of Bonus Act, 1965, non payment of bonus can lead to imprisonment up to 6 months, or a fine up to ₹1,000, or both. Bonus must be paid within 8 months of the close of the accounting year. The minimum bonus rate is 8.33% of salary, and the maximum is 20%.
Are the new labour codes applicable from 2025?
The Code on Social Security, 2020 came into force on November 21, 2025. The Code on Wages was notified in 2019 and is applicable in many states. The Industrial Relations Code and OSH Code are being implemented on a state by state basis. The new codes generally increase penalty amounts and introduce compounding provisions.
Does SalaryBox help with labour law compliance?
Yes. SalaryBox automatically calculates PF, ESI, professional tax, and TDS deductions with the correct rates and caps. It generates ECR files, sends compliance deadline reminders, creates payslips and Form 16, and supports multi state professional tax calculations. This eliminates the manual errors and missed deadlines that cause most labour law penalties.
Conclusion
Indian labour law penalties are not theoretical risks. EPFO, ESIC, and the Income Tax Department have moved to digital enforcement with automated penalty calculations. A single missed PF deposit can trigger Section 14B damages. One delayed Form 16 can cost lakhs. And gratuity non payment carries mandatory imprisonment.
The businesses that avoid these penalties are not the ones with the best lawyers. They are the ones with systems that automate calculations, track deadlines, and generate compliant filings before the due date.
If you are running payroll on spreadsheets or manual processes, every month that passes without a penalty is luck, not compliance. Eventually, a notice will come.
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