If there is one thing that keeps Indian business owners awake at night, it is compliance. Not competition, not cash flow, not hiring — compliance. And for good reason. India’s statutory compliance framework is among the most complex in the world, with overlapping central and state laws, monthly filing deadlines that carry automatic penalties for even a single day of delay, and regulations that change frequently enough that what was correct last quarter may be wrong this quarter.

The four Labour Codes that became fully operational alongside the Income Tax Act 2025 in April 2026 have added another layer of complexity. Wage definitions have been redrawn. PF and ESI contribution bases have changed. TDS sections have been renumbered. Form 16 has been replaced by Form 130. And the penalties for non-compliance have been significantly increased, with some violations now carrying fines of up to Rs 20 lakhs.

This guide is the definitive reference for understanding every statutory compliance obligation that Indian businesses must meet in 2026. We cover Provident Fund, Employee State Insurance, Tax Deducted at Source, Professional Tax, Labour Welfare Fund, Gratuity, and the compliance requirements under the new Labour Codes. For each, we explain the rules, the rates, the deadlines, the penalties, and how payroll software like SalaryBox automates the entire process.

The 2026 Monthly Compliance Calendar Every Indian Business Must Follow

Before diving into individual compliance areas, here is the complete monthly timeline that your business must follow. Missing any of these deadlines triggers automatic penalties with no grace period.

Deadline	Compliance Task	Applicable To	Penalty for Missing
7th	Deposit TDS on salaries (Section 392 of IT Act 2025)	All employers deducting tax	Rs 200/day + 1.5% monthly interest
15th	PF contribution deposit and ECR filing	Establishments with 20+ employees (or opted-in)	12% interest + 5-25% damages
15th	ESI contribution deposit	Establishments with 10+ employees (gross wage up to Rs 21,000)	12% interest + prosecution risk
15th-30th	Professional Tax deposit (varies by state)	Employers in states that levy PT	Rs 1,000-5,000/month (varies by state)
28th-31st	Salary payment and payslip distribution	All employers (Code on Wages)	Up to Rs 20,000 per offence
Quarterly	TDS return filing (Form 24Q/27Q)	All employers deducting TDS	Rs 200/day (max = TDS amount)
Quarterly	ESI return filing	ESI-registered establishments	Late filing penalties apply
Annual (June)	Form 130 (replacing Form 16) to employees	All employers deducting TDS	Rs 500/day per employee
Annual	PF annual return	PF-registered establishments	Penalties and prosecution

Provident Fund (PF) Compliance: Complete Guide for 2026

The Employees Provident Fund is the most significant statutory deduction for Indian employers. Under the Code on Social Security 2020, the rules have been updated to align with the new definition of wages.

Who Must Register for PF?

Every establishment employing 20 or more persons is mandatorily covered under the EPF Act. Establishments with fewer than 20 employees can voluntarily opt in. Once an establishment is covered, it remains covered even if the employee count drops below 20. Individual employees drawing wages above Rs 15,000 per month can opt out at the time of joining, but once enrolled, they cannot withdraw during the same employment.

PF Contribution Rates for 2026

Component	Rate	Calculated On
Employee PF Contribution	12% of wages	Basic + DA (up to Rs 15,000 or actual, per company policy)
Employer PF Contribution (EPF)	3.67% of wages	Same base as employee contribution
Employer Pension Contribution (EPS)	8.33% of wages	Basic + DA up to Rs 15,000 ceiling for pension
Employer EDLI Contribution	0.50% of wages	Basic + DA up to Rs 15,000
Admin Charges	0.50% + 0.01%	Total wages of all employees

New Wage Definition Under Labour Codes

The Code on Social Security redefined wages to mean all remuneration paid in money, excluding allowances that do not exceed 50 percent of total remuneration. In practical terms, this means basic salary must be at least 50 percent of gross wages. If a company had structured basic at 30 percent with heavy allowances to minimise PF liability, that structure is no longer compliant. The PF base has effectively increased for many employees, and companies that have not restructured salaries face significant compliance risk.

PF Penalties and Consequences

Violation	Penalty	Additional Consequences
Late deposit (up to 2 months)	12% interest per annum + 5% damages	EPFO notice to employer
Late deposit (2-4 months)	12% interest + 10% damages	Show cause notice, potential prosecution
Late deposit (4-6 months)	12% interest + 15% damages	Prosecution proceedings initiated
Late deposit (6+ months)	12% interest + 25% damages	Criminal prosecution, imprisonment up to 3 years
Non-registration	Up to Rs 1 lakh	Retrospective liability for all past months
Wrong reporting of wages	Difference amount + damages + interest	Assessment proceedings, recovery action

Employee State Insurance (ESI) Compliance: What You Must Know

ESI provides medical, sickness, maternity, and injury benefits to employees in the lower income bracket. The compliance requirements are strict and the consequences of non-compliance can include criminal prosecution.

ESI Applicability and Rates

Parameter	Current Rule (2026)
Establishment Threshold	10 or more employees (some states: 20)
Employee Wage Ceiling	Rs 21,000 per month gross wages
Employer Contribution	3.25% of gross wages
Employee Contribution	0.75% of gross wages
Total Contribution	4% of gross wages
Contribution Period	April-September and October-March
Benefit Period	Starts after contribution period

Important: Once an employee is covered under ESI during a contribution period, they remain covered for the entire benefit period even if their wages increase above Rs 21,000 during that time. Contribution must continue on actual wages for the duration of the contribution period. SalaryBox automatically handles this continuation rule which many employers get wrong with manual systems.

TDS on Salary: New Rules Under Income Tax Act 2025

The Income Tax Act 2025, which replaced the 1961 Act from April 2026, has brought significant changes to how TDS on salary is calculated, deducted, and reported.

Key Changes Effective April 2026

• Section 192 has been renumbered to Section 392 for TDS on salary deductions.
• Form 16 has been replaced by Form 130 as the annual TDS certificate for employees.
• The concept of Tax Year has replaced Assessment Year and Previous Year terminology.
• The new tax regime has been updated with revised slabs and a higher rebate limit under Section 87A.
• Standard deduction of Rs 75,000 is available under the new tax regime.

New Tax Regime Slabs for Tax Year 2026-27

Income Slab	Tax Rate
Up to Rs 4,00,000	Nil
Rs 4,00,001 to Rs 8,00,000	5%
Rs 8,00,001 to Rs 12,00,000	10%
Rs 12,00,001 to Rs 16,00,000	15%
Rs 16,00,001 to Rs 20,00,000	20%
Rs 20,00,001 to Rs 24,00,000	25%
Above Rs 24,00,000	30%

Employees with total taxable income up to Rs 12,00,000 get full tax rebate under Section 87A, making their effective tax zero. SalaryBox automatically calculates TDS under both old and new regimes for each employee, allowing them to choose the most beneficial option and ensuring accurate monthly deductions throughout the year.

Professional Tax: State-by-State Compliance Guide

Professional tax is levied by state governments and varies significantly across India. Not all states levy professional tax, and among those that do, the rates, slabs, and filing frequencies differ.

State	Max Monthly PT	Annual Cap	Filing Frequency	Applies Above	Penalty for Late Filing
Maharashtra	Rs 300 (Feb), Rs 200 (others)	Rs 2,500	Monthly	Rs 7,500/month	Rs 1,000/month + interest
Karnataka	Rs 200	Rs 2,500	Monthly	Rs 15,000/month	1.25% per month
West Bengal	Rs 200	Rs 2,500	Monthly	Rs 10,000/month	Rs 5/day
Tamil Nadu	Rs 208	Rs 2,500	Half-yearly	Rs 21,000/half-year	2% per month
Andhra Pradesh	Rs 200	Rs 2,500	Monthly	Rs 15,000/month	2% per month
Telangana	Rs 200	Rs 2,500	Monthly	Rs 15,000/month	2% per month
Gujarat	Rs 200	Rs 2,500	Monthly	Rs 12,000/month	Rs 5/day
Madhya Pradesh	Rs 208	Rs 2,500	Monthly	Rs 18,750/month	Interest + penalty
Kerala	Rs 208	Rs 2,500	Half-yearly	Rs 16,667/month	12% per annum
Delhi	N/A	N/A	N/A	N/A	N/A (No PT in Delhi)
Uttar Pradesh	N/A	N/A	N/A	N/A	N/A (No PT in UP)

For businesses with employees across multiple states, SalaryBox automatically applies the correct professional tax rate based on each employee’s registered work state. When state governments revise PT slabs, the system updates automatically, eliminating the risk of applying outdated rates.

Labour Code Compliance: The New Rules Businesses Must Follow

The four Labour Codes have consolidated 29 central labour laws into a unified framework. Here are the compliance requirements that directly impact payroll and HR operations.

Labour Code	Key Payroll Impact	Compliance Requirement
Code on Wages	Wages redefined: basic must be 50% of gross; affects all calculations	Salary restructuring, payslip mandate, payment within due date
Code on Social Security	PF, ESI, gratuity, maternity benefits under unified framework	Registration, contribution, filing per new definitions
OSH Code	Working hours (8/day, 48/week), overtime at 2x rate, 144-hr quarterly cap	Attendance tracking, OT calculation, documentation
IR Code	Standing orders, grievance mechanism, retrenchment rules	Policy documentation, dispute resolution process

Escalated Penalties Under Labour Codes 2026

The Labour Codes have significantly increased penalties compared to the older laws they replaced. Here is the penalty framework that businesses must be aware of.

Violation	First Offence	Repeat Offence
Non-payment of wages	Fine up to Rs 50,000	Fine up to Rs 1 lakh or imprisonment up to 3 months
Not providing payslips	Fine up to Rs 20,000	Fine up to Rs 40,000
Overtime violations	Fine up to Rs 50,000	Fine up to Rs 2 lakhs or imprisonment up to 6 months
Non-registration under SS Code	Fine up to Rs 1 lakh	Fine up to Rs 5 lakhs
False information in returns	Fine up to Rs 1 lakh	Fine up to Rs 5 lakhs or imprisonment
Contravention of OSH provisions	Fine up to Rs 2 lakhs	Fine up to Rs 5 lakhs or imprisonment up to 6 months
Fatal accident due to non-compliance	Fine up to Rs 5 lakhs + imprisonment up to 2 years	Fine up to Rs 20 lakhs + imprisonment up to 5 years

How SalaryBox Automates Statutory Compliance for Indian Businesses

The compliance landscape described above is genuinely overwhelming for any business owner or HR professional trying to manage it manually. The number of rules, rates, deadlines, and exceptions makes human error virtually inevitable. This is exactly the problem SalaryBox was designed to solve.

Automatic Calculation Engine

When you run payroll in SalaryBox, every statutory calculation happens automatically. PF contributions are computed using the correct wage base with the new definition under Labour Codes. ESI eligibility is checked against the Rs 21,000 threshold and contributions are calculated for eligible employees. TDS is computed based on each employee’s chosen tax regime with projected annual income calculations updated each month. Professional tax is applied based on the employee’s registered work state. And gratuity provision is maintained for all eligible employees.

Filing-Ready Outputs

SalaryBox does not just calculate. It generates the exact outputs needed for filing. PF ECR files are generated in the format required by the EPFO portal, ready for direct upload. ESI contribution registers match the ESIC filing format. TDS challans are generated for deposit, and quarterly 24Q data is prepared for return filing. Professional tax registers are maintained per state requirements.

Compliance Updates

When the government changes a rate, updates a threshold, or introduces a new rule, SalaryBox updates its calculation engine. This means you do not need to track government notifications, read through gazettes, or update Excel formulas. The next time you run payroll, the new rules are already applied. This is not compliance made easier. This is compliance that runs itself.

Statutory Compliance Checklist for New Indian Businesses

If you are setting up a new business or have recently crossed an employee threshold that triggers new compliance requirements, here is a complete checklist of registrations and ongoing obligations.

Registration	When Required	Where to Register
PAN and TAN	Before starting business operations	Income Tax Department (incometax.gov.in)
PF Registration	When you reach 20 employees (or voluntarily)	EPFO Unified Portal (unifiedportal-emp.epfindia.gov.in)
ESI Registration	When you reach 10 employees with wages up to Rs 21,000	ESIC Portal (esic.gov.in)
Professional Tax	Immediately when operating in PT-applicable state	State PT department (varies by state)
Shops & Establishment	Within 30 days of starting operations	Local municipal or labour department
Labour Welfare Fund	When applicable per state rules	State labour department
Gratuity Insurance	When you reach 10 employees	LIC or approved insurance provider

Frequently Asked Questions About Statutory Compliance

What is the penalty if my business misses the PF deposit deadline by just one day?

Even a single day of delay attracts 12 percent per annum interest on the late amount plus damages starting at 5 percent of the contribution amount. EPFO enforces this strictly through their automated systems. SalaryBox helps prevent this by generating reminders before deadlines and preparing challans as soon as payroll is processed.

Do I need to comply with PF and ESI if I have only 10 employees?

PF is mandatory for establishments with 20 or more employees, though voluntary registration is possible for smaller businesses. ESI becomes mandatory once you have 10 employees (in most states) with any employee earning gross wages up to Rs 21,000 per month. So at 10 employees, ESI may be applicable even if PF is not yet mandatory.

My company is in Delhi but I have employees working from Maharashtra. Which PT applies?

Professional tax applies based on where the employee works, not where the company is headquartered. Your Maharashtra-based employees should have Maharashtra professional tax deducted even though the company is in Delhi (which has no PT). SalaryBox handles this through location-based PT configuration for each employee.

What happens if I have been paying PF on Rs 15,000 but the new wage definition makes my actual PF-eligible wages higher?

Under the new Labour Code wage definition, if your allowances exceed 50 percent of total remuneration, the excess is treated as wages for PF calculation purposes. If your current salary structure is not compliant, you need to restructure salaries so that basic plus DA is at least 50 percent of gross. SalaryBox flags non-compliant salary structures and helps you restructure them correctly.

Compliance Is Not Optional — But It Can Be Automatic

The statutory compliance obligations for Indian businesses in 2026 are extensive, complex, and carry severe penalties for non-compliance. But here is the good news: every single compliance calculation, deadline, and filing requirement covered in this guide can be automated. Not through expensive enterprise solutions that cost lakhs per year, but through affordable, mobile-first platforms like SalaryBox that are specifically designed for the Indian compliance landscape.

When you run payroll through SalaryBox, PF is calculated correctly on the new wage base. ESI eligibility is checked automatically. TDS follows the latest Income Tax Act 2025 rules. Professional tax applies the correct state-wise rate. Overtime is calculated at the mandatory double rate. Payslips are generated with every required component. And all of this happens in under 30 minutes, not 3 to 5 days.

The businesses that thrive in India’s complex regulatory environment are not the ones that hire the most compliance experts. They are the ones that use technology to make compliance invisible, so they can focus their energy on what actually grows the business.