How to Calculate PF, PT, and TDS for Your Employees in India (2025 Guide)
A plain-English breakdown of EPF, Professional Tax, and TDS deductions every Indian employer must know — with examples and state-wise PT slabs.
Amol Gupta
28 March 2025
Running payroll for your team in India means dealing with three mandatory deductions: Provident Fund (PF), Professional Tax (PT), and Tax Deducted at Source (TDS). Get any of these wrong and you're looking at penalties, angry employees, or both.
This guide breaks down each one in plain English — no CA jargon.
1. Provident Fund (EPF)
Who must contribute?
Any employer with 20 or more employees must register under the Employees' Provident Fund Organisation (EPFO). If you have fewer than 20, it's optional but recommended.
How much?
- Employee contribution: 12% of Basic Salary + Dearness Allowance (DA)
- Employer contribution: 12% of Basic + DA, split as:
- 3.67% → Employee's EPF account
- 8.33% → Employee Pension Scheme (EPS) — capped at ₹1,250/month (based on ₹15,000 salary ceiling)
Example
Employee Basic: ₹30,000/month
| Component | Calculation | Amount |
|---|---|---|
| Employee EPF | 12% × ₹30,000 | ₹3,600 |
| Employer EPF | 3.67% × ₹30,000 | ₹1,101 |
| Employer EPS | ₹1,250 (capped) | ₹1,250 |
| Total employer cost | ₹2,351 |
Key rules
- PF is calculated on Basic + DA only, not on HRA, bonuses, or allowances
- If the employee's Basic > ₹15,000/month, you can cap PF on ₹15,000 (restricted PF) or calculate on actual (unrestricted PF) — most startups use restricted
- PF must be deposited by the 15th of the following month
- File monthly ECR (Electronic Challan cum Return) on the EPFO unified portal
2. Professional Tax (PT)
Professional Tax is a state-level tax levied on salaried employees. Not all states have it — and the slabs differ by state.
States that levy PT
| State | Monthly PT (approx. for ₹25,000+ salary) |
|---|---|
| Maharashtra | ₹200 (₹2,500/year — Feb is ₹300) |
| Karnataka | ₹200 |
| West Bengal | ₹200 |
| Telangana | ₹200 |
| Tamil Nadu | ₹208 |
| Andhra Pradesh | ₹200 |
| Gujarat | ₹200 |
| Madhya Pradesh | ₹208 |
| Kerala | ₹208 |
| Assam | ₹208 |
States like Delhi, Rajasthan, UP, Haryana, and Uttarakhand do NOT levy PT.
Key rules
- PT is deducted from the employee's salary — it's not an employer cost (unlike PF)
- PT slabs are based on gross monthly salary
- Employer must register under the state's PT Act and file returns (monthly or annually depending on the state)
- PT paid by the employee is deductible under Section 16 of the Income Tax Act
Maharashtra example (most common for startups)
- Salary < ₹7,500/month → ₹0 PT
- Salary ₹7,500–₹10,000 → ₹175/month (women: ₹0)
- Salary > ₹10,000 → ₹200/month (₹300 in February)
3. Tax Deducted at Source (TDS) on Salary
TDS on salary falls under Section 192 of the Income Tax Act. You (the employer) are responsible for estimating your employee's annual tax liability and deducting it monthly.
New Tax Regime (Default from FY 2024-25)
Under the new regime (which is now the default unless the employee opts out):
| Annual Income | Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹7,00,000 | 5% |
| ₹7,00,001 – ₹10,00,000 | 10% |
| ₹10,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Rebate u/s 87A: If taxable income ≤ ₹7,00,000, tax is fully rebated (you pay ₹0).
Standard Deduction: ₹75,000/year (new regime, FY 2025-26 onwards).
TDS calculation example
Employee CTC: ₹12,00,000/year (₹1,00,000/month)
- Gross income: ₹12,00,000
- Less: Standard deduction: ₹75,000
- Taxable income: ₹11,25,000
- Tax on ₹11,25,000 under new regime:
- 0–3L: ₹0
- 3–7L: ₹20,000 (5%)
- 7–10L: ₹30,000 (10%)
- 10–11.25L: ₹18,750 (15%)
- Total tax: ₹68,750
- Add 4% health & education cess: ₹2,750
- Annual TDS: ₹71,500
- Monthly TDS deduction: ₹5,958
Key rules
- Collect Form 12BB from employees at the start of the year (declares investments, HRA claims, etc.)
- Deposit TDS by the 7th of the following month (March: 30th April)
- File Form 24Q quarterly
- Issue Form 16 to employees by 15th June every year
Putting it all together — Monthly payslip example
Employee: Priya Sharma | Basic: ₹40,000 | HRA: ₹20,000 | Special Allowance: ₹20,000 | Gross: ₹80,000/month | State: Maharashtra
Deductions:
- EPF (employee): 12% × ₹40,000 = ₹4,800
- Professional Tax: ₹200
- TDS (estimated monthly): ₹5,500 (varies by annual income)
- Total deductions: ₹10,500
- Net take-home: ₹69,500
Employer additional cost:
- Employer EPF: ₹1,101 + ₹1,250 (EPS) = ₹2,351
Common mistakes to avoid
- Calculating PF on gross salary — it should be on Basic + DA only
- Forgetting PT for employees in PT-levied states — even remote employees are subject to the state where they work
- Not collecting Form 12BB — leads to over-deducting TDS and unhappy employees
- Missing deposit deadlines — EPFO levies 12–18% interest on late deposits; IT dept charges interest + penalty on late TDS
The easy way out
Tracking all of this in spreadsheets is how mistakes happen. JambaHR's payroll module handles PF caps, state-wise PT, TDS under the new tax regime, and generates printable payslips — so you can run payroll in minutes, not hours.