Staying on the Right Side of Payroll Compliance, By Sachin Disa

April 21: Staying up-to date with the ever-changing legal and statutory requirements related to labour and tax laws can be quite challenging. Depending on the office locations, there is several central and state labour laws that companies need to comply with. Moreover, in India, each industry has its own set of rules and regulations, and penalties for non-compliance can be significant.

Things to know about payroll compliances 

Payroll compliances cover income tax, provident fund, profession tax, ESIC, and labour welfare fund. Let’s look at some of the details.

Income Tax Act

Every employer is required to deduct witholding taxes (tax deducted at source or “TDS”) from employees earning gross salary above a particular threshold. Non-compliance with Income Tax Act can significantly impact any business. Therefore, it is imperative for any company to ensure there is accuracy, consistency, and punctuality in such tax deductions. Third-party payroll processing companies offer the following services to help you remain compliant under Income Tax Act:

1. Income tax computation based on investment declaration and recurring and one-time payments
2. Investment proof-verification at year-end and for full and final settlements
3. Online payment of statutory dues
4. Quarterly e-TDS (Form 24)
5. Form 16 and Form 12BA at year-end
6. Filing of revised eTDS returns

Provident Fund

Payroll processing companies offer employee provident fund services and help businesses stay compliant. They also assist companies in preparing documents required to register an establishment/company as per provident fund authorities and procure code numbers. The services offered by third-party payroll processing companies include:

1. Uploading ECR file and generating online challan
2. Assist in preparing the different employee forms, such as:

• Form 2 – Employee Provident Funds Nomination
• Form 10C – Employees’ Pension Withdrawal
• Form 9 – Employee PF membership Record
• Form 11 – Declaration of the employee for Provident Fund applicability
• Form 20 & 10D – Employees Death Benefit
• Form 19 – Employees Provident fund Withdrawal
• Form IW-1 – Statement that shows the employee details of those who qualify for membership as International Workers

3. Under our EPF services, we assist companies in submitting specimen signatures and digital signatures.

4. Update KYC of the new joinee.

5. Preparation and maintenance of Statutory Registers & Records.

Profession Tax

Every employer has to deduct profession tax from their employees’ salary as per respective state laws and deposit the same with the government. Third-party payroll processing companies help organisations in the generation of the PT return for the respective state to help them stay compliant.

ESIC

This social security scheme brings affordable healthcare to employees and their families. Payroll processing service providers assist companies with the following recurring compliances:

1. Uploading electronic contribution on ESIC online portal and generate monthly challan
2. Generating TIC (Temporary Identification Card) for new employees covered under ESIC
3. Preparation, verification, and submission of:

• Form 10: temporary disablement benefit form
• Form 13, Form 14A, and Form 12A: Claim of Benefits
• From 15: Claim form for dependant’s benefit
• Form 16: Accident Report from employer
• Form 17: Dependant’s or funeral benefit

4. Assistance in settlement of Maternity Benefit in respect of women employees.

Labour Welfare Fund (LWF)

Individual state authorities manage this statutory contribution. Third-party payroll processing companies help businesses in the generation of LWF Challan for the respective state and to always stay compliant.

TopSource Worldwide helps businesses stay compliant, meet all regulatory laws and avoid penalties and fines. We have over 18 years of experience providing payroll outsourcing and HR services to businesses of all shapes and sizes. In addition, we offer customised services to companies having a turnover of INR 100 crores and above. We have a team of experts who are familiar with the different rules and regulations related to payroll compliance across industries. For more details, please visit our Payroll Compliance page

About the Author

Sachin Disa is a qualified Chartered Accountant with 20+ years of experience. He heads the India business unit for TopSource Worldwide. TopSource Worldwide provides a complete suite of employer services that allows clients to employ and pay people promptly, consistently and compliantly, locally and internationally as per their business needs.Payroll anywhere. Employ everywhere.