PF, ESI & TDS in 2025: What Every Indian HR Manager Needs to Know

Provident Fund (PF): The Basics for 2025

The Employees' Provident Fund (EPF) is mandatory for all establishments with 20 or more employees. Here are the key numbers:

• Employee contribution: 12% of basic salary + DA
• Employer contribution: 12% of basic salary + DA (of which 8.33% goes to EPS — Employee Pension Scheme — and 3.67% to EPF)
• Applicability threshold: Employees earning up to ₹15,000 per month basic salary are mandatorily covered; above ₹15,000 it's voluntary but many employers continue contributions
• Payment deadline: 15th of the following month
• Filing: ECR (Electronic Challan cum Return) filed monthly via the EPFO Unified Portal

ESI: Who It Covers and 2025 Rates

The Employees' State Insurance (ESI) scheme provides medical and social security benefits to employees. Key details for 2025:

• Coverage: Employees earning ₹21,000 or less per month (gross salary)
• Employee contribution: 0.75% of gross wages
• Employer contribution: 3.25% of gross wages
• Applicability: Establishments with 10 or more employees (in some states, 20 or more)
• Payment deadline: 15th of the following month
• Returns: Filed bi-annually — for April–September (by 11 November) and October–March (by 11 May)

ESI entitles covered employees to free or subsidised medical treatment at ESIC hospitals, sickness benefits, maternity benefits, and disablement benefits. Employees earning above ₹21,000 are not covered but employers with 10+ employees are still required to register.

TDS on Salary: How It Works

Tax Deducted at Source (TDS) on salary is governed by Section 192 of the Income Tax Act. Unlike PF and ESI which have fixed rates, TDS is calculated based on the employee's projected annual income and applicable tax slab.

The process works like this:

1. At the start of each financial year (April), employees submit their investment declarations (Form 12BB)
2. HR calculates the estimated annual taxable income after declared deductions (80C, 80D, HRA, etc.)
3. TDS is calculated as the tax payable on this income divided by 12, deducted monthly
4. At year-end, the actual investment proofs are submitted and TDS is reconciled
5. Form 16 (TDS certificate) is issued to all employees by 15 June

• Old Tax Regime slabs (2025): Up to ₹2.5L: Nil | ₹2.5L–5L: 5% | ₹5L–10L: 20% | Above ₹10L: 30%
• New Tax Regime slabs (2025): Up to ₹3L: Nil | ₹3L–7L: 5% | ₹7L–10L: 10% | ₹10L–12L: 15% | ₹12L–15L: 20% | Above ₹15L: 30%
• TDS payment deadline: 7th of the following month
• Quarterly returns: Form 24Q filed quarterly

Compliance Calendar: Key Deadlines

• 7th of every month: TDS payment for previous month
• 15th of every month: PF and ESI payment for previous month
• 31 July: TDS quarterly return (Q1: Apr–Jun)
• 31 October: TDS quarterly return (Q2: Jul–Sep)
• 31 January: TDS quarterly return (Q3: Oct–Dec)
• 31 May: TDS quarterly return (Q4: Jan–Mar) + ESI return
• 15 June: Form 16 issuance deadline
• 11 November: ESI return for April–September period

5 Common Compliance Mistakes

• Late payments: PF late payment attracts 12% per annum interest + penalty up to 100% of dues
• Wrong salary definition: PF is on "basic + DA" — not gross salary. Many employers incorrectly calculate on gross, leading to over-deduction
• Not updating ESIC portal on time: New employees must be registered within 10 days of joining
• Incorrect Form 16: Missing declarations or wrong TDS amounts cause employee ITR filing complications
• Treating contractors as employees: If TDS is deducted under Section 192 for contractors, it creates liability. Contractors should have TDS under 194C

How to Automate Statutory Compliance

The simplest way to avoid compliance errors is to use an HRMS that calculates PF, ESI, and TDS automatically, generates the required challans and returns, and alerts you to upcoming deadlines.