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Payroll and Benefits Guide India

Last updated: Apr 09, 2023

Currency
Indian Rupee (INR)
Employer Taxes
Unknown
Payroll Frequency
Monthly
Employee Costs
16.75%
Capital
New Delhi
Date Format
dd/mm/yyyy
Fiscal Year
1 April - 31 March
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Contribution

Employer

Employer Employer Payroll Contributions
12.00%
Employee’s Provident Fund (EPF) and Employee’s Pension Scheme (EPS) (Compulsory for employers with more than 20 employees & a maximum monthly salary of 15,000.00 INR) applied on basic salary.
3.25%
Employee’s State Insurance (ESI) for employees with salaries of up to 21,000 INR per month
16.75%
Total Employment Cost

Employee

Employee Employee Payroll Contributions
12.00%
Employee’s Provident Fund (EPF) and Employee’s Pension Scheme (EPS) (Compulsory for employers with more than 20 employees & a maximum monthly salary of 15,000.00 INR)
0.75%
Employee’s State Insurance (ESI) for employees with salaries of up to 21,000 INR per month
Varies
Professional tax, maximum limit of  2500 INR/annum
4.00%
Health and Education Cess (levied at the rate of 4.00% on the amount of income-tax plus surcharge)
18.08%
Total Employee Cost

 

Employee Income Tax
0.00%
0.00 INR – 300,000.00 INR Annually
5.00 %
300,001.00 INR – 600,000.00 INR Annually
10.00%
600,001.00 INR – 900,000.00 INR Annually
15.00%
900,001.00 INR – 1,200,000 INR Annually
20.00%
1,200,001 INR – 1,500,000 INR Annually
30.00%
Over 1,500,001 INR Annually
In case the income exceeds a certain threshold, surcharge will be applicable:
10.00%
for total taxable income of above 5,000,000 INR
15.00%
for total taxable income of above 10,000,000 INR
25.00%
for total taxable income of above 20,000,000 INR

Employer taxes

Highest
Lowest

Employee taxes

Highest
Lowest

Minimum Wage

General

The national minimum wage in India is fixed by the respective state governments. It uses a complex method of setting minimum wages that defines thousands of different jobs for unskilled workers and over 400 categories of employment, with a minimum daily wage for each type of job.  The new Labour Code has introduced an increase of 14.5 times on the existing minimum wage to Rs 15,000 per month

MINIMUM WAGE (PER MONTH)

Highest
Lowest

Payroll

Payroll Cycle

The payroll cycle in India is generally monthly, with wages paid on or after the 28th of each month.

13th Salary

The 13th salary in India is mandatory for low income workers, paid as a percentage of the annual salary and within eight months of the end of the financial year.

Working Hours

General

The standard working hours in India are 40 hours weekly at 8 hours a day. This can also be 48 hours including breaks, only as per client’s discretion.

The employees are allowed to work for 8-9 hours in a day. The standard practice followed by a majority of organizations in India is 8 hours a day of working.

Overtime

All work in excess of the standard 48 hours a week is to be paid as overtime and is regulated by employment contracts, generally calculated at 200% of the regular pay rate.

Leave

Annual Leave (vacation)

The regulations regarding paid leave in India are set in the employment contract as a minimum of 15 days paid holiday a year (following completion of 240 days of employment). However, it is common practice for additional leave days to be included in the contract, together with rules on how many days can be carried over to the following year.
All PTO requests must be applied for at least 15 days prior to the start of the leave and approved by the employer, works committee, and the manager to ensure continuity of work.

Public Holidays

Workers are entitled to 12 public holidays per year. The country wide holidays listed below are the default days to give off, however, workers can choose to swap these days out in order to take off their Regional or Religious holidays instead.

Public holidays that fall on Saturday are observed on the Friday before and public holidays falling on a Sunday are observed on the following Monday.

Date Day Holiday Notes
1 Jan 2024 Monday New Year
26 Jan 2024 Friday Republic Day National Holiday
25 Mar 2024 Monday Holi
29 Mar 2024 Friday Good Friday
11 Apr 2024 Thursday Id-ul-Fitr* Tentative Date, Depending on Lunar Calendar
15 Aug 2024 Thursday Independence Day National Holiday
19 Aug 2024 Monday Raksha Bandhan
26 Aug 2024 Monday Janmashtami
2 Oct 2024 Wednesday Gandhi Jayanti National Holiday
11 Oct 2024 Friday Dusshera
31 Oct 2024 Thursday Diwali
15 Nov 2024 Friday Guru Nanak’s Birthday
25 Dec 2024 Wednesday Christmas

Sick Days

In India, the law mandates a combined 12 days of sick and casual leave for employees. These 12 days can be used for sickness or non-medical emergencies, with the stipulation that medical emergencies are marked as sick leave and other emergencies as casual leave. The distribution of these 12 days between sick and casual leave can vary based on the employee’s needs, for example, 7 casual and 5 sick, or 8 sick and 4 casual. Casual leaves are intended for unplanned situations, while sick leaves are specifically for health-related issues.

Maternity Leave

Eligible expectant mothers are entitled to 100% of their regular salary rate for 26 weeks for their first two children, decreasing to 12 weeks for any subsequent children. No woman is allowed to work during the six weeks immediately following the day of the delivery or of her miscarriage.

To be eligible, the employee must have been employed for at least 80 days of the preceding 12 months before the expected due date.

Adoptive Mothers and Commissioning Mothers

A woman who legally adopts a child below the age of 3 months or a commissioning mother (a biological mother who uses her egg to create an embryo that is implanted in any other woman), shall be entitled to maternity benefits for a period of 12 weeks from the date the child is handed over.

Every company with 50 or more employees shall have the facility of creche within the prescribed distance either separately or along with other common facilities.

The employer shall allow 4 visits a day to the creche by the woman, which shall also include the interval of rest allowed to her.

Paternity Leave

While government employees are entitled to 15 days of paternity leave, there are no statutory paternity leave laws for the private sector.

Parental Leave

There are no statutory laws on parental leave.

Other Leave

Each state generally sets other leave entitlements and policies.

Vacation Days
Public Holidays
Highest
Lowest

PAID MATERNITY LEAVE (DAYS)

Highest
Lowest

Termination

Termination Process

The termination process is standard in India, with notice periods required unless an employer can provide sufficient cause for dismissal without notice due to misconduct, disobedience, lack of skill, neglect of duties, or absence without permission.

Notice Period

The notice period required is at least 30 days.

Severance Pay

In case of a termination due to redundancy, employers are required to pay retrenchment compensation. Severance or retrenchment compensation equal to 15 days’ average pay for every completed year of continuous service or part thereof in excess of 6 months must be paid to a workman on termination of employment.

The provisions of the IR Code pertaining to retrenchment are aligned with the provisions under the ID Act. However, for the purposes of retrenchment compensation, the same will be calculated at the rate of 15 days’ average pay or average pay of such number of days as may be notified by the appropriate government, for every completed year of continuous service or any part thereof in excess of 6 months.

Additionally, as mentioned above, the IR Code also requires employers to contribute an amount equal to 15 days’ wages or such amount as may be notified by the government for every retrenched worker to a “worker re-skilling fund.” In addition, the employer must pay certain termination benefits to employees who are dismissed, including leave encashment, gratuity payment (for employees, whether workmen or not, with 5 years or more of continuous service), payment in lieu of notice (if no notice is given), statutory bonus payment, and any other amounts due under the employment contract.

Employees who are being terminated on account of misconduct are not entitled to notice pay or retrenchment compensation.

Probation Period

Probation periods in India are generally between 3 and 6 months, based on the employee’s role and seniority.

Common Benefits

  • Wellness allowance – between USD 175 to 250 per month.
  • Work from home allowance – between USD 150 to 200 per month.
  • Meal allowance – between USD 75 to 150 per month.
  • Private pension – employer contribution of 10%. Additional paternity leave of 10-15 days.
  • Additional 5-9 days of annual leave.
  • Paternity Leave of 1-2 weeks.

VISA

VISA

There are two main types of visas in India: a business visa (visits to India of up to 6 months to conduct business for a non-Indian company) and an employment visa.
An employment visa is required for foreigners going to India for employment. The maximum length for this type of visa is 5 years, however, if the employment contract is longer than five years, an extension will need to be sought before the end of the visa.
This visa also offers the possibility to live and work in India on a more permanent basis.
Visa applications must be made in the applicant’s country of residence.

VAT

General

The standard rates of VAT in India are 18.00% and 12.00%, with other primary rates of 28%, 5%, 3%, 1% & 0.25%

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Questions & Answers

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Devi
Devi
2 years ago

When do you need to start contributing to the Provident Fund? 

Emily Kuhnert
Emily Kuhnert
2 years ago
Reply to  Devi

If a company has less than 20 employees, the employer is not required to contribute to the PF, however, this can be a voluntary contribution. Once there are more than 20 employees, this becomes a mandatory contribution.

HElen
HElen
1 year ago

Re the overtime rules/payments are they different in different states of India? I am wanting to know for Chennai. Many thanks

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  HElen

In Chennai, the total number of hours of work on any day shall not exceed ten; If hours are spread with intervals for rest, the workday should not exceed twelve hours. The total number of hours in a week including overtime shall not exceed sixty and the total number of hours of overtime shall not exceed fifty for any quarter.

Grant
Grant
1 year ago

Is the “total employment cost” percentage inclusive of mandatory AND discretionary benefits, or is it just mandatory benefits?

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  Grant

These are mandatory benefits.

Sylvia
Sylvia
1 year ago

Hi What is the usual practice of leave encashment? can the company disallow for leave encashment? how does it work? Thanks for yr advice in prior.

Erez Greenberg
Erez Greenberg
1 year ago
Reply to  Sylvia

Unused leave balances should be cashed out upon termination. Deletion of unused vacation days would not be legal. The company cannot force an employee to go on vacation but can draft a policy with a maximum number of days that can be carried over to the following year. Unlimited paid time off is permitted under the law, the employment contract should state the mandatory minimum annual leave days. Any remaining statutory leave will be paid out in last payroll.

Vikash Kunal
Vikash Kunal
8 months ago

Employer contribution for Gratuity is not included

Enny Shmurin
Admin
Enny Shmurin
8 months ago
Reply to  Vikash Kunal

Hello, would you be able to clarify what your question is?

Shantanu
Shantanu
7 months ago

What conversion rate is used for monthly salary? Is it based on the conversion rate while making the monthly payment? If it is based on the conversion rate while contract for the year was made, when a new contract is made, is the conversion rate updated?

Enny Shmurin
Admin
Enny Shmurin
1 month ago
Reply to  Shantanu

Salaries have to be paid in local currency.

Suzie
Suzie
5 months ago

Hello. If a foreign expert, hired by a foreign company, is sent to India to provide technical guidance to an Indian company for several months with business visa, is such foreign expert required to make contribution to Provident Fund? Many thanks!

Enny Shmurin
Admin
Enny Shmurin
5 months ago
Reply to  Suzie

Provident Fund contribution can be exempted provided India has SSA agreement with the home country of worker and will continue the social and pension contribution in home country while in deputation in India for shorter duration.

Suzie
Suzie
5 months ago
Reply to  Enny Shmurin

Thanks! No SSA agreement has been entered between the expert’s home country and India… So my assumption is that the expert will be subject to Provident Fund in India, even if he is holding a business visa and no employment agreement will be entered in India, is that correct? Thank you!

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Payroll and Benefits Guide in India

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Payroll and Benefits Guide
in India

What’s covered in this guide:

  • Employer/employee contributions
  • Minimum wage
  • Working hours
  • Visa requirements

And more...

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All questions are answered by our in-house compliance department working in conjunction with our local in-country partner for this specific country

Public Holidays Calendar

India
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ICS
Date Day Holiday Notes
1 Jan 2024 Monday New Year
26 Jan 2024 Friday Republic Day National Holiday
25 Mar 2024 Monday Holi
29 Mar 2024 Friday Good Friday
11 Apr 2024 Thursday Id-ul-Fitr* Tentative Date, Depending on Lunar Calendar
15 Aug 2024 Thursday Independence Day National Holiday
19 Aug 2024 Monday Raksha Bandhan
26 Aug 2024 Monday Janmashtami
2 Oct 2024 Wednesday Gandhi Jayanti National Holiday
11 Oct 2024 Friday Dusshera
31 Oct 2024 Thursday Diwali
15 Nov 2024 Friday Guru Nanak’s Birthday
25 Dec 2024 Wednesday Christmas