This article explains how payroll works for employees engaged in India through RemoFirst, covering pay schedules, deductions, salary structure, statutory contributions, leave, working time and end-of-employment entitlements. Employees in India are always paid in Indian Rupees (INR).
If you have a question that is not answered below, contact RemoFirst support and the team will be happy to help.
Payroll Schedule in India
How often are employees paid in India?
Employees in India are paid monthly.
When are employees paid in India?
Employees in India are paid on the last working day of the month. Employees activated after the 20th are generally included in the following month's payroll cycle.
What currency are employees paid in India?
Employees in India are paid in Indian Rupees (INR).
Payslips in India
When are Indian payslips issued?
Payslips in India are provided together with the salary payment.
What deductions appear on an Indian payslip?
Common deductions on an Indian payslip include:
- Income Tax (TDS)
- Employee Provident Fund (EPF)
- Professional Tax, where applicable
- Employee State Insurance (ESI), where applicable
Salary Structure in India
Updated for 2026: India's four Labour Codes came into force on 21 November 2025. A key effect for payroll is a single, standard definition of wages, described below, which changes how provident fund and gratuity are calculated.
How is salary typically structured in India?
Most salaries in India include:
- Basic Salary (around 40%)
- Dearness Allowance (around 10%)
- House Rent Allowance (HRA)
- Special Allowance
Under the Labour Codes, the components that count as wages, broadly basic pay plus dearness allowance, must be at least 50% of total remuneration. Where the excluded allowances exceed 50% of total pay, the excess is added back to the wage base, which increases the base used to calculate provident fund and gratuity.
How many salary payments are made each year in India?
Employees in India receive 12 monthly salary payments. There is no statutory 13th month salary in India.
Salary Proration in India
Why was my first salary in India lower than expected?
Employees who join during a month in India receive a prorated salary, paid only for the days worked during the payroll period.
How is proration calculated in India?
Proration in India is calculated as:
Prorated Salary = (Monthly Salary ÷ Total Days in Month) × Days Worked
For example, for a monthly salary of ₹60,000 with a start date of 10 June and 21 days worked, salary is paid only for those 21 days.
Tax and Government Contributions in India
Updated for FY 2026-27: The New Tax Regime slabs reflect the structure introduced in the 2025 budget and retained for FY 2026-27. The New Tax Regime is the default.
What taxes apply to employees in India?
Employees in India pay:
- Income Tax (TDS)
- EPF contributions
- Professional Tax, where applicable
What income tax rates apply in India?
India operates a progressive income tax system, and the New Tax Regime is the default. The slabs for the current financial year (FY 2026-27) are:
- Up to ₹4,00,000: Nil
- ₹4,00,001 to ₹8,00,000: 5%
- ₹8,00,001 to ₹12,00,000: 10%
- ₹12,00,001 to ₹16,00,000: 15%
- ₹16,00,001 to ₹20,00,000: 20%
- ₹20,00,001 to ₹24,00,000: 25%
- Above ₹24,00,000: 30%
A rebate under Section 87A means resident individuals with taxable income up to ₹12,00,000 effectively pay no income tax. Salaried employees also receive a standard deduction of ₹75,000, which lifts the effective tax-free salary to around ₹12,75,000. A 4% health and education cess applies on the tax payable, and a surcharge applies at higher income levels.
What is tax annualization in India?
At year-end, payroll in India performs a reconciliation of the tax deducted during the year against the tax actually owed. This may result in either an additional tax deduction or a tax refund.
Provident Fund (EPF) in India
What is EPF in India?
The Employee Provident Fund (EPF) is India's mandatory retirement savings scheme.
Who contributes to EPF in India?
Both the employee and the employer contribute to EPF in India.
How much is contributed to EPF in India?
The contribution is typically 12% of the wage base for both the employee and the employer, subject to statutory rules and caps. Following the Labour Codes, the wage base for this calculation uses the standard wage definition described in the salary structure section.
Gratuity in India
What is gratuity in India?
Gratuity is a statutory lump-sum payment that rewards long service in India. It is generally calculated as 15 days of wages for each completed year of service.
When does gratuity become payable in India?
Gratuity in India is generally payable after 5 years of continuous service, on resignation, retirement or termination other than for misconduct. Under the Labour Codes, fixed-term employees are entitled to pro-rata gratuity regardless of whether they reach 5 years of service.
Reimbursements in India
How are expenses reimbursed in India?
Expenses in India are processed through regular payroll.
Are receipts required in India?
Yes. All reimbursements in India should be supported by valid receipts and an appropriate business justification.
Are there additional fees for reimbursements in India?
No additional payroll fees apply for standard reimbursements in India. Off-cycle processing of additional payments and expenses has an add-on fee.
Public Holidays in India
How many public holidays are provided in India?
Employees in India generally receive 10 public holidays annually, including 4 mandatory national holidays:
- Republic Day (26 January)
- Labour Day (1 May)
- Independence Day (15 August)
- Gandhi Jayanti (2 October)
The remaining holidays vary by state.
Annual Leave in India
What annual leave entitlement applies in India?
Employees in India receive 18 days of annual leave per year, generally available from the beginning of employment.
Can annual leave be carried over in India?
Yes. Annual leave in India can be carried forward up to 45 days. Unused leave above the cap may require the employee to take leave.
Sick Leave in India
What sick leave entitlement applies in India?
Employees in India may receive up to 12 sick or casual leave days annually.
Is a medical certificate required for sick leave in India?
A medical certificate is usually recommended but not always legally required in India. Requirements may vary by employer policy.
Maternity Leave in India
What maternity leave entitlement applies in India?
Eligible employees in India receive:
- 26 weeks of paid maternity leave for the first and second child
- 12 weeks for the third child onwards
Are adoptive parents covered in India?
Yes. Eligible adoptive and commissioning mothers in India may receive 12 weeks of leave.
Can an employee be terminated during maternity leave in India?
No. Employees in India are protected from dismissal during maternity leave.
Paternity Leave in India
Is paternity leave mandatory in India?
No. There is no statutory paternity leave for private sector employees in India. However, RemoFirst supports 15 days of paternity leave for eligible employees, subject to eligibility requirements.
Working Hours in India
What are standard working hours in India?
A typical schedule in India is Monday to Friday, 09:00 to 17:00.
What is the maximum working week in India?
The maximum working week in India is 48 hours per week, with daily working time generally capped at 8 hours.
When does overtime apply in India?
Overtime in India applies after 48 hours worked in a week.
How is overtime paid in India?
Overtime in India is paid at twice the normal pay rate. Total working hours generally should not exceed 60 hours per week.
Probation in India
What probation period is supported in India?
A typical probation period in India is 3 to 6 months.
Can probation be extended in India?
Yes. Probation in India may be extended up to 12 months if specified in the employment agreement.
Employment Changes in India
What employment changes require documentation in India?
Examples of employment changes in India that generally require formal documentation include:
- Salary changes
- Title changes
- Location changes
- Probation completion
- Contract extensions
- Terminations
Resignation in India
What happens when an employee resigns in India?
Employees in India are generally expected to serve the notice period set out in their contract.
What is included in the final pay in India?
The full and final settlement (F&F) in India may include:
- Outstanding salary
- PTO payout
- Other accrued entitlements
What happens to unused leave in India?
Unused leave in India is generally paid out, or it may be used to offset the notice period.
Termination in India
How should terminations be handled in India?
All formal termination communication in India must be managed through RemoFirst. Clients should not communicate termination decisions directly to the employee before aligning with RemoFirst.
What payments may apply on termination in India?
Depending on the circumstances, termination payments in India may include:
- Salary until the last working day
- PTO payout
- Notice pay
- Severance, where applicable
- Mutual separation payments
For any payroll question about India not answered above, contact RemoFirst support and the team will be glad to help.
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