School Payroll in India: PF, ESI, Professional Tax and TDS Explained
A plain-English guide for school accountants to the statutory deductions on teachers' and staff salaries, the common mistakes, and how to automate them.
By SSMS Team
Also available in:हिन्दीગુજરાતીमराठीবাংলাଓଡ଼ିଆதமிழ்తెలుగుಕನ್ನಡമലയാളംاردوঅসমীয়াनेपालीसंस्कृतम्कोंकणीमैथिलीडोगरीबड़ोমৈতৈলোন্ᱥᱟᱱᱛᱟᱲᱤسنڌيکٲشُرالعربيةFrançaisEspañolDeutschPortuguêsItalianoNederlandsРусскийTürkçeفارسیKiswahiliBahasa IndonesiaBahasa MelayuไทยTiếng Việtසිංහල简体中文日本語한국어
School payroll mixes permanent teachers, contract staff, visiting faculty paid by the hour, drivers on daily wages and security on duty rosters. Each has the same statutory questions: PF, ESI, professional tax, LWF and TDS. This guide explains them in plain words. Rates and thresholds change — always confirm current values with your tax adviser.
Provident Fund (PF)
Employees covered by EPF contribute a percentage of basic pay (plus DA) and the employer contributes a matching amount, split between EPF and the pension scheme (EPS), plus EDLI and administration charges. A wage ceiling usually applies to mandatory contributions. Common mistakes: wrong wage base, missing new joiners, and errors in the ECR file.
Employees' State Insurance (ESI)
ESI applies to employees earning up to a gross-wage limit, with employee and employer contributions as a percentage of gross. Eligibility is decided per contribution period, so an employee whose salary crosses the limit mid-period usually continues until the period ends.
Professional Tax (PT)
PT is a state tax with slabs that differ by state — and sometimes by month (for example, a higher deduction in February in some states). Schools with branches in several states must apply each state's slabs.
Labour Welfare Fund (LWF)
Some states require small periodic LWF contributions from employees and employers.
TDS on salary
Schools must deduct income tax at source based on each employee's projected annual income under the regime they choose (new or old), considering the standard deduction, rebate, cess and — under the old regime — declared investments. Monthly TDS is the projected annual tax minus TDS already deducted, spread over the remaining months.
Automate it — but keep the rules visible
Good payroll software keeps these rules as dated configuration, reads attendance automatically, handles arrears when salaries are revised back-dated, and produces the bank file and statutory data. SSMS Payroll does all of this and posts the salary journal to your books.