Country Guides

Taxes in India

The employer’s contribution to the EPF is 12% of the employee’s basic salary plus dearness allowance. This 12% is further broken down to 8.33% toward EPS, 3.67% toward EPF, and other small percentages going to administrative charges for EDLI (0.5%) and admin charges (0.5%).

The Employee State Insurance Scheme is mandatory for employees earning up to INR 21,000 per month (or INR 25,000 for disabled employees). This is funded by contributions from both the employer and employee, as well as the government.

These contributions are withheld and remitted monthly by the employer via EPFO/ESIC/state portals; income‑tax TDS deposited to the Central Government (CIN/Challan ITNS‑281), reported in quarterly Form 24Q.

Contribution: Employees’ Provident Fund (EPF)

Contribution amount: 12% of basic + Dearness Allowance (8.33% to pension fund up to ₹15,000 cap + 3.67% to EPF)

Contribution: Employees’ Deposit Linked Insurance (EDLI)

Contribution amount: 0.5% of basic + DA (capped at ₹15,000)

Contribution: EPF Administrative Charges

Contribution amount: 0.5% of EPF wages, minimum ₹500/month (₹75 if no contributory members)

Contribution: Employees’ State Insurance (ESI)

Contribution amount: 3.25% of gross wages (only if employee earns ≤ ₹21,000/month, or ₹25,000 for disabled employees), eligibility rules apply

Contribution: Gratuity (accrual)

Contribution amount: ≈ 4.81% of basic pay (statutory payout = 15 days’ wages per completed year after 5 years’ service)

Contribution: Statutory Bonus (accrual)

Contribution amount: 8.33% – 20% of eligible wages (if earning ≤ ₹21,000/month, subject to surplus)

Contribution: Labour Welfare Fund (state-specific)

Contribution amount: Small fixed amounts where applicable (e.g. ₹24–₹75 per employee, varies by state)

Social security contributions in India are mandatory flat-rate salary percentages, varying by income level, ranging between 15% – 25%.

Employer Social Security contribution

Gross income: ₹0 – ₹21,000/month (gross)

Tax rate: ESI employer 3.25%

Gross income: > ₹21,000/month

Tax rate: ESI not applicable

Gross income: ₹0 - ₹15,000/month (basic + DA)

Tax rate: EPS portion of EPF limited to ₹1,250/month (8.33% of ₹15,000); balance to EPF

In India, employees contribute through progressive income tax (ranging from 0% to 30% depending on income), as well as mandatory social security deductions. These include 12% of basic salary plus dearness allowance towards the Provident Fund, 0.75% of gross wages for State Insurance if earning up to ₹21,000 per month, and a small state-level professional tax of up to ₹200 per month where applicable.

Income tax

The employee’s income tax rate in India is progressive, with rates ranging from 0% to 3%, depending on the individual’s gross income.

Income tax

Gross income: ₹0 – ₹3,00,000

Tax rate: 0%

Gross income: ₹3,00,001 – ₹6,00,000

Tax rate: 5%

Gross income: ₹6,00,001 – ₹9,00,000

Tax rate: 10%

Gross income: ₹9,00,001 – ₹12,00,000

Tax rate: 15%

Gross income: ₹12,00,001 – ₹15,00,000

Tax rate: 20%

Gross income: Above ₹15,00,000

Tax rate: 30% (surcharge may apply)

Employee Social Security contribution

Contribution: Employees’ Provident Fund (EPF)

Contribution amount: 12% of basic + Dearness Allowance

Note: May be higher (voluntary PF); tax treatment per regime.

Contribution: Employees’ State Insurance (ESI)

Contribution amount: 0.75% of gross wages (if earning ≤ ₹21,000/month)

Note: Deducted via payroll. Eligibility continues to end of contribution period.

Contribution: Professional Tax (State Levy)

Contribution amount: ₹0–₹200/month (varies by state)

Note: Employer withholds & remits.

Tax rebates

  • Section 87A rebate: resident individuals with net taxable income up to ₹7,00,000 (new regime) pay zero tax.
  • Standard deduction: ₹50,000 for salaried taxpayers (allowed under both old and new regimes).
  • Employer NPS (80CCD(2)) deduction: up to 10% of basic+DA (private sector) in addition to section‑80C limits (regime‑dependent).

Tax thresholds

  • Basic exemption: New regime ₹0–₹3,00,000; Old regime ₹0–₹2,50,000 (higher old‑regime thresholds for senior citizens).
  • Surcharge: 10% >₹50L; 15% >₹1Cr; 25% >₹2Cr; (old regime had 37% at >₹5Cr; new regime capped at 25%).

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