Small Startup Payroll Dilemma: How to Handle Payslip Deductions and Taxes?

Hi all, We are a small startup with 3 employees. We don't have a dedicated HR, and we end up doing many things on our own. We are revising the pay of our employees to 2.88 LPA.

Deduction components in the payslip

What are the deduction components in the payslip? We understand we should deduct Professional Tax (TN), which is Rs. 200 per month. We don't have PF as we are too small. Is this amount taxable, and what component does it fall under?

Please advise on the salary slip format for this. Waiting for your kind help in this regard.

Thanks in advance.

Regards, Swarna

Hi Swarna,

As per your request, there is a deduction of EPF, ESI, and PT on a monthly basis. For these, you have to register with the EPF (PF Regional Office), ESI (Regional Office), and PT (Coimbatore) corporation. Only then can you deduct from employees and pay to the respective department. The deductions are exempt from Income Tax under section 10.

Regards, Prakash G [Phone Number Removed For Privacy-Reasons]

Hi Swarna,

EPF and ESI Applicability

EPF is applicable only if you have 20 or more headcount, including contractual workmen. ESI is applicable when the count is 10 or above.

Professional Tax (PT) Deduction

Yes, PT needs to be deducted and remitted to the local municipal authorities. The amount is not Rs. 200. In Tamil Nadu, there are 5 slabs, and it is paid on a half-yearly basis, i.e., in March and September. Additionally, registration is required for this.

Income Tax Applicability

If the salary is around 2.88 LPA, then Income Tax is not applicable as it is below the threshold limit.

Hi Swarna, I have a quick query. The employees will draw an amount of Rs 23,000 per month and are located in Chennai. What would be the PT deduction per month for the employee? Thank you in advance for your help.

Regards, Swarna