PF/ESI/TDS Rules for Indian Startups 2026

Why PF, ESI, and TDS Matter

Provident Fund PF, Employee State Insurance ESI , and Tax Deducted at Source TDS) are critical statutory requirements for Indian startups. Non-compliance can result in penalties, legal issues, and employee dissatisfaction. In 2026, with updated rules and digital compliance, itʼs essential to understand the latest regulations.

This guide covers the latest PF, ESI, and TDS rules for Indian startups.

Provident Fund PF Rules for 2026

Eligibility

• Mandatory for organizations with 20+ employees.
• Voluntary for smaller organizations.

Contribution

• Employee: 12% of basic salary.
• Employer: 12% of basic salary 3.67% to PF, 8.33% to EPS, 0.5% to EDLI .

Compliance

• Register with EPFO.
• File monthly ECR Electronic Challan-cum-Return) on the EPFO portal.
• Maintain accurate records and issue payslips.

Employee State Insurance ESI Rules for 2026

Eligibility

• Mandatory for organizations with 10+ employees.
• Employees earning up to ₹21,000 per month.

Contribution

• Employee: 0.75% of gross salary.
• Employer: 3.25% of gross salary.

Compliance

• Register with ESIC.
• File monthly returns on the ESIC portal.
• Maintain records and issue payslips.

TDS Rules for 2026

TDS on Salary

• Deduct TDS as per the applicable slab rates.
• Collect PAN details from employees.
• File quarterly TDS returns Form 24Q) on the TRACES portal.

TDS on Other Payments

• Contractor Payments (Section 194C): 1% for individuals, 2% for others if the amount exceeds ₹30,000 in a single transaction or ₹1,00,000 annually.
• Rent Payments (Section 194I): 10% on land and buildings, 2% on plant and machinery.
• Professional/Technical Fees (Section 194J): 10% (or 2% for technical services).

Compliance

• File TDS returns quarterly.
• Maintain records and issue TDS certificates.

Key Compliance Steps for Startups

1. Register: Register with EPFO, ESIC, and TRACES.
2. Collect Details: Collect PAN, Aadhaar, and bank details from employees.
3. Calculate Contributions: Accurately calculate PF, ESI, and TDS.
4. File Returns: File monthly/quarterly returns on respective portals.
5. Maintain Records: Keep detailed records and payslips.
6. Stay Updated: Monitor changes in rules and update your process.

How OxHRM Helps with PF, ESI, and TDS Compliance

OxHRM automates payroll, compliance, and reporting for Indian startups:

• Automated Calculations: Accurately calculate PF, ESI, and TDS.
• Compliance Updates: Stay updated with rule changes.
• Digital Records: Maintain accurate, auditable records.
• Reporting: Generate compliance reports and payslips.

Conclusion: Stay Compliant, Avoid Penalties

Understanding and complying with PF, ESI, and TDS rules is essential for Indian startups. By following this guide, you can ensure your payroll process is compliant, efficient, and audit-ready.

If youʼre looking for a reliable payroll solution, consider OxHRM. It automates payroll, compliance, and reporting for Indian businesses.

Ready to simplify your payroll compliance? Book a demo or start a free trial of OxHRM today.