Guide 8 of 9

India Compliance

Configure PF, ESI, Professional Tax, TDS (Section 192), and Gratuity for India-based employees. All statutory deductions calculate automatically at payroll time.

Audience: HR Admin · Finance Setup time: 15–25 minutes

1. Overview — How India Compliance Works

India compliance in MAttendance is per-employee, not per-organization. A single organization can have employees from multiple countries. Each employee's statutory deductions follow their own Compliance Country setting.

Employee ComplianceCountry = "India" Payroll Engine Detects India compliance rules Statutory Deductions Applied PF (Employee 12%) ESI (0.75%) Prof. Tax TDS Sec. 192 Gratuity accrual → shown on payslip Net Pay Gross minus all deductions

Where to configure: Go to Settings → India Compliance. You will find four tabs: Provident Fund, ESI, Professional Tax, and Gratuity.

Per-employee activation: Statutory deductions only apply to employees whose Compliance Country is set to India on their employee profile. Employees with UAE or Generic use different rules.

2. Provident Fund (PF)

Governed by the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. PF applies to employees whose Basic salary is below or at the PF wage ceiling, unless they are individually marked as exempt.

PF Contribution Breakdown (Default Rates) Employee Contribution 12% of PF Base (Basic) capped at ₹15,000 Employer Contribution (not deducted from employee) Employer EPF 3.67% Employer EPS 8.33% (capped ₹15,000)

Setup Steps

  1. Go to Settings → India Compliance → Provident Fund
  2. Enter your Establishment PF Code (e.g. MH/BOM/0012345/000)
  3. Verify Employee PF Rate (default 12%) and PF Wage Ceiling (default ₹15,000)
  4. Set Employer EPF Rate (3.67%) and Employer EPS Rate (8.33%)
  5. Click Save
PF Base formula: PF Base = min(Basic Salary, Wage Ceiling). If an employee's basic is ₹30,000 and the ceiling is ₹15,000, PF is computed on ₹15,000.
ContributionRateComputed on
Employee PF12%min(Basic, WageCeiling)
Employer EPF3.67%min(Basic, WageCeiling)
Employer EPS8.33%min(Basic, ₹15,000) — always ₹15,000 ceiling

3. ESI (Employee State Insurance)

Governed by the Employees' State Insurance Act, 1948. ESI applies only when an employee's gross salary is ≤ ESI wage ceiling (default ₹21,000/month).

Default Rates

ContributionRateComputed on
Employee ESI0.75%Gross Salary
Employer ESI3.25%Gross Salary

Setup Steps

  1. Go to Settings → India Compliance → ESI
  2. Enter your Establishment ESI Code (17-digit ESIC code)
  3. Verify rates and ESI Wage Ceiling (default ₹21,000)
  4. Click Save
Ceiling check: If an employee's gross salary exceeds the ceiling in any month, ESI is not deducted for that month — even if previously covered. When the salary drops back below the ceiling, ESI resumes.

4. Professional Tax

Professional Tax is a state-level levy — rates and slabs vary by state. Maharashtra, Karnataka, West Bengal, and others have their own schedules. MAttendance lets you configure any slab structure.

How Slabs Work

You define salary ranges and the fixed PT amount for each range. Month-specific slabs (e.g. February ₹300 in Maharashtra) take priority over general slabs for that month.

Setup Steps

  1. Go to Settings → India Compliance → Professional Tax
  2. Click Add Slab
  3. Enter From Salary, To Salary (0 = no upper limit), PT Amount
  4. Leave Applicable Month blank for all months; set to a specific month for state-specific rules (e.g. February for Maharashtra ₹300)
  5. Repeat for all salary bands

Example: Maharashtra PT Slabs

From (₹)To (₹)PT AmountMonth
07,500₹0All months
7,50110,000₹175All months
10,001No limit₹200All months
10,001No limit₹300February only

5. TDS — Income Tax (Section 192)

Under Section 192 of the Income Tax Act, employers must deduct TDS on salary at source. MAttendance computes the estimated annual tax and deducts 1/12th each month.

Tax Regimes

Tax Regime Comparison — FY 2025-26 New Regime (Default) Standard Deduction: ₹75,000 87A Rebate: up to ₹25,000 if income ≤ ₹7L Slabs: 0% / 5% / 10% / 15% / 20% / 30% No investment declarations required ✓ Simpler · Lower tax for most employees Old Regime Standard Deduction: ₹50,000 87A Rebate: up to ₹12,500 if income ≤ ₹5L Slabs: 0% / 5% / 20% / 30% 80C, HRA, and other declarations apply ✓ Better for high 80C/HRA claimants

TDS Calculation Formula

StepFormula
Annual GrossGross Salary × 12
Taxable IncomeAnnual Gross − Standard Deduction − Declared deductions (Old regime only)
Slab TaxProgressive slab calculation on Taxable Income
Rebate (87A)Subtract up to ₹25,000 (New) or ₹12,500 (Old) if eligible
CessTax × 1.04 (4% Health & Education Cess)
Monthly TDSAnnual Tax ÷ 12

New Regime Slabs (FY 2025-26)

Income RangeTax Rate
Up to ₹3,00,000Nil
₹3,00,001 – ₹7,00,0005%
₹7,00,001 – ₹10,00,00010%
₹10,00,001 – ₹12,00,00015%
₹12,00,001 – ₹15,00,00020%
Above ₹15,00,00030%

Setting Employee Tax Regime

  1. Open the employee's profile (Employees → [Name])
  2. Click the Tax Regime button (visible to HR and above)
  3. Select the Financial Year and choose New or Old
  4. If Old regime: enter 80C, HRA exemption, and other deductions
  5. Click Save — applies from the next payroll run
Default is New Regime. Employees should declare their preference early in the financial year (April). A change mid-year will recalculate remaining months' TDS to catch up.

6. Gratuity

Governed by the Payment of Gratuity Act, 1972. Gratuity is a lump-sum payment made to an employee on separation after a minimum period of continuous service.

Formula

Gratuity Calculation Basic ÷ 26 Daily wage rate × 15 days per year × Completed Years ≥6 months in last year rounds up = Gratuity Amount Capped at ₹20,00,000 (statutory limit)

Setup Steps

  1. Go to Settings → India Compliance → Gratuity
  2. Toggle Enable Gratuity
  3. Set Minimum Service Years (default 5)
  4. Set Maximum Cap (statutory limit ₹20,00,000)
  5. Click Save

Liability Report

Click Liability Report on the Gratuity tab to see the current gratuity liability for all active India employees, sorted by amount descending. Use this for annual provisioning in your accounts.

Example: Basic = ₹25,000 | Service = 8 years 8 months → rounds to 9 years
Gratuity = (₹25,000 ÷ 26) × 15 × 9 = ₹1,30,000

7. Employee Setup

For India compliance to activate, each employee must have their Compliance Country set to India. Additional fields unlock once this is set.

FieldWherePurpose
Compliance CountryEmployee form → Statutory sectionSet to India to activate statutory deductions
UANEmployee form → Statutory section12-digit Universal Account Number (EPFO)
ESI NumberEmployee form → Statutory sectionInsured Person Number (ESIC)
Exempt from PFEmployee form → Statutory sectionSkip PF for this employee
Exempt from ESIEmployee form → Statutory sectionSkip ESI for this employee

Steps

  1. Open Employees → [Employee Name] → Edit
  2. Scroll to the Statutory / Compliance section
  3. Set Compliance Country = India — additional fields appear
  4. Enter UAN and ESI Number if available
  5. Toggle Exempt from PF / ESI if needed
  6. Click Save

8. Payslip Breakdown

Once India compliance is active, the payslip shows a dedicated Statutory Deductions section and an employer contributions summary for CTC transparency.

Sample India Payslip EARNINGS Basic Salary ₹25,000 HRA ₹8,000 Special Allowance ₹5,000 Gross Salary ₹38,000 Net Payable ₹33,219 STATUTORY DEDUCTIONS Employee PF (12%) ₹1,800 Employee ESI (0.75%) ₹285 Professional Tax ₹200 TDS (Income Tax) ₹496 Total Deductions ₹2,781 Net = Gross − Deductions ₹33,219 Employer Contributions (CTC only — not deducted): Employer PF ₹918 Employer EPS ₹1,249 Employer ESI ₹1,235
CTC = Gross + Employer Contributions. Employer PF, EPS, and ESI are shown for transparency but are never deducted from the employee's take-home pay.

Quick Setup Checklist

#TaskWhere
1Enter PF establishment code and verify ratesSettings → India Compliance → Provident Fund
2Enter ESI establishment code and verify ratesSettings → India Compliance → ESI
3Add Professional Tax slabs for your stateSettings → India Compliance → Professional Tax
4Enable Gratuity and set cap / minimum yearsSettings → India Compliance → Gratuity
5Set Compliance Country = India on each employee; enter UAN and ESI numberEmployees → Edit → Statutory section
6For Old-regime employees: declare regime and investmentsEmployee Profile → Tax Regime
7Run test payroll and verify statutory deductions on payslipPayroll → Generate
8Review Gratuity Liability Report for provisioningSettings → India Compliance → Gratuity → Liability Report
Continue to Guide 9 — Gulf Compliance for EOSB, WPS, and social insurance setup for UAE, Saudi, Qatar, and Kuwait employees.