Most Indian payroll tools look identical on a demo. These are the six compliance checks that separate software that works from software that creates liability. Run them before you commit.
Why Indian payroll is harder than it looks
Payroll in India is not just salary calculation. Every month you're handling PF contributions, ESIC deductions, state Professional Tax slabs that differ across Karnataka, Maharashtra, Tamil Nadu, West Bengal, and eight other states, TDS under Section 192, Labour Welfare Fund contributions, and the Bonus Act where applicable. A software that handles five of these well but misses one can expose your business to penalties, EPFO notices, and employee disputes.
Free trials are your opportunity to stress-test the software before you're locked in. Here are the six checks that matter.
Check 1: Does it handle state-specific Professional Tax correctly?
Professional Tax is a state subject. Karnataka charges ₹200/month for salaries above ₹15,000. Maharashtra charges ₹200/month for salaries above ₹10,000. Telangana has different slabs. West Bengal uses a quarterly slab system.
During your free trial, add three test employees: one each in Maharashtra, Karnataka, and Tamil Nadu with identical salaries. Check that the PT deduction is different for each, and correct for the slab in each state. If the software uses a single flat PT rule, it will file incorrectly for multi-state businesses.
Check 2: Test ESIC at the salary boundary
ESIC applies when an employee's gross salary is at or below ₹21,000/month. The common failure point is when an employee gets a raise mid-year that takes them above ₹21,000. Good payroll software stops ESIC deduction from the contribution period following the breach and handles the transition cleanly in reports.
Create a test employee at ₹20,500 gross. Run payroll for that month. Then give them a raise to ₹21,500 and run the following month. ESIC should stop. If the software keeps deducting, it will over-deduct and you'll spend hours getting refunds from ESIC.
Check 3: PF on new joiners and mid-month exits
PF must be pro-rated for employees who join or leave mid-month. The calculation uses calendar days (or working days, depending on your policy). During the trial, run a payroll cycle with one employee who joined on the 15th and another who resigned on the 20th. Check that their PF contribution is correctly pro-rated and not calculated on a full month's basic.
Check 4: TDS on salary — investment declarations
TDS under Section 192 requires you to estimate the employee's annual income, apply deductions under 80C, 80D, HRA exemption, LTA exemption, and compute the monthly TDS. This changes when employees submit their investment declarations in December-January.
Enter investment declarations for a test employee (₹1.5L under 80C, ₹25,000 under 80D). Verify that TDS drops to reflect those declarations. If the software ignores declarations or doesn't let you enter them, you'll either over-deduct TDS (unhappy employees) or under-deduct (employee faces a tax bill in March).
Check 5: Full-and-final settlement automation
When an employee leaves, FnF involves earned leave encashment, notice period deduction or payment, gratuity calculation (only for 5+ years of service), arrear adjustments, and final payslip generation. Many mid-market payroll tools handle FnF manually or require a separate process.
During the trial, simulate a resignation. Check whether FnF is automated or whether your HR manager will need to manually calculate each component every time someone leaves.
Check 6: Export formats for statutory filing
The EPFO portal accepts ECR files in a specific format. The ESIC portal has its own format. State PT authorities have their own submission requirements. Run payroll for a trial month and download the statutory export files. Open them. Check that they match the format the government portal expects.
This sounds tedious. But discovering that your payroll software generates reports that don't import into the EPFO portal is a problem you do not want to find in month three.
What good payroll software does automatically
After six months of using the right tool, your payroll process should look like this: attendance data syncs from your biometric or mobile app. The system calculates gross, deductions, and net for every employee. You review the summary and approve. Payslips are emailed to employees. ECR file for EPFO, ESIC report, and PT challan data are generated and ready.
Total time: twenty minutes per month for a thirty-person team.
If you're looking for software that handles payroll compliance out of the box, Proactiq includes this as part of its all-in-one platform. [Try it free](https://proactiq.com/signup) — no card needed.
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