PF is 12% of basic salary. ESIC is 3.25% (employer) + 0.75% (employee). But there are salary limits, exemptions, and state rules. This guide explains everything.

PF & ESIC: Why Every Indian SMB Owner Needs to Get This Right

Provident Fund (PF) and Employee State Insurance (ESIC) are mandatory for most Indian businesses. Getting them wrong means penalties, employee disputes, and compliance notices. Getting them right means your employees are protected and your business is legally clean.

PF (Provident Fund) — How it Works

Who must contribute: Every business with 20+ employees. Once you cross 20, you must register — even if headcount later falls below 20.

Contribution rates:

Salary ceiling: PF is calculated only on salary up to ₹15,000/month (basic + DA). Employees earning more can opt for higher contributions voluntarily.

Practical example:

Basic salary: ₹20,000

PF calculated on: ₹15,000 (ceiling applies)

Employee deduction: ₹1,800 (12% of ₹15,000)

Employer contribution: ₹1,800 total (split across EPF + EPS)

ESIC (Employee State Insurance) — How it Works

Who must contribute: Businesses with 10+ employees in notified areas, where gross salary is ≤ ₹21,000/month.

Contribution rates (2026):

What ESIC covers: Medical treatment, hospitalization, maternity benefit, disability benefit, dependent benefit — for both employee and their family.

Practical example:

Gross salary: ₹18,000

Employee deduction: ₹135 (0.75%)

Employer contribution: ₹585 (3.25%)

PT (Professional Tax) — State-Specific

Professional Tax is a state subject — each state sets its own rates and thresholds. Key states:

TDS on Salary (Section 192)

For employees earning above the basic exemption limit (₹2.5L for general, ₹3L for senior citizens), you must deduct TDS and deposit it by the 7th of next month.

How Proactiq Automates All of This

Running this manually for 20+ employees every month is a 2-3 day job. Proactiq automates everything:

1. PF calculation: Enter basic salary → PF computed automatically. Challan generated.

2. ESIC calculation: Enter gross salary → ESIC computed. Filing-ready report generated.

3. PT deduction: State-aware PT deducted based on employee's work location.

4. TDS: Computed based on salary structure and investment declarations.

5. Payslips: Generated and emailed to employees automatically.

6. Statutory filing: EPFO ECR, ESIC Return data ready for upload.

Time to run payroll for 20 employees: 20 minutes (down from 3 days).

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PF & ESIC Calculator for India — Complete 2026 Guide