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Payroll and Benefits Guide India
Last updated: Mar 03, 2026
Currency
Indian Rupee (INR)
Employer Taxes
16.75%
Payroll Frequency
Monthly
Employee Costs
16.75%
Capital
New Delhi
Date Format
dd/mm/yyyy
Fiscal Year
1 April - 31 March
Contribution
| Employer Payroll Contributions | |
|
12.00%
|
Employee’s Provident Fund (EPF) and Employee’s Pension Scheme (EPS) (Compulsory for employers with more than 20 employees & a maximum monthly salary of 15,000.00 INR) applied on basic salary.
|
|
3.25%
|
Employee’s State Insurance (ESI) for employees with salaries of up to 21,000 INR per month
|
|
1%
|
Employees’ Deposit Linked Insurance (EDLI) and EPF admin charges
|
| 16.25% |
Total Employment Cost |
| Employee Payroll Contributions | |
|
12.00%
|
Employee’s Provident Fund (EPF) and Employee’s Pension Scheme (EPS) (Compulsory for employers with more than 20 employees & a maximum monthly salary of 15,000.00 INR)
|
|
0.75%
|
Employee’s State Insurance (ESI) for employees with salaries of up to 21,000 INR per month
|
|
Varies
|
Professional tax, maximum limit of 2500 INR/annum
|
|
4.00%
|
Health and Education Cess (levied at the rate of 4.00% on the amount of income-tax plus surcharge)
|
| 18.08% |
Total Employee Cost |
|
Employee Income Tax
|
Annual |
|
0.00%
|
Up to 300,000 INR
|
|
5.00 %
|
300,001 – 600,000 INR
|
|
10.00%
|
600,001 – 900,000 INR
|
|
15.00%
|
900,001 – 1,200,000 INR
|
|
20.00%
|
1,200,001 – 1,500,000 INR
|
|
30.00%
|
Over 1,500,001 INR
|
|
In case the income exceeds a certain threshold, surcharge will be applicable:
|
|
|
10.00%
|
For total taxable income of above 5,000,000 INR
|
|
15.00%
|
For total taxable income of above 10,000,000 INR
|
|
25.00%
|
For total taxable income of above 20,000,000 INR
|
Employer taxes
Highest
Lowest
Employee taxes
Highest
Lowest
Minimum Wage
General
The National Floor Level Minimum Wage is Rs. 178 per day and Rs. 5,340 per month.
However, the applicable minimum wage is fixed by the respective State governments by setting minimum wages that defines thousands of different jobs for unskilled workers and over 400 categories of employment, with a minimum daily wage for each type of job.
MINIMUM WAGE (PER MONTH)
Highest
Lowest
Payroll
Payroll Cycle
The payroll cycle in India is generally monthly, with wages paid on or after the 28th of each month.
13th Salary
The 13th salary in India is mandatory for low income workers, paid as a percentage of the annual salary and within eight months of the end of the financial year.
Working Hours
General
The standard working hours in India are 40 hours weekly at 8 hours a day. This can also be 48 hours including breaks, only as per client’s discretion.
The employees are allowed to work for 8-9 hours in a day. The standard practice followed by a majority of organizations in India is 8 hours a day of working.
Overtime
-
Maximum Ordinary Hours: The national standard is 8 hours per day and 48 hours per week (Section 13, Code on Wages).
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Note: The OSHWC Code permits the total daily hours, including overtime, to be capped at 12 hours (this 12-hour limit includes rest intervals).
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Maximum Overtime Hours (Factories/Shops): The older acts (Factories Act and Model Shops and Establishments Act, which guide the new codes) historically cap overtime at:
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10 hours per week (under the Factories Act); or
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125 hours per quarter (three months) (under the Model Shops and Establishments Act).
-
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Consent: Overtime work generally requires the consent of the worker.
Mandatory Overtime Pay Rate
India mandates one of the highest minimum overtime rates globally. This is a non-negotiable statutory minimum for covered employees.
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Standard Overtime: Any work beyond the prescribed 8 hours per day or 48 hours per week must be paid at a minimum of twice the ordinary rate of wages (200%).
| Day/Condition | Minimum Compensation Rate (Statutory) | Formal Note |
| Normal Overtime (Working Days) | 200% (Double the ordinary rate of wages). | This applies to all work exceeding 9 hours in a day or 48 hours in a week (as per the Factories Act, 1948, which sets the precedent for the new Codes). |
| Rest Days/Holidays | 200% (Double the ordinary rate of wages). | Work on a rest day or designated holiday is also required to be compensated at this minimum rate. |
Important Context: The “ordinary rate of wages” for this calculation includes the basic wage plus certain allowances, but typically excludes bonuses.
Leave
Annual Leave (vacation)
The regulations regarding paid leave in India are set in the employment contract as a minimum of 15 days paid holiday a year (following completion of 240 days of employment). However, it is common practice for additional leave days to be included in the contract, together with rules on how many days can be carried over to the following year.
All PTO requests must be applied for at least 15 days prior to the start of the leave and approved by the employer, works committee, and the manager to ensure continuity of work.
PTO carryover
In India, statutory annual leave can be carried over, but only up to legal caps set by applicable law. Under the Factories Act, unused leave may be carried forward up to 30 days (or 40 days for public utility services). State Shops & Establishments Acts have similar capped carryover rules. Employers cannot apply an unlimited “use-it-or-lose-it” policy that wipes out statutory leave beyond what the law permits; unused leave within the cap carries forward and must be paid out on termination.
- For Proclosz, unused leave may be carried forward, subject to a maximum accumulation of 45 days.
- For Vandey Consultancy, carry over allowed by law – 8 days
Public Holidays
Workers are entitled to 12 public holidays per year. The country wide holidays listed below are the default days to give off, however, workers can choose to swap these days out in order to take off their Regional or Religious holidays instead.
Public holidays that fall on Saturday are observed on the Friday before and public holidays falling on a Sunday are observed on the following Monday.
| Date | Day | Holiday | Notes |
|---|---|---|---|
| 26 January 2026 | Monday | Republic Day | Standard holiday |
| 4 March 2026 | Wednesday | Holi | Standard holiday |
| 21 March 2026 | Saturday | Id-ul-Fitr | Standard holiday |
| 31 March 2026 | Tuesday | Mahavir Jayanti | Standard holiday |
| 3 April 2026 | Friday | Good Friday | Standard holiday |
| 1 May 2026 | Friday | Buddha Purnima | Standard holiday |
| 27 May 2026 | Wednesday | Id-ul-Zuha (Bakrid) | Standard holiday |
| 26 June 2026 | Friday | Muharram | Standard holiday |
| 15 August 2026 | Saturday | Independence Day | Standard holiday |
| 26 August 2026 | Wednesday | Milad-un-Nabi / Id-e-Milad | Standard holiday |
| 2 October 2026 | Friday | Mahatma Gandhi’s Birthday | Standard holiday |
| 20 October 2026 | Tuesday | Dussehra (Vijay Dashami) | Standard holiday |
| 8 November 2026 | Sunday | Diwali (Deepavali) | Standard holiday |
| 24 November 2026 | Tuesday | Guru Nanak’s Birthday | Standard holiday |
| 25 December 2026 | Friday | Christmas Day | Standard holiday |
Sick Days
In India, the law mandates a combined 12 days of sick and casual leave for employees. These 12 days can be used for sickness or non-medical emergencies, with the stipulation that medical emergencies are marked as sick leave and other emergencies as casual leave. The distribution of these 12 days between sick and casual leave can vary based on the employee’s needs, for example, 7 casual and 5 sick, or 8 sick and 4 casual. Casual leaves are intended for unplanned situations, while sick leaves are specifically for health-related issues.
Maternity Leave
Eligible expectant mothers are entitled to 100% of their regular salary rate for 26 weeks for their first two children, decreasing to 12 weeks for any subsequent children. No woman is allowed to work during the six weeks immediately following the day of the delivery or of her miscarriage.
To be eligible, the employee must have been employed for at least 80 days of the preceding 12 months before the expected due date.
Adoptive Mothers and Commissioning Mothers
A woman who legally adopts a child below the age of 3 months or a commissioning mother (a biological mother who uses her egg to create an embryo that is implanted in any other woman), shall be entitled to maternity benefits for a period of 12 weeks from the date the child is handed over.
Every company with 50 or more employees shall have the facility of creche within the prescribed distance either separately or along with other common facilities.
The employer shall allow 4 visits a day to the creche by the woman, which shall also include the interval of rest allowed to her.
Paternity Leave
While government employees are entitled to 15 days of paternity leave, there are no statutory paternity leave laws for the private sector.
Parental Leave
There are no statutory laws on parental leave.
Other Leave
Each state generally sets other leave entitlements and policies.
Vacation Days
Public Holidays
Highest
Lowest
PAID MATERNITY LEAVE (DAYS)
Highest
Lowest
Termination
Termination Process
The termination process is standard in India, with notice periods required unless an employer can provide sufficient cause for dismissal without notice due to misconduct, disobedience, lack of skill, neglect of duties, or absence without permission.
| Salary payment interval / date | Final payment on termination | Bank account payment requirement |
|---|---|---|
| Employees must be paid at regular intervals as per contract. Under the Payment of Wages Act 1991 wages may be paid by cheque, cash, credit transfer, postal/money order or bank account (if agreed) – the law does not fix a single universal payday date for all employment contracts. | On termination of employment the employer must pay all earned wages, accrued annual leave, and any other amounts due. | Under the Payment of Wages Act 1991, wages may be paid by several methods including credit transfer into the employee’s bank account (if specified). The law does not mandate that payment must only be via bank account for all employees. |
Notice Period
The notice period required is at least 30 days.
Severance Pay
In case of a termination due to redundancy, employers are required to pay retrenchment compensation. Severance or retrenchment compensation equal to 15 days’ average pay for every completed year of continuous service or part thereof in excess of 6 months must be paid to a workman on termination of employment.
The provisions of the IR Code pertaining to retrenchment are aligned with the provisions under the ID Act. However, for the purposes of retrenchment compensation, the same will be calculated at the rate of 15 days’ average pay or average pay of such number of days as may be notified by the appropriate government, for every completed year of continuous service or any part thereof in excess of 6 months.
Additionally, as mentioned above, the IR Code also requires employers to contribute an amount equal to 15 days’ wages or such amount as may be notified by the government for every retrenched worker to a “worker re-skilling fund.” In addition, the employer must pay certain termination benefits to employees who are dismissed, including leave encashment, gratuity payment (for employees, whether workmen or not, with 5 years or more of continuous service), payment in lieu of notice (if no notice is given), statutory bonus payment, and any other amounts due under the employment contract.
Employees who are being terminated on account of misconduct are not entitled to notice pay or retrenchment compensation.
Probation Period
Probation periods in India are generally between 3 and 6 months, based on the employee’s role and seniority.
Minimal Statutory Termination Costs
Final wages
Unusued paid leave must be encashed as part of full and final
Notice
Notice Period during Probation: 15 days
Notice Period after Probation: 30 to 90 days depending on job role
Severance:
Retrenchment compensation (often treated as “statutory severance”) — only for eligible “workmen”
If a person qualifies as a workman and is retrenchment-terminated (e.g., redundancy), the Industrial Disputes Act requires:
1 month notice (or wages in lieu), and
Compensation equal to 15 days’ average pay for every completed year of continuous service (and part > 6 months)
Disclaimer: By proceeding with an MTA between the worker and the client, the client will be released from any negative action by the employee going forward.
Severance amount is recommended to be paid to the worker based on the client discretion. The minimum amount being recommended as equivalent to 1-2 months of the employee’s gross salary for a smooth exit of the employee.
Common Benefits
- Wellness allowance – between USD 175 to 250 per month.
- Work from home allowance – between USD 150 to 200 per month.
- Meal allowance – between USD 75 to 150 per month.
- Private pension – employer contribution of 10%. Additional paternity leave of 10-15 days.
- Additional 5-9 days of annual leave.
- Paternity Leave of 1-2 weeks.
Immigration
India issues several visa categories, including Business Visas and Employment Visas, governed by the Ministry of Home Affairs. Employment Visas are required for foreign nationals hired to work in India and are generally granted for up to 5 years, subject to renewal and meeting eligibility criteria such as specialist skills and a minimum salary threshold. Business Visas permit short-term business activities but do not allow employment. All visa applications must be submitted in the applicant’s country of residence and must meet documentation and compliance requirements set by the Government of India.
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Payroll and Benefits Guide
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Payroll and Benefits Guide
in India
What’s covered in this guide:
- Employer/employee contributions
- Minimum wage
- Working hours
- Visa requirements
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All questions are answered by our in-house compliance department working in conjunction with our local in-country partner for this specific country
Public Holidays Calendar
India
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ICS
| Date | Day | Holiday | Notes |
|---|---|---|---|
| 26 January 2026 | Monday | Republic Day | Standard holiday |
| 4 March 2026 | Wednesday | Holi | Standard holiday |
| 21 March 2026 | Saturday | Id-ul-Fitr | Standard holiday |
| 31 March 2026 | Tuesday | Mahavir Jayanti | Standard holiday |
| 3 April 2026 | Friday | Good Friday | Standard holiday |
| 1 May 2026 | Friday | Buddha Purnima | Standard holiday |
| 27 May 2026 | Wednesday | Id-ul-Zuha (Bakrid) | Standard holiday |
| 26 June 2026 | Friday | Muharram | Standard holiday |
| 15 August 2026 | Saturday | Independence Day | Standard holiday |
| 26 August 2026 | Wednesday | Milad-un-Nabi / Id-e-Milad | Standard holiday |
| 2 October 2026 | Friday | Mahatma Gandhi’s Birthday | Standard holiday |
| 20 October 2026 | Tuesday | Dussehra (Vijay Dashami) | Standard holiday |
| 8 November 2026 | Sunday | Diwali (Deepavali) | Standard holiday |
| 24 November 2026 | Tuesday | Guru Nanak’s Birthday | Standard holiday |
| 25 December 2026 | Friday | Christmas Day | Standard holiday |
When do you need to start contributing to the Provident Fund?
If a company has less than 20 employees, the employer is not required to contribute to the PF, however, this can be a voluntary contribution. Once there are more than 20 employees, this becomes a mandatory contribution.
Re the overtime rules/payments are they different in different states of India? I am wanting to know for Chennai. Many thanks
In Chennai, the total number of hours of work on any day shall not exceed ten; If hours are spread with intervals for rest, the workday should not exceed twelve hours. The total number of hours in a week including overtime shall not exceed sixty and the total number of hours of overtime shall not exceed fifty for any quarter.
Is the “total employment cost” percentage inclusive of mandatory AND discretionary benefits, or is it just mandatory benefits?
These are mandatory benefits.
Hi What is the usual practice of leave encashment? can the company disallow for leave encashment? how does it work? Thanks for yr advice in prior.
Unused leave balances should be cashed out upon termination. Deletion of unused vacation days would not be legal. The company cannot force an employee to go on vacation but can draft a policy with a maximum number of days that can be carried over to the following year. Unlimited paid time off is permitted under the law, the employment contract should state the mandatory minimum annual leave days. Any remaining statutory leave will be paid out in last payroll.
Employer contribution for Gratuity is not included
Hello, would you be able to clarify what your question is?
What conversion rate is used for monthly salary? Is it based on the conversion rate while making the monthly payment? If it is based on the conversion rate while contract for the year was made, when a new contract is made, is the conversion rate updated?
Salaries have to be paid in local currency.
Hello. If a foreign expert, hired by a foreign company, is sent to India to provide technical guidance to an Indian company for several months with business visa, is such foreign expert required to make contribution to Provident Fund? Many thanks!
Provident Fund contribution can be exempted provided India has SSA agreement with the home country of worker and will continue the social and pension contribution in home country while in deputation in India for shorter duration.
Thanks! No SSA agreement has been entered between the expert’s home country and India… So my assumption is that the expert will be subject to Provident Fund in India, even if he is holding a business visa and no employment agreement will be entered in India, is that correct? Thank you!
We are a non-public company in the US and giving stock options to employees in India. When the employee exercises their options, is there anything we will need to do for filing?
We are unable to advise on specific equity questions, the requester should reach out to a local equity expert to advise on this specific set up.