How to Set Up Zoho Payroll for PF, ESI & TDS in India — Complete Guide

Zoho Payroll PF ESI TDS India compliance is why Indian businesses choose it over generic payroll tools. Running payroll incorrectly in India — wrong PF calculations, incorrect ESI applicability, or missed TDS deductions — can result in penalties, employee disputes, and compliance notices. This guide walks through the complete Zoho Payroll setup for Indian statutory compliance, covering every configuration step in the correct sequence.

Step 1: Organisation and Pay Schedule Configuration

Begin in Zoho Payroll → Settings → Organisation. Enter your company legal name, PAN, TAN, and registered address. Configure your Pay Schedule — select Monthly or Weekly, set the pay date (e.g., last working day of the month), and define your pay period start and end dates. Set up Salary Components: Basic, HRA, DA, Special Allowance, LTA, Medical Allowance, and any other components applicable to your pay structure. The ratio of Basic to total CTC is critical — PF and ESI are calculated on Basic (and PF applies on Basic+DA), and HRA exemption for employees is based on Basic. Most Indian employers set Basic at 40–50% of CTC.

Step 2: Provident Fund (PF) Configuration

Go to Settings → Statutory Components → Provident Fund. Enter your EPFO establishment code (your PF registration number). Configure the employee PF contribution rate — 12% of Basic+DA is the standard rate. The employer contributes 12% of Basic+DA: 8.33% goes to Employee Pension Scheme (EPS) and the remaining 3.67% goes to EPF. Zoho Payroll calculates both components automatically. Set the PF wage ceiling — currently ₹15,000/month for mandatory PF applicability (employees earning more than ₹15,000 Basic+DA can opt out or continue on the actual wage basis). Enable the option for Voluntary PF contributions for employees who choose to contribute more than 12%. Zoho Payroll generates the ECR (Electronic Challan cum Return) file for monthly PF filing.

Step 3: ESI (Employee State Insurance) Configuration

Go to Settings → Statutory Components → ESI. Enter your ESIC establishment code. ESI applies to employees earning up to ₹21,000 gross per month. Employee contribution is 0.75% of gross wages and employer contribution is 3.25% of gross wages. Zoho Payroll automatically applies or excludes ESI for each employee based on their gross salary and updates eligibility when salary revisions push employees above the threshold. Generate the ESIC monthly contribution challan and 6-monthly return directly from Zoho Payroll's statutory reports.

Step 4: TDS and Income Tax Configuration

Go to Settings → TDS. Zoho Payroll comes pre-loaded with the current Income Tax slabs for both the old and new tax regimes. For each employee, you can specify which regime they opt for (they must choose before the start of the financial year). Zoho Payroll calculates the projected annual income, applies the appropriate deductions and exemptions, and computes the monthly TDS amount. Investment declarations (Section 80C, 80D, HRA exemption, LTA, etc.) can be submitted by employees through the Zoho Payroll employee self-service portal — the system automatically adjusts TDS based on submitted proofs. At year-end, Zoho Payroll generates Form 16 Part A and Part B for all employees.

Step 5: Employee Setup and Salary Structure Assignment

Add employees under Employees → Add Employee. Enter personal details, DOB, PAN, Aadhaar, UAN (for PF), ESIC IP number (if applicable), and bank account details for salary credit. Assign a salary structure — select from the pay grades or salary templates you created, or input a custom CTC breakdown. Verify that PF and ESI settings are correct for each employee (Zoho Payroll auto-applies based on your configuration, but manual review during setup is recommended). Upload existing employee data via CSV for bulk setup if migrating from another system.

Step 6: Running Payroll and Statutory Filing

Once configured, running monthly payroll in Zoho takes minutes. Go to Pay Runs → New Pay Run, select the period, review attendance and leave data (integrated from Zoho People if you use it), approve the salary calculation, and process. Zoho Payroll generates payslips automatically and can distribute them to employees via email and through the employee self-service portal. For PF filing, download the ECR file and upload to the EPFO portal. For TDS, Zoho Payroll generates Form 24Q (the quarterly TDS return for salary) which your CA submits to TRACES. Year-end processes include Form 16 generation and full-year income tax reconciliation.

Frequently Asked Questions

Does Zoho Payroll integrate with Zoho People for attendance?

Yes. Zoho Payroll integrates natively with Zoho People. Attendance data from Zoho People (daily attendance, shift data, overtime hours) is automatically pulled into Zoho Payroll when processing the pay run. Leave data is also synced — if an employee has taken unpaid leave, the deduction is calculated automatically. This integration eliminates the manual transfer of attendance data from an HR system to payroll, which is a common source of errors in manual payroll processes.

Can Zoho Payroll handle salary revisions mid-year?

Yes. Zoho Payroll supports salary revisions effective from any date. When you update an employee's salary, the system calculates the arrear (difference in pay from the revision date to the next pay run) and includes it in the next payslip. The TDS calculation is automatically recalculated based on the revised annual projected income. Salary revision history is maintained on each employee record for audit purposes.

How does Zoho Payroll handle employees who are not PF-eligible?

Employees whose Basic+DA salary exceeds ₹15,000 per month at the time of joining are not mandatorily required to contribute to PF. In Zoho Payroll, you can mark such employees as PF-exempt during setup. If an existing PF contributor's salary is revised above the ceiling, they must continue PF contributions (once enrolled, employees cannot exit PF). Employees below the ceiling at joining can choose to contribute on the actual Basic+DA (not capped at ₹15,000) — this is the Voluntary PF option and can be configured per employee in Zoho Payroll.

Does Zoho Payroll support gratuity calculation?

Yes. Zoho Payroll calculates gratuity liability based on the Payment of Gratuity Act — 15 days of last drawn salary for each completed year of service, for employees who have completed 5 or more years. The gratuity calculation uses Last Drawn Basic+DA / 26 × 15 × number of years of service. Zoho Payroll tracks tenure from the Date of Joining on each employee record. You can run a gratuity liability report at any time to see the accrued liability across your employee base.