EduVizio

School Payroll in India: PF, ESI, Professional Tax and TDS for Teachers

By the EduVizio team · Updated · 4 min read

Short answer

School payroll in India means calculating each staff member's salary from their structure and attendance, then deducting the statutory items that apply: Provident Fund (usually 12% of basic wages from employee and employer), ESI for staff earning up to ₹21,000 a month, state professional tax, and income tax (TDS) under the regime the employee chooses. The school deposits these by their due dates, issues monthly payslips and gives each employee Form 16 after the year ends.

This is a general guide, not tax or legal advice. Rates, thresholds and due dates change, and several rules depend on your state and your school's registration. Confirm them with your CA before you run payroll.

The parts of a school payroll

Every month, for each teacher and staff member, payroll works through the same steps:

  1. Attendance. Days present, approved leave and loss of pay (LOP) for unapproved absence.
  2. Gross salary. The salary structure (basic, DA, HRA and allowances), reduced for LOP.
  3. Statutory deductions. PF, ESI, professional tax and TDS.
  4. Other deductions. Advances, loans, fee concessions for staff children if recovered through salary.
  5. Net pay, paid by bank transfer, with a payslip.
  6. Deposits and returns for PF, ESI, PT and TDS by their due dates.

Provident Fund (PF)

Schools with 20 or more employees generally come under the Employees' Provident Funds scheme. The common arrangement:

  • Employee contribution: 12% of basic wages (basic plus DA), deducted from salary.
  • Employer contribution: 12% of basic wages, of which part goes to the pension scheme.
  • Wage ceiling: PF is mandatory for employees whose basic wages are up to ₹15,000 a month; above that, contributions can be capped at ₹15,000 if both sides agree.

Many private schools have structured salaries with a low basic and high allowances. India's new labour codes require "wages" for these calculations to be at least half of total remuneration, so review how your salary structures are split.

Employees' State Insurance (ESI)

ESI covers employees earning up to ₹21,000 a month in establishments covered by the scheme. Contributions are 0.75% of wages from the employee and 3.25% from the employer. In practice this applies mostly to support staff — drivers, attendants, housekeeping and some administrative staff — rather than senior teachers.

Professional tax (PT)

Professional tax is levied by states, so the amount and slabs depend on where your school is. Several states, including Karnataka, Maharashtra, West Bengal, Tamil Nadu and Telangana, levy it, typically up to ₹2,500 a year per employee; some states do not. The school deducts it monthly and deposits it with the state.

Income tax (TDS on salary)

The school deducts tax at source on salaries under section 192 of the Income-tax Act, based on each employee's estimated annual income:

  • Ask every employee to choose the new or old tax regime at the start of the year. The new regime is the default if they do not choose.
  • Collect investment declarations from employees on the old regime, and proofs before the final quarter.
  • Spread the year's tax evenly over the remaining months, and recalculate when salary changes.
  • Deposit TDS monthly and file quarterly TDS returns.
  • Issue Form 16 to every employee by the deadline after the year ends.

Other items to plan for

  • Gratuity for employees who complete the qualifying period of service, under the Payment of Gratuity Act and the labour codes.
  • Leave encashment at exit, if your leave policy allows it.
  • Full and final settlement for staff who leave mid-year, including pending salary, leave and gratuity.
  • Mid-year joiners, whose TDS must account for income from a previous employer.

Common mistakes in school payroll

  • Calculating loss of pay from a paper register that was never reconciled with approved leave.
  • Forgetting to recalculate TDS after an increment or arrears.
  • Paying staff in cash, which breaks the audit trail and complicates PF and ESI.
  • Keeping salary structures in a spreadsheet nobody else understands, so payroll stops when one person is on leave.
  • Not posting salary costs to the school's accounts, so the books and payroll never agree.

Running payroll from the school's own records

Payroll is simplest when it reads staff attendance and approved leave directly, rather than receiving a summary at month end. In EduVizio, staff check in and out in the app, leave is applied for and approved in stages, and a monthly attendance sign-off feeds payroll. Payroll runs need approval and calculate loss of pay, PF, ESI, PT and TDS, with payslips and Form 16, and a paid run posts to the accounts. Payroll is part of the Elevate and Intelligence plans; see plans or book a demo.

Frequently asked questions

Is PF mandatory for private school teachers?

For schools covered by the Employees' Provident Funds scheme (generally those with 20 or more employees), PF is mandatory for employees whose basic wages are up to ₹15,000 a month, and can be extended to others. Check coverage and your structures with your CA.

Do teachers pay professional tax?

In states that levy professional tax, yes. The school deducts it from salary and deposits it with the state. The amount depends on the state's slabs.

When must a school issue Form 16?

Form 16 is issued after the financial year ends, by the deadline set under the Income-tax rules (in recent years, 15 June). It summarises salary paid and tax deducted.

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