Run payroll for a team spread across Bangalore, Hyderabad, Mumbai, and Delhi and you're operating under four different state-level compliance frameworks simultaneously. Professional Tax rates differ. Labour Welfare Fund contributions differ. Shops & Establishments registration requirements differ. Leave entitlements differ. And each state has its own filing calendars.
For international companies managing India payroll in-house or with a global payroll provider unfamiliar with India-specific rules, multi-state compliance is where costly errors cluster.
Professional Tax: A State-by-State Reality
Professional Tax (PT) is a state-level tax on employment income. Not all states levy it, and among those that do, the rates and slabs vary significantly. Key states:
| State | Max Monthly PT | Annual Max | Notes |
|---|---|---|---|
| Karnataka | ₹200 | ₹2,400 | Applies to all employees earning >₹15,000/month |
| Maharashtra | ₹200 | ₹2,500 | Slab-based; varies by monthly salary |
| West Bengal | ₹200 | ₹2,400 | Separate registration required |
| Telangana | ₹200 | ₹2,400 | Applies from ₹20,001/month |
| Tamil Nadu | ₹208 | ₹2,500 | Half-yearly remittance |
| Delhi, Haryana, UP | None | None | No Professional Tax in these states |
Critically, PT deduction is the employee's liability deducted by the employer — not an employer contribution. Failure to deduct and remit carries penalties under state-specific PT Acts.
Labour Welfare Fund (LWF)
LWF is a small biannual contribution (employee + employer) that funds state labour welfare schemes. It applies in some states and not others, and the contribution amounts are nominal (₹6–₹36 per employee per contribution cycle). But registration and timely remittance is required where applicable. Maharashtra, Karnataka, Telangana, Tamil Nadu, West Bengal, and Gujarat all have LWF requirements.
Shops & Establishments Registration
Every commercial establishment must register under the local Shops & Establishments Act within 30 days of commencing operations. For EOR arrangements, the EOR provider handles this registration. For companies with their own entity, you need separate registrations in each state where you have employees — even if those employees work from home.
Multi-state payroll checklist
- PT: confirm applicable rate by state, register in each applicable state, remit monthly/quarterly per local rules
- LWF: check applicability in each state, register where required, remit biannually
- Shops & Establishments: register in each state with employees, even for remote/WFH employees
- ESI: different ESI branch offices per state; ensure correct branch code in payroll system