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Run payroll

Employees, PF, ESI and professional tax, a monthly run, and paying it.

Payroll pays your employees once a month from their gross salary. It takes off TDS, and PF, ESI and professional tax as your business deducts them, and books every rupee: the salaries, what is owed to the government, and what left the bank.

Setting up

  1. Go to Books, Employees and add each person with their gross salary a month and their TDS rate.
  2. Go to Settings, Payroll and switch on PF and ESI if your business is registered for them. Both are off until you do.
  3. On each employee, set Professional tax a month if your state charges it, and Professional tax in February where February is different. Untick In PF for anybody outside PF.

What comes off, and what the business pays

  • PF: 12% of basic pay, worked out on basic up to ₹15,000, so at most ₹1,800 a month. The business pays the same 12% on top.
  • ESI: for anyone earning up to ₹21,000 gross a month, 0.75% comes off and the business pays 3.25% on top. Above ₹21,000 nothing applies.
  • Professional tax: the employee’s own amount, owed to the state.
  • TDS: the employee’s rate, under section 192, posted to the TDS register.

Basic pay is half the gross salary unless the employee’s salary structure says otherwise.

Running a month

  1. Go to Books, Payroll and choose Run salaries.
  2. Pick the month and, if you know it, the account the salaries will leave.
  3. Check the preview: each person’s gross, PF, ESI, professional tax, TDS and net pay, and under the totals what the business pays on top.
  4. Choose Create the run. Each salary is booked and its TDS is in the register; nothing has left the bank yet.
  5. When the money goes, open the run and choose Mark paid, with the account and the day it was paid.

A month is run once. If something was wrong, open the run, choose Undo payment if it was paid, delete the draft and run the month again.

In the books

Gross salary goes to Salaries and wages, and the business’s own PF and ESI to Employer’s PF and ESI. What came off is owed in TDS payable, Provident fund payable, ESI payable and Professional tax payable, and net pay is owed to each employee until the run is paid.

A salary is paid, undone and deleted with its run, on Payroll, never on its own from Expenses.

Next in accounting & finance Returned goods on credit and debit notes → Stock in the books →

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