Indian payroll year-end: a checklist
Reviewed by Mellow Editorial Team, HR & payroll content team
The Indian payroll year-end runs from 1 April to 31 March. Closing it correctly means reconciling every salary component, verifying statutory deductions, filing the right forms on time, and issuing Form 16 to all employees before the deadline.
Know your key deadlines
The financial year 2025/26 has closed; you are now in 2026/27. Year-end tasks for 2025/26 should already be in motion.
The critical dates to track:
- Q4 TDS return (Form 24Q): due after 31 March for the January–March quarter
- Form 16 issuance: must reach employees by 15 June of the assessment year
- Annual PF return and ESI filings: follow their own cycles but align with the year-end reconciliation
- Investment declaration finalisation: employees must have submitted actual proof before the last payroll run of the year
Missing these deadlines attracts interest and penalties, so build a calendar at the start of the financial year, not in March.
Reconcile all salary and deduction figures
Before you file anything, every number in your payroll records must match every number in your accounts.
Work through this list:
- Gross salary paid: add up all monthly payroll runs. Include arrears, bonuses and any off-cycle payments.
- EPF contributions: confirm both the 12% employee deduction and the 12% employer contribution have been deposited correctly each month. Cross-check your challan records against the EPFO portal.
- ESI contributions: verify deductions for all eligible employees against the ESIC portal.
- Professional tax: amounts vary by state; confirm you have applied the correct slab for each state where you have employees.
- TDS deducted: reconcile the total TDS deducted across all four quarters against what you have actually deposited to the Income Tax Department.
Any mismatch at this stage will cause Form 24Q to reject or trigger a notice later.
Process investment declarations and finalise TDS
Employees submit investment declarations at the start of the year as estimates. In February and March, they submit actual proof — rent receipts, insurance premium certificates, home loan statements and so on.
Your job is to:
1. Collect and verify proof for every declaration
2. Recalculate each employee's taxable income under the applicable regime (new or old) for the full year
3. Adjust the final one or two salary runs to recover any TDS shortfall, or refund any excess deducted
Under the new tax regime, income is taxed at slabs rising to 30%, a 4% health and education cess applies on the tax amount, and a section 87A rebate is available for lower-income employees. Employees who opted for the old regime will have more deductions in play — you need documented proof for each.
If an employee has not submitted proof in time, you must tax them at the higher computed liability. They can claim any refund when they file their personal return.
File Form 24Q and issue Form 16
Form 24Q is the quarterly TDS statement for salaries. You file it four times a year; the Q4 filing is the most important because it carries the full-year figures.
Once the Q4 Form 24Q is accepted by TRACES, you can generate and issue Form 16. This form has two parts:
- Part A: TDS deducted and deposited, generated from TRACES
- Part B: A detailed computation of the employee's income and deductions, which you prepare
Every permanent employee from whom TDS was deducted must receive Form 16. Even if TDS was nil for lower-income employees, it is good practice to provide a salary certificate.
Issue Form 16 by 15 June. Employees need it to file their own income tax returns.
Handle gratuity, full-and-final settlements and Labour Code compliance
Year-end is a natural time to audit your gratuity provisioning. Gratuity becomes payable after five years of continuous service; provisioning for it through the year avoids a large one-time charge. Review which employees are approaching or have crossed the five-year mark.
For any employees who left during the year, confirm that full-and-final settlements were processed correctly and that their Form 16 (or Form 12B adjustment) is in order.
India's four consolidated Labour Codes came into force in 2025. If you have not already reviewed how the definitions of "wages" and "allowances" under the Codes affect your salary structures and statutory calculations, do that before you lock the year-end figures. The definition of wages under the Codes affects EPF, gratuity and bonus calculations — getting it wrong in the current year compounds into the next.
Prepare for the new financial year
Once 2025/26 is closed, set up 2026/27 cleanly:
- Collect fresh investment declarations from all employees
- Confirm which tax regime each employee is opting for
- Update salary structures if you changed CTC during appraisals
- Verify that PF, ESI and professional tax thresholds are applied correctly under any revised rules
- Archive payroll registers, challans and TDS certificates in a retrievable format — the statutory retention period is several years
A clean close makes the next year's audit and compliance work significantly easier.
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