Tax Planning for Self-Employed Professionals: Section 44ADA, GST & TDS

27 Feb 2026

Updated: May 2026

Payroll Compliance for SMEs in Kerala: A Complete Statutory Checklist for 2026

Running a small or medium enterprise in Kerala means navigating a layered set of central and state-level statutory obligations on payroll. Non-compliance is not merely a risk of penalties — it can result in prosecution of directors and proprietors under the relevant labour laws, withdrawal of business licences, and complications in banking relationships. This post provides a consolidated, statute-referenced payroll compliance checklist for Kerala SMEs for FY 2025-26.

1. Kerala Shops and Commercial Establishments Act, 1960

Any shop or commercial establishment in Kerala must register under the Kerala Shops and Commercial Establishments Act, 1960. Registration is mandatory within 30 days of commencement of business under Section 4 of the Act. The registration certificate must be displayed prominently and renewed annually.

The Act regulates:

• Working hours: maximum 9 hours per day and 48 hours per week for employees
• Overtime: at twice the ordinary rate for hours worked beyond prescribed limits
• Weekly rest: one full day off per week
• Leave: earned leave (one day for every 20 days worked), casual leave, and sick leave
• Notice periods and termination conditions for employees

Establishments with 10 or more employees must maintain registers of employment, wages, and leave in the prescribed formats. Failure to register or maintain registers attracts penalties under Section 27 of the Act.

2. Kerala Labour Welfare Fund Act, 1975

Kerala has its own Labour Welfare Fund administered under the Kerala Labour Welfare Fund Act, 1975 and the Kerala Labour Welfare Fund Rules, 1977. The fund applies to establishments with five or more employees.

Contribution rates (current):

• Employee contribution: ₹20 per half-year
• Employer contribution: ₹40 per half-year

Contributions are due twice a year — January to June (remitted by 15 July) and July to December (remitted by 15 January). The employer deducts the employee share from wages and remits the combined amount to the Kerala Labour Welfare Fund Board. Non-compliance attracts interest and penalties under the Act.

3. Employees' Provident Fund: EPF Act 1952

The Employees' Provident Funds and Miscellaneous Provisions Act 1952 applies to establishments employing 20 or more persons. Once covered, the establishment remains covered even if headcount falls below the threshold.

Key rates and rules:

• Employee contribution: 12% of basic salary plus Dearness Allowance (DA)
• Employer contribution: 12% of basic + DA — 8.33% to the Employee Pension Scheme (EPS), capped at ₹1,250 per month; balance to the EPF account
• EDLI: Employer contributes 0.50% to the Employees' Deposit Linked Insurance Scheme (no employee contribution)
• ECR Filing: Electronic Challan-cum-Return filed on the EPFO Unified Portal by the 15th of the following month
• UAN: Every employee must have a Universal Account Number; KYC seeding (Aadhaar, PAN, bank account) is mandatory for online PF services

Under the pending implementation of the Social Security Code 2020, the definition of wages for PF computation will broaden, potentially increasing the PF base for many Kerala SMEs that currently have low basic-to-CTC ratios.

4. Employees' State Insurance: ESI Act 1948

The Employees' State Insurance Act 1948 applies to establishments with 10 or more employees where at least one employee earns gross wages up to ₹21,000 per month (₹25,000 for persons with disability). Kerala has notified ESIC applicability across a wide range of establishment types.

Contribution rates (on gross wages):

• Employee: 0.75%
• Employer: 3.25%

Monthly contributions must be paid and returns filed by the 15th of the following month. ESIC provides employees with medical benefits, sickness benefit, maternity benefit, disablement benefit, and dependants' benefit. Non-registration when applicable attracts prosecution under Section 85 of the ESI Act.

5. Professional Tax in Kerala

Professional tax in Kerala is levied under the Kerala Panchayat Raj Act and the Kerala Municipality Act through local self-government institutions. Employers must deduct professional tax from employees' salaries based on prescribed slabs and remit it monthly to the relevant local body (Gram Panchayat, Municipality, or Corporation). Employer obligations include obtaining an enrolment certificate, maintaining a register of deductions, and filing periodic returns with the local body.

6. TDS on Salary: Section 192 of the Income Tax Act 1961

Every employer in Kerala is a tax deductor under Section 192 of the Income Tax Act 1961. Key requirements for FY 2025-26:

• Default New Tax Regime: The new tax regime under Section 115BAC is the default from FY 2025-26. Employees wishing to opt for the old regime must submit a written declaration to the employer.
• Standard Deduction: ₹75,000 per annum under the new tax regime from FY 2025-26 (Finance Act 2025) — must be factored into TDS computation.
• TDS Deposit: Deducted TDS must be deposited by the 7th of the following month (30 April for March deductions) using Challan ITNS 281.
• Form 24Q: Quarterly TDS return filed by the prescribed due dates.
• Form 16: Annual TDS certificate issued to employees by 15 June of the following financial year.

Failure to deduct or deposit TDS attracts interest under Section 201(1A) — 1% per month for failure to deduct and 1.5% per month for failure to deposit after deduction — plus penalty under Section 271C.

7. Contract Labour Compliance

Kerala SMEs engaging workers through contractors must comply with the Kerala Contract Labour (Regulation and Abolition) Act (mirroring the central Contract Labour (R&A) Act 1970 with state modifications). The principal employer bears subsidiary liability for wages, PF, and ESIC contributions of contract workers if the contractor defaults. Principal employers with 20 or more contract workers must obtain a registration certificate.

Payroll Compliance Calendar for Kerala SMEs

Regi Tom Antony And Associates is a Chartered Accountant firm based in Kakkanad, Kochi, specialising in payroll compliance, labour law advisory, and statutory filings for SMEs across Kerala. We help businesses stay current with PF, ESIC, professional tax, and TDS obligations — so payroll compliance never becomes a liability. Visit www.smeadvisory.in or write to us at letstalk@rtaandassociates.com.