PF, ESI, PT and TDS: what changes when you cross a state line

A distributed team makes a lot of things easier and one thing harder. The first employee in a new state turns a single payroll process into several, and the change is easy to miss because most of the deductions do not move.

What stays the same

Provident fund and employees' state insurance are central schemes. The wage definitions, thresholds and contribution rates do not change because someone moved city. Tax deducted at source is likewise governed centrally, computed on projected annual income and the regime the employee has declared.

This is the part that lulls teams into assuming a new state is a non-event. Three of the four statutory deductions genuinely are.

What does not

Professional tax is levied by the state, and the states do not agree. Slabs differ, the amounts differ, some states do not levy it at all, and the filing frequency and due dates differ too. It is a small deduction that generates a disproportionate share of compliance work, because it multiplies with every state you enter rather than every person you hire.

• Registration is per state, and usually needed before the first payment rather than after it.
• Slabs are defined on monthly gross, so a mid-period revision can move someone between slabs.
• Returns and due dates follow the state's calendar, not your payroll calendar.

Practical sequence

The order that causes least pain: confirm the work state on the employee record before the offer is finalised, register in that state if you are not already, configure the slab, and only then run the first payroll that includes them. Doing it in the other order means a correction in month two and an explanation in month three.

None of this is difficult. It is just easy to discover late, and the cost of discovering it late is paid in arrears, notices and goodwill.