Hiring your first employee: tax and compliance checklist

Your first hire turns you into a deductor and, beyond certain headcounts, into an EPF and ESI contributor. This checklist sets out the registrations to make (TAN, and EPF/ESI/professional tax where they apply), the monthly payroll-TDS and contribution duties, and the records to keep, so you start as a compliant employer rather than retrofitting it later.

Last reviewed: 29 May 2026

Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact Income Tax Department. Read our editorial scope →

What it contains

A checklist of one-time registrations, monthly duties, and records for a first-time employer, with the headcount and state caveats flagged.

How to use it

Get the TAN before the first salary run

You cannot deduct and deposit payroll TDS without a TAN, so apply for it as soon as you decide to hire.

Check headcount and state triggers

EPF and ESI apply above prescribed employee counts, and professional tax only in states that levy it, so confirm which apply to you before assuming all do.

Look at 80JJAA

Hiring formal, PF-covered staff under Rs 25,000 a month gives you an extra 30% deduction on their wages for three years, even on the 22% company regime.

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HIRING YOUR FIRST EMPLOYEE - TAX & COMPLIANCE CHECKLIST

  ONE-TIME REGISTRATIONS:
  [ ] Apply for a TAN (Tax Deduction Account Number) - needed to deduct and deposit TDS on salary
  [ ] EPF registration - applies once you reach the prescribed employee count (commonly 20); voluntary below
  [ ] ESI registration - applies above the prescribed employee count, for employees within the wage ceiling
  [ ] Professional tax (PTRC) - ONLY if your state levies professional tax (e.g. Maharashtra/Karnataka/TN; NOT Delhi/UP)
  [ ] Shops & Establishment registration (state) if not already done

  AT HIRING:
  [ ] Collect PAN, Aadhaar, bank details, and Form 12B (previous employer) if mid-year
  [ ] Agree the CTC structure; consider employer NPS (80CCD(2)) - deductible to you and tax-efficient for the employee even on the new regime
  [ ] Issue an appointment letter; confirm employee vs consultant status (a genuine employee = salary/192, not 194J)

  EVERY MONTH:
  [ ] Deduct TDS on salary (Section 192) based on the employee's projected annual tax and chosen regime
  [ ] Deposit TDS by the 7th of the next month
  [ ] Deposit EPF and ESI (where applicable) by their due dates
  [ ] Deduct and remit professional tax (where the state levies it)

  QUARTERLY / ANNUAL:
  [ ] File the quarterly salary-TDS return (Form 24Q)
  [ ] Issue Form 16 to each employee after year-end
  [ ] Consider Section 80JJAA: an EXTRA 30% deduction for 3 years on new PF-covered employees earning <= Rs 25,000/month (survives the 22% company regime)