6 Must Do Things for the Year-end Payroll Process

The payroll year-end process in India covers six must-do activities before the financial year closes on 31 March: completing income tax formalities, filing tax returns promptly, closing salary and statutory expenses in the books, finishing paid-leave accounting, issuing Form 16, and checking and updating employee data.

Quick Summary

• Task 1: Collect and verify income tax investment proofs before 31 March, recompute TDS from January, and re-adjust deductions.
• Task 2: Confirm Form 24Q is filed cleanly for the first three quarters and prepare final Q4 TDS (due 31 May).
• Task 3: Close salary, TDS, EPF (annual return due by end of April), ESI (half-yearly return due 12 May), PT, LWF, F&F, and overtime by 31 March.
• Task 4: Complete FY-based paid-leave accounting: policies finalized, pending applications cleared, encashment and lapses computed.
• Task 5: Issue Form 16 to all employees by 15 June, which requires a properly filed Q4 Form 24Q.
• Task 6: Fix employee data gaps: PAN, Aadhaar, nominees, pending proofs, and any retrospective wage revisions.

Payroll year-end is almost here, and it's time for HR and payroll managers to be prepared for an important annual activity. From a governance and compliance perspective, the Indian payroll year-end process is critical for organisations of all sizes.

The Indian Financial Year is from 1 April to 31 March. It is mission-critical for organisations to plan and charter all things-to-do items for the year-end processing and fulfill all obligations.

1. How do you complete Income Tax-related formalities?

Collect income tax investment proofs from every employee before 31 March, verify them against declarations, recompute tax liability from January onwards, and re-adjust deductions in the final two months, granting exemptions only after validating documents.

Usually, the financial year-end is a busy season for HR/Payroll/Accounting professionals. Transaction and query load can be very high. If employees are not rightly educated about Income Tax processes, they are likely to ignore investments and end up paying a higher tax amount in one or two months. This may even result in a lower take-home from January to March.

• Unlike many other countries, the year-end process in India involves income tax proof collection. Every employer is supposed to collect the proof documents towards income tax savings declared by employees before 31 March. As this process takes time, it's better to give strict timelines to various parties (employees, verification team, etc.)
• It is important to check whether the submitted investment-proof documents match with the declaration or not. If not matching, recalculate the tax amount and deduct accordingly. Recompute the income tax liability based on the investment proof collection and verification from January onwards, and re-adjust deductions in the next two months.
• If the investment proof submitted is above the declared amount and produced evidence, the TDS for two months may be less or zero. If this is not taken care of before 31 March, then the employee has to wait for a refund from the IT department till return filing.
• Tax exemption should be given to employees only after checking and validating investment-proof documents. Also, keep track of the latest amendments and guidelines by the Income Tax Department, Auditors and other statutory agencies.

2. How do you ensure prompt tax filing and returns?

Verify the first three quarters of Form 24Q (April-June, July-September, October-December) are filed with no discrepancies, and get final TDS calculations ready for the January-March quarter, whose filing due date is 31 May.

While processing the monthly salary, TDS would be deducted by the employer. Every organisation is bound to deposit the tax and file Form 24Q quarterly.

• Make sure that all the previous quarters (April-June, July-September and Oct-Dec) are filed and have no discrepancies.
• Get ready with final TDS calculations for the last quarter Jan-March (Remember, 31 May is the due date of filing Q4). Consider the scenarios of recalculation when there is no match with actual proof and tax declaration by employees.

3. How do you close salary and statutory expenses in bookkeeping?

By 31 March, close salary payouts, TDS, EPF and ESI contributions, PT, LWF, arrears, and reimbursements. Remember the calendar: the EPF annual return is due by end of April, and the ESI half-yearly return (1 October to 31 March) is due 12 May.

By the end of 31 March, organisations are supposed to close expenses like salary payout, TDS, social security contributions like EPF and ESI, Professional Tax payments (PT), Labour Welfare Fund (LWF) payments and other outstanding payments like arrears, reimbursements, etc.

• The EPF contribution deducted from employers and employees shall be paid every month, and the annual return is due by end of April. So, check for pending issues and discrepancies if any, and close this before 31 March.
• The ESI half-yearly return from 1 Oct to 31 March is due on 12 May. Contributions shall be filed within 42 days of the end of each half-year. So, check for pending issues and discrepancies if any, and close this before 31 March.
• Professional Tax (PT) is not applicable in all states and does not follow FY like Income Tax. Organisations are supposed to deduct and deposit PT, monthly. So from a payroll accounting perspective, make sure that PT computation and accounting are complete by 31 March.
• Labour Welfare Fund (LWF) is a one-time payment by organisations. Like PT, LWF is also state specific, and organisations are supposed to compute and deposit this amount annually. Unlike Income Tax, LWF is also not strictly following FY. However, from a payroll accounting perspective, make sure that the LWF calculation and accounting is complete by 31 March.
• Make sure that you have cleared and provisioned expenses for all the full and final settlements for those who are relieved on 31 March.
• Check and validate that all approved payments towards overtime claims in the FY are cleared by 31 March.
• Check and confirm that payments on behalf of pending attendance regularisations, revocation of disciplinary actions and payment due on account of clerical errors are all settled and accounted for by 31 March.

4. How do you complete paid-leave accounting?

For organisations on financial-year leave accounting, finalise leave policies, account for maternity leave entitlements, clear pending leave applications, complete auto encashment, factor in lapses, and verify new-joinee leave accounting, all by 31 March.

In India, organisations follow a calendar year or financial year for leave accounting. As holidays are typically calendar-year based, a lot of organisations follow the calendar year for leave accounting as well. However, some organisations prefer financial year-based leave accounting as it simplifies the overall payroll year-ending process. This is applicable only for those following FY-based leave accounting.

• Make sure that Annual Leave or Earned Leave policies are intact (Finalise all sorts of changes in policy, tweaks in checks and balances, etc.) by 31 March.
• Make sure that Maternity Leave entitlements within the FY are accounted for by 31 March.
• Get all pending leave applications cleared by 31 March.
• Ensure that auto encashment (if a policy exists) is completed by 31 March.
• Make sure to factor in any lapse (as per the policy) in the computation by 31 March.
• Make sure that leave accounting is proper for all new joinees.

5. How do you issue Form 16 correctly?

Form 16, the TDS certificate employers issue on behalf of employees, is mandatory for all taxpayers and due by 15 June. Issuing it requires Form 24Q for the January-March quarter to be filed with deductions and deposits done properly.

Form 16 is the certificate of tax deduction at source issued on tax deduction by the employer on behalf of the employees. These certificates provide details of TDS for various transactions between deductor and deductee. It is mandatory to issue these certificates to all taxpayers.

• All employers are supposed to generate Form 16 for employees for a financial year, and the due date is 15 June.
• To issue Form 16, the employer shall file Form 24Q for the last quarter (Jan-March). So make sure that tax deductions and deposits are done properly.

6. Why check and update employee data before year end?

Data gaps are common, so clear them by 31 March: verify dependent and nominee details, PAN and Aadhaar, decide pending wage restructures with retrospective effect, collect outstanding investment proofs, and resolve filed data grievances with tax and social security agencies.

It is quite usual to find gaps in employee data. However, it is recommended to clear all such gaps by 31 March.

• Check all the employee information like dependent details, nominee particulars, PAN, Aadhar, etc.
• Take a decision on any wage restructuring or revision (with retrospective effect) that is still under review but likely to be accepted in the FY.
• Collect the pending (if any) investment proof documents.
• Try to find a resolution for the filed grievances concerning data discrepancy or updates (if the employee does the request directly) with Income Tax and social security agencies.

Need a handy checklist? Download one here

About greytHR

greytHR is a full-suite HRMS trusted by 34,000+ organisations and 3.5 million+ employees across 30+ countries. This cloud-based platform helps businesses manage the complete employee lifecycle, including manpower planning, recruitment and onboarding, core HR, leave and attendance, timesheets, payroll and statutory compliance, performance and expense management, and exit. With built-in Agentic AI working across every module, HR teams can surface insights instantly and make data-driven decisions. greytHR is widely recognised for its dedicated in-house support team and strong Indian and GCC statutory payroll compliance.

Frequently Asked Questions

What are the 6 must-do year-end payroll tasks in India?

Income tax formalities, prompt tax filing, bookkeeping closure of salary and statutory expenses, paid-leave accounting, issuing Form 16, and checking and updating employee data.

When is Form 24Q for Q4 due?

31 May, covering the January to March quarter; the earlier three quarters should already be filed without discrepancies.

When must Form 16 be issued?

By 15 June each year, after the Q4 Form 24Q has been filed with deductions and deposits done properly.

What statutory returns cluster around year end?

EPF annual return by end of April, ESI half-yearly return (October to March) by 12 May, plus monthly PT and annual LWF completion by 31 March.

What happens if investment proofs aren't processed by 31 March?

Excess TDS stays deducted and the employee must wait for a refund from the IT department until return filing.