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Payroll deductions and employee benefits taxes are among the many tax complexities that small businesses must grapple with. In this blog, we'll discuss payroll deductions and employee benefits taxes in detail to help you understand the ins and outs of both processes. This will make payroll tax calculations and employee benefits tax payments less complicated for you.

Guide for startups 

Payroll deductions and taxes are an essential part of running a company. It's important to understand what goes into each category and have the plan to reduce your tax burden. That's where this guide comes in. It provides an overview of all the payroll deductions and taxes your business may be responsible for. It also includes tips on reducing your tax burden through strategic planning. And finally, it provides a step-by-step guide on completing these tasks in TurboTax or other similar software applications. This guide is essential for startups looking to get a head start on their tax planning. 

HR payroll process 

HR payroll is a necessary process for any company and can be complicated. It includes calculating taxes, withholding allowances, and other deductions and sending the payroll to the Income Tax Department for processing. Depending on your country of residence, tax rates may also vary. So, ensure you're up to date on all the latest payroll-related news and developments to keep your business running smoothly. 

Payroll deductions: EPF, PT and income tax 

Payroll deductions are an essential part of payroll management. They help to reduce costs and taxes for your business and are compulsory in most cases. The three most common payroll deductions and the taxes they help to pay are PT (Professional Tax), EPFO (Employment Provident Fund), and income tax. Make sure you're registered for PT, EPF, and income tax if you're not automatically registered, as withholding taxes will be taken care of automatically. 

How to calculate payroll deductions 

Payroll deductions can be a daunting process, but with some understanding and practice, it can be a breeze. The first step is to calculate your employee's gross pay. This includes all your employees pay before taxes and deductions are taken. Next, determine your employer's percentage rate and add it to your employee's gross pay. Deduct taxes from that total - central, state, and local - and record the amount on Form 16A (Employee Wage/Salary Statement). 

What are payroll deductions? 

Payroll deductions are an essential part of your paycheck. They include money taken out before taxes are calculated, central, state, and local income taxes, EPFO and professional taxes, tips and gratuities, unemployment insurance contributions, and more. Knowing which payroll deductions you're entitled to take is crucial, so you don't have to pay extra fees or fines later. Make sure to ask your employer about any additional paperwork you need to claim these deductions correctly. Payroll deduction information is essential, so keep it in mind as you work and pay your taxes. 

What are employee benefits taxes? 

Employee benefits taxes are a payroll deduction employers must withhold from employees' paychecks. These taxes include coverage of such things as medical and dental insurance, retirement plans, and paid leave days. The amount withheld depends on the employee's income level and whether they're eligible for benefits like a health insurance through their job. If you don't deduct these taxes correctly, you could face penalties in tax season - so it's essential to know everything there is to know! For example, what are employee benefits taxes, and what are the different types of benefits that are covered? How do you calculate withholding for employee benefits taxes, and what are the penalties for not doing so? In this post, we'll answer all these questions and more. So, keep reading to learn everything you need about payroll deductions and taxes for employee benefits! 

Who pays for payroll deductions and employee benefits taxes? 

Payroll deduction and employee benefits taxes are two of the many taxes employees must pay. Employers are responsible for payroll deductions and employee benefits taxes. In contrast, employees must report all income and file a tax return if they have over INR 5 lakhs in taxable wages from the prior year. In addition to income tax, employees are also responsible for withholding taxes on certain types of employee benefits, such as health insurance premiums. Finally, employees may be required to make additional contributions to their retirement accounts or receive employer-match funds for EPFO plans. 

Frequently Asked Questions

What common mistakes do businesses make with their payroll deductions and taxes? 

When it comes to payroll deductions and taxes, businesses' most common mistakes are withholding the wrong tax rates from employee paychecks and not filing the correct tax forms. In addition to two common mistakes, many businesses forget to withhold professional taxes from employee paychecks. This can lead to significant tax bills down the road. Moreover, failing to report income or making incorrect payments can add stress and complications for business owners. By following these simple tips, you can avoid making these standard payroll deductions and tax mistakes in the first place. 


Payroll deductions and taxes can be daunting, but by understanding the basics of the process, you'll be on your way to tax-free payroll! This blog discusses the different payroll deductions that businesses can make and how to calculate them. Additionally, we explain employee benefits taxes and who is responsible for paying them. Finally, we provide a guide to HR payroll processes so that you can keep your business tax-free and compliant.

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