Payroll Interview Questions and Answers (India, 2026)

Whether you are a fresher going for a payroll associate role or an experienced executive aiming for a specialist or lead role, payroll interviews follow a familiar pattern. Interviewers want to know that you understand the payroll cycle, know the current statutory rules, can calculate accurately, and can handle errors and employee queries calmly. The questions below are grouped by topic, with short model answers you can adapt in your own words. Figures reflect the rules as of November 2026, including the Labour Codes and the ₹25,000 PF ceiling. For the role itself, see our payroll executive job description.

Quick reference: rates and due dates to remember

Interviewers often start with these numbers, so learn them first. Check for changes just before your interview, because ceilings and rates are revised from time to time.

Payroll basics

1. What is payroll?

Payroll is the process of paying employees: recording attendance and pay inputs, calculating gross pay, statutory and other deductions and net pay, paying salaries, depositing statutory dues, filing returns and keeping records.

2. What is the difference between gross salary, net salary and CTC?

Gross salary is total earnings before deductions (basic, HRA and allowances). Net salary is what the employee receives after deductions such as PF, ESI, professional tax and TDS. CTC is the employer's total cost, including gross salary plus employer contributions such as employer PF, ESI, gratuity provision and benefits.

3. What are the main steps in the monthly payroll process?

Collect inputs by the cut-off (attendance, leave, joiners, exits, changes); update master data; calculate gross pay, deductions and net pay; review variances; get approval; pay salaries; deposit TDS, PF, ESI, professional tax and LWF; issue payslips; reconcile and file returns.

4. What is a payroll cut-off date?

It is the last date by which inputs for the month are accepted. Changes after the cut-off go into the next month's payroll or an off-cycle run, so the payroll team has time to process and check before the pay date.

5. What is LOP and how is it calculated?

Loss of pay is a deduction for unpaid absence. It is usually salary divided by the number of days used as the month basis (calendar days, 30 or 26, as per policy) multiplied by LOP days. Apply the same basis consistently.

6. What is the difference between salary and wages?

In everyday use, salary means a fixed monthly payment and wages often mean daily or hourly pay. Under the Code on Wages, 'wages' has a legal definition used for PF, gratuity, bonus and other benefits: basic, DA and retaining allowance, with listed exclusions, and any excess of exclusions over 50% of total pay added back.

Our guides to the payroll process and gross vs net salary cover these in depth.

Labour Codes and wages

7. What changed for payroll under the Labour Codes?

The four Labour Codes came into force on 21 November 2025. For payroll, the key changes are a uniform definition of wages with the 50% rule, gratuity for fixed-term employees after one year, wage slips and appointment letters, timelines for paying wages and final dues, and limits on deductions.

8. Explain the 50% wage rule.

If excluded allowances (such as HRA and conveyance) exceed 50% of total remuneration, the excess is added back to wages. Wages then form the base for PF, gratuity and bonus. So keeping basic very low no longer reduces these costs.

9. When must wages be paid?

Under the Code on Wages, monthly wages must be paid before the end of the 7th day of the following month; weekly wages on the last working day of the week; daily wages at the end of the shift. On resignation, removal or dismissal, wages are due within two working days.

10. What is the limit on deductions from wages?

Total deductions in a wage period cannot exceed 50% of wages. Recovery of advances and loans is made in instalments within that limit, and recovery of a notice-pay shortfall is not a permitted wage deduction.

11. What is the overtime rate?

Overtime must be paid at least twice the ordinary rate of wages under the Code on Wages, for covered workers.

12. What is minimum wage and who fixes it?

The minimum wage is the lowest wage that can be paid for a category of work. It is fixed by the Central or state government by skill level and area, usually with a variable dearness allowance revised periodically, and cannot be lower than the floor wage.

See our guide to salary structure under the Labour Codes.

Provident fund (PF)

13. What are the PF contribution rates?

The employee contributes 12% of PF wages and the employer 12%. From the employer's share, 8.33% of wages up to the ceiling goes to the pension scheme (EPS) and the rest to EPF. The employer also pays EDLI at 0.5% and admin charges at 0.5% (minimum ₹500).

14. What is the PF wage ceiling?

The PF wage ceiling is ₹25,000 a month from 17 September 2026 (it was ₹15,000). Employers may pay on full wages, but contributions are mandatory on wages up to the ceiling for members.

15. What is the maximum EPS contribution?

8.33% of ₹25,000, which is ₹2,083 a month, unless a valid higher-pension option applies.

16. When does PF apply to an establishment?

PF applies to establishments with 20 or more employees; smaller ones can register voluntarily.

17. What is the PF due date and return?

PF contributions and the electronic challan-cum-return (ECR) are due by the 15th of the following month.

18. What is UAN?

The Universal Account Number is a single PF account number for a member across employers. A new employer links the existing UAN so that service and balance continue.

19. What happens if PF is paid late?

EPFO levies interest and damages on delayed contributions. For tax year 2026-27 onwards, the employees' share deducted from salary is still allowed as a deduction for the employer if it is deposited by the due date for filing the income-tax return (section 29(1)(e) of the Income-tax Act, 2025); deposits after that date are disallowed.

More in our PF guide and ECR filing guide.

ESI

20. What are the ESI rates and wage limit?

The employee contributes 0.75% and the employer 3.25% of gross wages, for employees earning up to ₹21,000 a month (₹25,000 for persons with disability). Employees whose average daily wage is up to ₹176 do not pay their share; the employer still pays.

21. When does ESI apply?

To establishments with 10 or more employees. Once covered, coverage generally continues even if headcount falls.

22. What is a contribution period in ESI?

ESI has two six-month contribution periods (April–September and October–March). An employee covered at the start of a period stays covered until its end, even if wages rise above the limit.

23. When is ESI due?

By the 15th of the following month.

More in our ESI guide.

Income tax, TDS and professional tax

24. How is TDS on salary calculated?

Estimate the employee's annual taxable salary under the chosen regime, compute the annual tax including cess, subtract tax already deducted, and divide the balance by the remaining months. Revise as salary or declarations change.

25. What are the key features of the new tax regime for salaried employees?

It is the default regime. It gives a standard deduction of ₹75,000 and a rebate that makes tax nil on taxable income up to ₹12 lakh, but does not allow most exemptions and deductions such as HRA and LTA.

26. How is HRA exemption calculated?

In the old regime, HRA exemption is the least of actual HRA received, rent paid minus 10% of salary, and 50% of salary in Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune or Ahmedabad (40% elsewhere), where salary means basic plus DA. It is not available in the new regime.

27. What are Form 138 and Form 130?

Under the Income-tax Act, 2025, Form 138 is the quarterly TDS return for salaries (replacing Form 24Q), due 31 July, 31 October, 31 January and 31 May. Form 130 is the annual TDS certificate for salary (replacing Form 16), issued by 15 June.

28. When is TDS on salary deposited?

By the 7th of the following month, and by 30 April for tax deducted in March.

29. What is relief for salary arrears?

When arrears or advance salary push an employee into a higher bracket, relief is available under section 157 of the Income-tax Act, 2025 (earlier section 89) by filing Form 39 (formerly Form 10E).

30. What is professional tax?

A state tax on employment, deducted by the employer by slabs set by each state that levies it, subject to a maximum of ₹2,500 a year per person under the Constitution.

See our Form 138 guide and the HRA exemption calculator.

Gratuity, bonus, leave and exits

31. How is gratuity calculated?

Gratuity is 15 days' wages for each completed year of service, calculated as last drawn wages × 15/26 × years. It is payable after five years of continuous service (one year for fixed-term employees), and on death or disablement regardless of service. Service of more than six months in the final year counts as a full year. The tax exemption limit is ₹20 lakh.

32. What is statutory bonus?

Under the Code on Wages, eligible employees (wages up to ₹21,000 a month) get a bonus of 8.33% to 20% of wages, calculated on ₹7,000 a month or the minimum wage, whichever is higher. It must be paid within eight months of the end of the accounting year.

33. How is leave encashment taxed on retirement or resignation?

For non-government employees, leave encashment on retirement or leaving is exempt up to a lifetime limit of ₹25 lakh, subject to the formula conditions; encashment during service is fully taxable.

34. What is labour welfare fund?

A small state-level contribution from employees and employers in states that levy it, usually paid half-yearly or annually, used for workers' welfare schemes.

35. What is a full and final settlement?

The final payment to a leaving employee: salary to the last day, leave encashment, bonus, gratuity if eligible, reimbursements, less permitted recoveries and TDS. Wages are due within two working days of separation.

Practise with our gratuity calculator, bonus calculator and leave encashment calculator.

Process and accounting questions

36. How do you handle a mid-month joiner?

Pay pro-rata for days from the joining date using the policy's month basis, collect PAN, UAN, bank and tax regime details, and include previous employer's salary and TDS for the year in the TDS calculation.

37. How do you calculate salary arrears?

Find the difference between revised and paid pay for each month affected, adjust PF and ESI on the arrears where they relate to those months' wages (PF on arrears is subject to the ceiling for each month they relate to and is shown as arrears in the ECR), add arrears to taxable salary in the month paid, and recompute TDS.

38. What is an off-cycle payroll?

A payroll run outside the normal cycle, for corrections, missed joiners, urgent full and final settlements or bonuses. It should follow the same checks and approvals as the main run.

39. How do you reconcile payroll?

Match the payroll register with bank payments, the general ledger, and PF, ESI, professional tax and TDS deposits; explain every difference; and compare this month with last month for headcount and amounts.

40. What is the journal entry for salary?

Debit salary and employer contribution expenses; credit PF, ESI, PT and TDS payable and salary payable. When paid, debit the payables and credit bank.

41. How do you treat a salary advance?

Record it as an asset (salary advance) when paid and recover it in instalments from salary, within 50% of wages in any month as per the Code on Wages rules, recording it in the register of deductions and advances kept under the Codes.

42. What do you do if an employee was paid wrongly?

Find the cause, correct the master data or input, calculate the difference, inform the employee, and adjust in the next payroll or an off-cycle run, with approval. Recover overpayments within the deduction limits and with the employee informed.

See our guides to payroll reconciliation, salary journal entry and off-cycle payroll.

Scenario and calculation questions

43. An employee's salary is ₹30,000 basic and ₹20,000 other allowances. What is PF?

Allowances of ₹20,000 are 40% of total pay of ₹50,000, below 50%, so nothing is added back and PF wages are ₹30,000 (assuming the allowances are HRA-type exclusions, not a special allowance paid to everyone). If the employer restricts PF to the ceiling, PF is 12% of ₹25,000, which is ₹3,000 each. If the employer pays on full wages, it is ₹3,600 each. The EPS share stays at ₹2,083.

44. An employee earns ₹20,000 gross. What is ESI?

Employee 0.75% = ₹150; employer 3.25% = ₹650.

45. An employee with ₹40,000 last wages leaves after 7 years 8 months. What is gratuity?

Service of 7 years and more than 6 months counts as 8 years. Gratuity = 40,000 × 15/26 × 8 = about ₹1,84,615.

46. TDS was under-deducted for six months. What do you do?

Recalculate annual tax, deduct the shortfall over the remaining months (or as agreed if large), inform the employee, and correct the quarterly return data if needed. Interest may apply for short deduction.

47. A new joiner says they have two UANs. What do you do?

Ask them to transfer the old member ID into the current UAN through a transfer request on the EPFO member portal, and report the duplicate UAN to EPFO so it can be deactivated. Link only the current UAN in payroll and never generate a new one.

48. An employee wants to switch tax regime mid-year. Can they?

No. The employee tells the employer their regime once at the start of the year, and the employer deducts TDS on that basis for the whole year. An employee without business income can still choose either regime when filing the return, and claim a refund or pay any shortfall then.

49. An employee asks why net pay fell this month. How do you answer?

Compare this month's payslip with last month's line by line: LOP, arrears, TDS changes from revised declarations, one-time deductions or recoveries. Explain the specific reason with figures and, if it is an error, correct it.

Questions on tools and Excel

Expect questions such as: Which payroll software have you used? How do you use VLOOKUP or XLOOKUP to match attendance to employees? How do you build a pivot table of payroll cost by department? How do you check a payroll file for duplicate employee codes or missing bank details? Answer with the steps you would take, and mention any payroll, HRMS or ERP tools you have used, such as TallyPrime, cloud payroll products or SAP. Our payroll in Excel guide covers the formulas.

Behavioural questions

• Tell us about a payroll error you found or made. Describe what happened, how you fixed it, how you informed people, and what you changed so it did not recur.
• How do you handle pressure at month-end? Show how you plan: cut-offs, checklists, early reviews and clear communication with managers.
• How do you keep salary data confidential? Mention access controls, not sharing files on personal devices, and discretion in conversations.
• How do you explain a tax deduction to an upset employee? Show the calculation calmly, using their payslip and declarations.

How to prepare for a payroll interview

• ☐ Revise the current rates and limits (PF ceiling, ESI limit, tax regime, gratuity and bonus rules)
• ☐ Practise five calculations: PF, ESI, TDS, gratuity and full and final settlement
• ☐ Know the due dates: salary and TDS by the 7th, PF and ESI by the 15th, Form 138 quarterly, Form 130 by 15 June
• ☐ Read the job description and match your examples to it
• ☐ Prepare two stories: an error you fixed and a process you improved
• ☐ Brush up Excel: lookups, pivot tables, IF and SUMIFS
• ☐ Take a practice quiz

Test yourself with our free Indian payroll management quiz. For official rules, the EPFO and Income Tax Department websites are the primary sources.

Frequently asked questions

How do I pass a payroll interview?

Know the monthly payroll cycle and every due date, be able to calculate PF, ESI, professional tax, TDS, gratuity and bonus on a sample salary, and explain the Labour Code changes. Show Excel skills, give examples from your own work, and explain how you check accuracy and keep data confidential.

What are common payroll interview questions for freshers?

Freshers are usually asked what payroll is, the difference between gross, net and CTC, the PF and ESI rates and limits, how LOP is calculated, the monthly payroll steps, the due dates for salary, TDS, PF and ESI, and basic Excel tasks such as VLOOKUP and pivot tables.

What is asked in an HR payroll interview?

Interviewers test both process and law: payroll steps and controls, statutory deductions, income tax on salary, the Labour Codes, full and final settlement, and how you handle errors, queries and confidentiality. Expect practical calculations rather than definitions alone.

Why do you want to work in payroll?

A good answer links your interest to the role: payroll combines numbers, law and people, every month has a clear outcome, and accuracy directly affects employees. Mention any payroll work you have done and what you enjoyed about getting it right.

Is there a payroll interview questions PDF?

We don't offer a separate download, but you can save this page as a PDF from your browser's print option to read offline. Revise the figures before your interview, because rates and limits such as the PF ceiling change.

Is there a payroll quiz to practise?

Yes. Our free Indian payroll management quiz on hrcalcy.in lets you test your knowledge of payroll processes and statutory rules before an interview.

Position as of 15 November 2026, under the Labour Codes, the PF wage ceiling of ₹25,000 from 17 September 2026 and the Income-tax Act, 2025. Model answers are guidance; adapt them to your experience. General information, not legal or tax advice.