This is the people-and-payroll half. The tax, funding, loans and expansion schemes for founders live in our companion Founders' Schemesguide — a few items (startup ESOP tax, Section 80JJAA) sit in both worlds, and we've cross-linked them.
Part 1
Schemes you sign up for
Government programmes you actively register for and claim.
01 — the headline
PM-VBRY — the big new hiring reward
How hardMedium
Formerly the Employment Linked Incentive (ELI) Scheme, now the Pradhan Mantri Viksit Bharat Rozgar Yojana. The government pays you for growing your team — and hands your new employees a bonus. Two parts.
Part B — your moneyCash for the employer
You getUp to ₹3,000 per new employee, per month, for 2 years(up to 4 years in manufacturing) — ₹1,000 / ₹2,000 / ₹3,000 by the employee's EPF wage band (≤₹10k / ₹10–20k / ₹20k–1L).
Who: any EPFO employerAdd 2 hires (<50 staff) or 5 (50+)Keep them 6+ monthsLive · paying out · June 2026
On 19 June 2026 the Prime Minister released about ₹2,400 crore under it. Covers jobs created between 1 Aug 2025 and 31 Jul 2027. Existing EPFO employers are treated as registered from 1 Aug 2025, but you must complete portal formalities and every new hire must do a face-authentication (FAT) on the UMANG app.
The catchIncentives track your ECR filings— late or missing filings cost you the benefit. Don't leave the portal setup undone. (The one-time baseline window, Aug 2024–Jul 2025, closed 31 Jan 2026.)
The opportunityClose to free money for hiring you were doing anyway. 20 people at ₹3,000/month ≈ ₹60,000/month — over ₹7 lakh a year, for two years.
Part A — a hiring perkA cash bonus for your new employees
They getUp to ₹15,000(one month's EPF wage) in two parts — ₹7,500 after 6 months, the rest after 12 months plus a short financial-literacy course. The second part is parked in a savings instrument and withdrawn later.
Why you care:you don't get this cash, but you can use it to attract freshers — "join us and the government adds up to ₹15,000 to your first year" — at zero cost to you.
02 — ITI / 10+2 trainees
NAPS — cheap, trained apprentices
How hardMedium
You hire trainees; the government pays part of their stipend directly to them, so you fund less.
You saveThe government puts 25% of the minimum stipend, up to ₹1,500/month, straight into the apprentice's bank account (DBT) — cutting what you pay by that much. Minimum stipend now runs ₹6,800–₹12,300/month (36% hike from May 2025, CPI-linked).
Who: any employer30+ staff? apprentices are mandatoryPortal: apprenticeshipindia.gov.inLive · June 2026
The catchAdmin-heavy, and you pay your ~75% share reliably. If you're a 30+ employee firm, not engaging apprentices can attract penalties.
The opportunityA cheap, low-risk pipeline — apprentices are generally exempt from PF/ESI during training, you train them your way, and you keep the good ones.
03 — graduates / diploma
NATS — apprentices with degrees
How hardMedium
Same idea as NAPS, but for engineering degree/diploma holders (and now Arts, Science and Commerce graduates too).
You saveA bigger share — the government pays 50% of the minimum stipend, up to ₹4,500/month, directly to the apprentice via DBT. Revised minimums (from 1 Apr 2026): graduates ₹9,000–₹12,300, diploma ₹8,000–₹10,500, vocational ₹6,800–₹9,000.
Ministry of EducationPortal: nats.education.gov.inLive · revised Apr 2026
The catchYou fund the other 50%, plus paperwork and compliance; update contracts to the revised minimums (arrears apply from 1 Apr 2026).
The opportunityHalf the trainee cost effectively covered while you trial fresh engineering talent for a year before a full-time offer. Great for tech and product teams.
Quick rule: ITI / 10+2 trainee → NAPS. Degree / diploma trainee → NATS.
04 — free talent pool
Skill India / PMKVY
How hardEasy
The government trains people for free in job-ready skills; you hire from that pool.
You getNot cash — access to trained, certified candidatesin AI, 5G, cybersecurity, data, drones and more, via skillindiadigital.gov.in. You can also do "Recruit–Train–Deploy," where people are trained for your roles.
Any employer hiring entry-level/skilled staffLive · PMKVY 5.0 successor expected
PMKVY 4.0 ran through 2025-26. A successor round (PMKVY 5.0) is expected and is reported to include incentives for employers who hire certified candidates — treat those details as "watch this space" until officially notified.
The catchCandidate quality varies by centre — you still screen.
The opportunityLower training and hiring cost; shape training to your exact needs via Recruit–Train–Deploy.
05 — now much more accessible
PM Internship Scheme
How hardMedium
A government-funded internship where the state pays most of the intern's stipend. Overhauled in 2026 and no longer just for the largest CSR spenders.
You getInterns are largely government-funded. Stipend is now ₹9,000/month (₹8,100 government via DBT + ₹900 company), plus a ₹6,000 one-time grant. Duration is now 6–9 months (was 12).
CSR requirement removedInterns aged 18–25; PGs/MBAs eligible~549 companies (not "2,000+")Live · revamped
Removing the CSR obligation opens it to many more companies, including startups and sunrise-sector firms (semiconductors, renewables, GCCs). Portal: pminternship.mca.gov.in.
The catchStill skews toward larger, established employers; interns can't already have done NAPS/NATS or come from very high-income families.
The opportunityWith the CSR rule gone, mid-size and sunrise-sector firms can now host heavily-subsidised interns as a low-cost early-talent pipeline.
Part 2
Quieter money-savers most HR teams miss
Not schemes you enrol in — legal rules and structuring choices that quietly cut cost. Usually the easy wins.
6a — the Section 17(2A) swap
Group term life instead of EDLI
How hardMedium
Every EPFO employer already pays for a small life cover called EDLI. The law lets you swap it for your own group term life policy — often cheaper and better.
You saveFor a young workforce, a group term policy for the same ₹7 lakh cover often costs less than the EDLI amount you already pay (0.5% of wages, capped ₹75/employee/month) — and you can buy much higher cover for a small premium. Claims settle faster too.
EDLI: max ₹7L · min ₹2.5L · ₹50k floor (Jul 2025)Live · Sec 17(2A)
The catchNeeds EPFO approval, and your policy must match or beat EDLI across every age band and salary slab. A group policy attracts 18% GST (see 6f).
The opportunityFar better life cover for staff, often at lower net cost, and a real benefits differentiator.
6b — stacks with PM-VBRY
Section 80JJAA — a 30% deduction for hiring
How hardMedium
A tax rule that lets you deduct an extra 30% of what you pay new employees — for three years running.
You save30% of the cost of each eligible new employee, deductible for 3 years — no cap. On a junior hire costing ₹3 lakh/year, roughly ₹90,000 of extra deduction each year for three years.
All tax-audited businesses — not just manufacturingEmployees ≤₹25k/month, 240+ days, in a PFFile Form 10DA (CA report)Live · survives new regime
The Finance Act 2016 removed the old manufacturing-only limit — IT, SaaS, BFSI, logistics and other services all qualify. It also survives the concessional 22%/15% company rates, one of very few deductions that do. (Renumbered under the Income Tax Act 2025 — confirm the reference with your CA.)
The catchThe ₹25k/month cap limits it to junior roles, and the 240-day and banking-channel rules are strict. Tax officers have increased scrutiny — keep documentation airtight.
The opportunityA real tax saving on top of the PM-VBRY cash for the samenew hires. (80JJAA excludes staff whose PF is fully government-funded; PM-VBRY isn't, so they generally stack — confirm with your CA.)
6c — tax-efficient CTC
Employer NPS contribution (80CCD(2))
How hardEasy
Route part of an employee's package into their NPS retirement account as an employer contribution — tax-friendly for both sides.
You saveEmployer NPS is deductible for you and tax-free for the employee. The limit is 14% of salary under the new tax regime (and for government employees); under the old regime it's 10% for private-sector staff. A more tax-efficient package at no extra cash cost.
Best at mid-to-senior salariesLive · June 2026
The catchThe money is locked in NPS until retirement, so some employees prefer cash.
The opportunityA retention perk that improves employees' take-home tax position and gives you a clean deduction.
6d — cash-flow + tax
Fund gratuity through an approved trust
How hardMedium
Instead of paying gratuity out of pocket when a long-serving employee leaves, set money aside in advancethrough an insurer's group gratuity plan.
You saveContributions to an approved gratuity fund are tax-deductible, the money earns returns while it waits, and you avoid a lump-sum shock when senior staff exit.
For firms with tenured/fixed-term staffLive · via LIC & insurers
New under the Labour Codes: fixed-term/contract employees now earn gratuity after just 1 year (not 5), so your liability is larger than before — factor that into funding.
The catchSetup effort and actuarial valuation cost; worth it once you have a sizeable or long-tenured team.
The opportunitySmooths cash flow, earns a return on money you'll owe anyway, and is tax-efficient.
6e — retention tool
Startup ESOP tax deferral
How hardEasy
Eligible recognised startups can let employees delay the tax on their ESOPs, so equity becomes a genuinely attractive, cash-light reward.
You saveEmployees defer perquisite tax to the earliest of the deferral window, a sale, or leaving — instead of being taxed upfront on paper gains. The window is 48 months for shares allotted before 1 Apr 2026, and 60 months for shares allotted on/after that under the new Act.
Needs DPIIT + IMB / 80-IAC certificate~4,000 of ~1.97 lakh DPIIT startups hold itLive · Budget 2026 expansion proposed
This is really a tax item — full detail sits in the Founders' Schemes guide; it's flagged here because it's a powerful retention tool.
6f — cost awareness
GST reality check on employee insurance
Know what tax you're actually paying on employee cover.
Since 22 September 2025, individual health and life policies are 0% GST. But group / employer-sponsored policies still carry 18% GST, and you generally can't reclaim it as input credit (narrow exception for legally-mandated cover). Budget the 18% on your group cover — and note the maths changes if employees buy their own GST-free top-ups alongside your plan.
6g — a saver most HR teams miss
ESI maternity benefit — paid by ESIC, not you
How hardEasy
For employees covered by ESI, the government (ESIC) pays their maternity benefit — not the employer.
You saveFor an ESI-covered employee (earning ≤ ₹21,000/month), ESIC pays 26 weeks of maternity benefitat full average daily wage directly. Many employers wrongly pay this themselves — that's up to ~6 months of salary you don't need to bear.
The action: make sure eligible employees are correctly enrolled in ESI, and route their maternity benefit through ESIC rather than absorbing it yourself.
6h — worth a line
Smaller levers
- Meal cards / food vouchers: now tax-exempt up to ₹200 per meal (Income Tax Rules 2026, up from ₹50) and available under both tax regimes — roughly ₹1 lakh/year tax-free. Use restricted-use, non-transferable meal cards usable only at eating outlets, not generic wallets.
- National Career Service (NCS) portal (ncs.gov.in): a free government job portal to post vacancies and search candidates — a zero-cost recruitment channel that can replace agency fees for entry-level roles.
- PF wage-ceiling capping:many employers legally calculate PF on the ₹15,000 statutory wage rather than full basic — but note the new 50% wage rule (below) may pull more into "wages" regardless.
Part 3
The background you need
Context that shapes every scheme above — and the regulatory shifts of 2025–26.
7 · The money you have to pay: EPF & ESI
The standard payroll contributions every employer makes.
EPF (Provident Fund): you and the employee each put in 12% of wages. The wage ceiling remains ₹15,000 — formally notified on 29 May 2026 under the Code on Social Security. The much-discussed hike to ₹25,000 is a proposal under government review (the Supreme Court asked for it to be considered), not yet enacted; model payroll at ₹15,000 until a gazette notification says otherwise.
ESI (health cover): applies to employees earning up to ₹21,000/month (₹25,000 with a disability), in establishments with 10+ staff. Employer pays 3.25%, employee 0.75%. Funds their medical, sickness and maternity cover (see 6g).
7b · The Labour Codes — what just changed
IN FORCE FROM 21 NOVEMBER 2025
India's four Labour Codes replaced 29 old laws and are now in force. Central and state rules are still being rolled out through 2026, but the substantive payroll provisions already apply. The ones that hit your costs:
- The "50% wage rule" (biggest change). "Wages" (basic + DA + retaining allowance) must be at least 50% of total pay. If allowances (HRA, etc.) exceed 50%, the excess is added back into "wages" — which raises PF, gratuity and ESI. Many firms with low basic pay will need to restructure CTC. Overtime counts inside this 50%.
- Gratuity for fixed-term employees after 1 year (not 5). Permanent staff still need 5 years. This increases liability for firms using contract/fixed-term staff (see 6d).
- Appointment letters are now mandatory for all employees.
- Gig / platform workersget formal social security: aggregators must contribute to a social security fund (rate set centrally; states can't levy their own cess). If you engage gig labour, plan for this.
- Overtime is capped and paid at twice the regular rate; crèche facilities and annual health check-ups apply for larger establishments.
The action:recalculate PF/gratuity under the 50% rule, issue appointment letters, and check your state's notification status (states are notifying rules at different speeds). Annual POSH (anti-harassment) audits are also being tightened — keep that current.
8 · State-level PF & hiring incentives (real cash, often missed)
Several state IT/startup policies reimburse part of your employer PF or give per-employee hiring support — on top of central PM-VBRY. A few concrete examples (confirm current terms on the state portal):
- Karnataka (IT policy): PF/ESI reimbursement of about ₹2,000 per employee per month for ~2 years for new technical hires in IT/ITeS units outside Bengaluru, plus lease, stamp-duty and patent support.
- Telangana: recruitment assistance of about ₹10,000 per employee (first year) for DPIIT-recognised startups, for Telangana-domiciled employees retained ~8 months.
- Others (Maharashtra, Tamil Nadu, Gujarat, etc.): similar EPF reimbursement or salary-support clauses, often with extra benefits for hiring women, SC/ST or persons with disability.
The action:when you register for your state's startup/IT benefits, tick the employment / PF reimbursement box too — it's easy to miss.
9 · New Income Tax Act, 2025 — quick context
A new Income Tax Act took effect on 1 April 2026, replacing the 1961 Act. It's largely a simplification (no major new taxes): "Assessment Year" becomes "Tax Year," and section numbers were renumbered (for example, the old ESOP/TDS section 192 became 392; 80-IAC became 140). Every tax benefit here continues — just verify the new section reference with your CA, and update any ESOP plan documents that cite old section numbers.
10 · Schemes that have ended — don't chase these
- ABRY (Aatmanirbhar Bharat Rozgar Yojana): the old Covid-era hiring-support scheme — closed (registration ended 2022). PM-VBRY replaced it.
- PMRPY (Pradhan Mantri Rojgar Protsahan Yojana): an earlier PF-support scheme — closed.
If an old blog tells you to apply for these, ignore it — use PM-VBRY.
Last verified: June 2026Sources
EPFO / Ministry of Labour & Employment (PM-VBRY, EDLI, Labour Codes, EPF ceiling notification 29 May 2026); Ministry of Skill Development (NAPS, PMKVY); Ministry of Education (NATS); Ministry of Corporate Affairs (PM Internship); Income Tax Department / Income-tax Act 2025 & Rules 2026 (80JJAA, 80CCD(2), ESOP deferral, meal vouchers); ESIC; GST Council / DFS (insurance GST).
Disclaimer
This guide is for general information, not legal, tax or financial advice. Amounts, deadlines, thresholds and section numbers change often — the fastest-moving items here are the Labour Code state rules and any EPF-ceiling decision. Confirm current figures on the official portals and with a qualified CA before acting.
