What deductions are illegal to make from an employee’s salary in India?

Under the Payment of Wages Act, only specified deductions are lawful — such as those for PF, ESI, professional tax, income tax, authorised advances or loans, and absence from duty. Any deduction not falling within the permitted categories is illegal, and total deductions are also subject to overall statutory ceilings on the proportion of wages that can be withheld.

Common deductions that are not permitted include arbitrary fines outside the prescribed process, penalties unrelated to time not worked, and recoveries the employee has not agreed to or that exceed legal limits. Deductions for damage or loss generally require that the employee was given an opportunity to explain. When in doubt, an employer should map each deduction to a permitted category and a clear authorisation before applying it.