Purpose
This process describes how the system computes professional tax, payable by employees, during a payroll run.
The system processes professional tax as part of the payroll run. While processing professional tax, it considers the following factors:
An employee might have worked in more than one state within a payroll period. In this case the system splits the payroll state wise, and computes the professional tax basis for the different states.
Some states exempt some employee categories from paying professional tax. For example, in Karnataka, blind, deaf or dumb employees are exempt from professional tax.
Within a payroll period, an employee might have worked in more than one state. As the professional tax calculation rules vary from one state to another, the system divides the professional tax period into smaller split periods. All calculations for a split period are as per the rules of the state to which the employee belongs in the split period.
The system identifies the state depending on the Personnel Area and Personnel Subarea information of an employee.
Process Flow
While processing professional tax in a payroll run, the system:
For example, an employee worked in the state of Gujarat from the 1st to the 15th of June and in Karnataka from the 16th to the 30th of June. This results in two split periods and the creation of two Professional Tax Basis wage types (/3P2). One wage type for Gujarat and the other for Karnataka.
The system uses the country specific indicators to distinguish the Professional Tax basis wage types (/3P2) from one another.
The system first creates the following cumulated professional tax basis wage types:
Depending on the state, the system then uses one of the above wage types. This wage type stores the cumulated professional tax basis obtained from all the pay components you have configured for the professional tax basis. They include:
Based on the Professional Tax basis calculated for the employee, the system identifies the salary ranges for professional tax and the professional tax amount. You can view and maintain the same in the IMG under Payroll India: Professional Tax ® Assign amounts for Professional Tax Deduction.
The system determines the professional tax amount for the period and saves it in the Professional Tax – split period wage type (/3P1). If there are splits in the professional tax period, it determines the professional tax amount for every split and saves the same in the multiple Professional Tax – split period wage types (/3P1) created for the split periods.
The system also assigns indicators to these wage type to distinguish them from one another.
Result
You can display and print a professional tax report. The professional tax report displays the information in the format specified by the state.
See also:
Professional Tax Retroactive Professional Tax Calculation