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Prozessdokumentation Income Tax Calculation 

Purpose

This process computes tax on the income received by an employee, for a financial year.

Prerequisites

The master data records for the employee must exist.

Process Flow

India Income Tax computations payroll function (INTAX) processes tax on the income earned by the employee.

·  Gross Salary wage type (/416) = Ann Reg Income wage type (/410) + Ann Irr Income wage type (/411) + Annual Perk wage type (/413) + Prev Gross salary wage type (/4V1) + Val of perk u/s 17(2)wage type (/4VJ) + Profts wrt sal u/s 17(3) wage type (/4VK) - Exm.under pro.to sec17(2) wage type (/414).

·  Balance wage type  (/418) = Gross Salary wage type (/416) - Exemption U/S 10wage type (/130).

·  Incm under Hd Salary wage type (/426) = Balance wage type  (/418) - Aggrg Deduction wage type (/424).

·  Gross Tot Income wage type (/430) = Incm under Hd Salarywage type (/426) + Any other Income wage type (/131).

·  Total Income wage type (/434) = Gross Tot Incomewage type (/430) - Agg of Chapter VI wage type (/432).

Total Income wage type (/434) is rounded off to the nearest multiple of Rs.10.

·  Tax on total Income wage type (/436) = Tax calculated on Total Income wage type (/434).

Total Income wage type (/434) comprises of four components, which are taxed at different tax rates:

  i.  Long Term Capital Gains (Normal Rate) = Lng trm cap gns normal wage type (/3O3). This is taxed at the rate stored in the Long capital gain normal rate constant (LCNRT) of table view Payroll Constants (V_T511K).

  ii.  Long Term Capital Gains (Special Rate) = Lng trm cap gns special wage type (/3OD). This is taxed at the rate stored in the Long capital gain special rate constant (LCSRT) of table view Payroll Constants (V_T511K).

  iii.  Other Income = Income from other sources wage type (/3O7). This is taxed at the rate stored in the Other Income - rate constant (OTHRT) of table view Payroll Constants (V_T511K).

  iv.  Normal Income = Total Income wage type (/434) - (Lng trm cap gns normal wage type (/3O3) + Lng trm cap gns special wage type (/3OD) + Income from other sources wage type (/3O7)). This is taxed at the rate configured in table view Taxation Slabs(V_T7INT3).

·  Tax payable wage type (/446) = Tax on total Incomewage type (/436) - Agg of Chapter VIII wage type (/444).

·  Surcharge payable wage type (/448) = Surcharge calculated on Tax payable wage type (/446).

·  Tax payable and surcharge wage type (/450) = Tax payable wage type (/446)  + Surcharge payable wage type (/448).

Tax payable and surcharge wage type (/450) is rounded off to the nearest rupee.

·  Tax deducted so far wage type (/456) = Prev Tax Deducted wage type (/4V5) + TDS other than salaries wage type (/4OC) + Income Tax wage type (/460) in the Cumulative Results Table.

·  Net tax payable wage type (/458) = Tax payable and surcharge wage type (/450) - Sec 89 relief wage type (/451) - Tax deducted so far wage type (/456).

·  Income Tax wage type (/460) = Net tax payable wage type (/458) divided by (Projection Factor wage type (/401) +1).

Rounding off monthly tax amounts rule (INTR) does the rounding off of the Income Tax wage type (/460) to the nearest rupee in all payroll periods, except for the last payroll period.

Result

The system calculates the income tax liability of the employee for the month.

Example

A male employee in your organization has the following pay structure for the financial year 2002 - 2003:

·  Monthly Regular Income - The employee receives the following allowances that are cumulated in the Mon Reg Income wage type (/124).

¡  Basic Pay = Rs.9500.00

¡  Dearness Allowance = Rs.4200.00

¡  House Rent Allowance = Rs.3000.00

¡  Conveyance = Rs.1000.00

·  Irregular Income - The employee receives the following allowance in the month of June 2002 that gets cumulated in the Mon Irr Incomewage type (/125).

¡  Annual Bonus = Rs.15400.00

·  The employee pays a house rent of Rs.2500.00 per month.

·  The employee has invested Rs.20000.00 in National Savings Scheme (Section 88).

You are running the payroll for the month of June 2002. The taxable salary is calculated as follows:

·  Annual Regular Income = Ann Reg Incomewage type (/410)

= Rs.35400.00 (Value of Reg Incomewage type (/124) in the Cumulative Results Table)

+ Rs.17700.00 (Value of Reg Incomewage type (/124) in the Results Table)

+ Rs.159300.00 (Value of Mon Reg Income wage type (/124) in the Results Table multiplied by the value of Projection Factor wage type (/401))

= Rs.212400.00

·  Annual Irregular Income = Ann Irr Incomewage type (/411)

= Rs.15400.00 - Annual Bonus (Value of Mon Irr Income wage type (/125) in the Cumulative Results Table)

+ 0.00 (Value of Mon Irr Income wage type (/125) in the Results Table)

= Rs.15400.00

·  Gross Salary wage type (/416)

= Rs.212400.00 + Rs.15400.00

= Rs.227800.00

·  Exemption U/S 10 wage type (/130)

= Conveyance Annual Exempt wage type (/4E3) + HRA Annual Exemptionwage type (/4E4)

= Rs.800.00 multiplied by 12 + minimum of Rs.(65760.00,36000.00,13560.00)

= Rs.9600.00 + Rs.13560.00

= Rs.23160.00

·  Balance wage type  (/418)

= Rs.227800.00 - Rs.23160.00

= Rs.204640.00

·  Deductions

¡  The professional tax liability of the employee is Rs.200.00 per month.

Empmnt tax (Prof Tax) wage type (/422) = Rs.2400.00

¡  The employee will get a Standard Deduction of Rs.25000. 00.

Std Deduction wage type (/420) = Rs.25000.00

Aggrg Deduction wage type (/424) = Rs.27400.00

·  Incm under Hd Salary wage type (/426)

= Rs.204640.00 - Rs.27400.00

= Rs.177240.00

·  As the employee does not have any income from other sources, Any other Income wage type (/131) = 00.00.

Gross Tot Income wage type (/430) = Incm under Hd Salarywage type (/426)

= Rs.177240.00

·  As the employee does not have any Section 80 deductions, Agg of Chapter VI wage type (/432) = 00.00.

Total Income wage type (/434) = Gross Tot Incomewage type (/430)

= Rs.172200.00

Since, the year of assessment is 2002 - 2003,

·  Tax on total Income wage type (/436) = Tax calculated on Total Income wage type (/434)

= Rs.27172.00

·  Monthly Provident Fund deduction = 12% of (Basic salary + Dearness Allowance)

= Rs.1644.00

Ee Ann PF contribution wage type (/3F6) = Rs.19728.00

Sec 88 wage type (/438) = 15% of Rs.(19728.00 + Rs.20000.00)

= Rs.5959.20

·  As there is no Section 88B and 88C rebate, Agg of Chapter VIII wage type (/444) = Rs.5959.20

·  Tax payable wage type (/446) = Rs.27172.00 - Rs.5959.20

= Rs.21212.80

·  Surcharge payable wage type (/448) = 5% of Rs.21212.80

= Rs.1060.64

·  Tax payable and surcharge wage type (/450) = Rs.21212.80 + Rs.1060.64

= Rs.22273.44

= Rs.22273.00 (rounded off to the nearest rupee)

·  Tax deducted so far wage type (/456) = Rs.2904.00 (Tax paid by the employee in the previous periods of the financial year)

·  Net tax payable wage type (/458) = Rs.22273.00 - Rs.2904.00

= Rs.19363.00

·  Projection Factor wage type (/401) = 9 (July 2002 to March 2003)

·  Income Tax wage type (/460) = Rs.19363.00 divided by (9+1)

= Rs.1936.30

= Rs.1937.00 (rounded off to the nearest rupee)

The employee has to pay a tax of Rs.1937.00 for the month of June 2002.

See also:

Income Tax

 

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