Exemption on Child Education Allowance/Child Hostel Allowance 

Purpose

This component calculates the tax exemption on Child Education Allowance (CEA) and Child Hostel Allowance (CHA).

Integration

The Children Education Allowance exemption payroll function (INCEA) can generate the following wage types depending on the parameter setting:

·       /4CE Monthly exemption on education of children

·       /4CH Monthly exemption on hostel accommodation of children

·       /4E1  Annual exemption on education of children

·       /4E2  Annual exemption on hostel accommodation of children

Parameter Setting	Description	Wage Types Generated
EAA	Consider Exemptions infotype (0582), subtypes  SCEA and SCHA entries on an annual basis and treat the components as an allowance, that is, the components are projected for the financial year to arrive at the annual exemption.	/4E1, /4E2
EAR	Consider Exemptions infotype (0582), subtypes  SCEA and SCHA entries on an annual basis and treat the components as a reimbursement, that is, only year-to-date values are considered to arrive at the annual exemption.	/4E1, /4E2
EMA	Consider Exemptions infotype (0582), subtypes  SCEA and SCHA entries on a monthly basis and treat the components as an allowance, that is, the components are projected for the financial year to arrive at the annual exemption.	/4CE, /4CH, /4E1, /4E2
EMR	Consider Exemptions infotype (0582), subtypes CEA and CHA entries on a monthly basis and treat the components as a reimbursement, that is, only year-to-date values are considered to arrive at the annual exemption.	/4CE, /4CH, /4E1, /4E2
XOA	Ignore Exemptions infotype (0582), subtypes  SCEA and SCHA entries and treat the components as an allowance, that is, the components are projected for the financial year to arrive at the annual exemption.	/4E1, /4E2
XOR	Ignore Exemptions infotype (0582), subtypes SCEA and SCHA entries and treat the components as a reimbursement, that is, only year-to-date values are considered to arrive at the annual exemption.	/4E1, /4E2
'   '	Default parameter Ignore Exemptions infotype (0582), subtypes  SCEA and SCHA entries and treat the components as an allowance, that is, the components are projected for the financial year to arrive at the annual exemption.	/4CE, /4CH, /4E1, /4E2

Features

...

·       The number of children eligible for the tax exemption on CEA and CHA is the lesser of:

...

                        a.     Number of children entered and declared as eligible for the allowance component in Family/Related Person infotype (0021) subtype 2.

                        b.     Maximum number of children, for whom the exemption can be availed on the allowance component, as per the Income Tax Act. This number is stored in the No children exmpt for CEA/CHA constant (NOCHL) of table view Payroll Constants (V_T511K).

·       A fixed amount of CEA and CHA are tax exempt for a child per month, as per the Income Tax Act. To configure this maximum limit, go to the IMG under Payroll India ® Tax ® Tax Liability on Reimbursements, Allowances and Perks ®Assign Tax Code Limits to Wagetypes.

·       The employee has to submit the expenditure as proof to avail of the tax exemption. The details of the declaration are populated in the Exemptions infotype (0582), CEA and CHA  subtypes.

·       Exemption against CEA and CHA is the minimum of:

...

                        a.     Total CEA and CHA payments made for the month or the financial year through Basic Pay infotype (0008), Recur. Payments/Deds. infotype (0014), Additional Payments infotype (0015) orOne-Time Payments Off-Cycle infotype (0267).

                        b.     Total expenditure submitted as proofs and entered in the Exemptions infotype (0582), SCEA and SCHA subtypes.

                        c.     Number of children eligible for the exemption multiplied by the amount per child fixed by the government for each of the two components, respectively. In this case, the exemption amount will be the number in point 1 multplied by the amount in point 2, above.

You have been provided with an option, whereby, you can ignore the entries in the Exemptions infotype (0582), SCEA and SCHA subtypes, by sending a parameter to the Children Education Allowance exemption payroll function (INCEA). In such a case, exemption on Child Education and Child Hostel Allowances is the lesser of a and c, above.

·       The CEA Annual Exemption wage type (/4E1) and CHA Annual Exemption wage type (/4E2) are calculated by projecting the CEA Monthly Exemption wage type (/4CE) and CHA Monthly Exemption wage type (/4CH) respectively.

·       The annual projection of Child Education and Child Hostel Allowances is limited to the earlier of:

¡      End of the financial year                                     

¡      End Date of the Family/Related Person infotype (0021) subtype 2 record.

See also:

Defining Exemptions on Child Education/Child Hostel Allowances

Exemptions infotype (0582) SCEA/SCHA subtypes