Professional Tax Computation
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:
· The type of payroll that is being processed:
¡ An original payroll run – This in turn can be either a regular payroll run or an off-cycle payroll run.
¡ A retrospective payroll run.
· The state or region to which an employee belongs in the current payroll period.
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.
· The applicability of professional tax in the state or region.
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:
...
1. Identifies the basis type. Basis type can be either nominal or due, and it is state specific. You can view and maintain the basis type for a state through the IMG under Payroll India ® Professional Tax ® Maintain Method and Form Layout for PTax Grouping.
2. Computes the Professional Tax basis, and stores the value in the professional tax basis wage type (/3P2). If there are split periods, the system creates this wage type for every split.
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 calculates the professional tax basis for 1st June to the 15th June as per the professional tax rules in Gujarat. It stores the value in the /3P2 wage type for Gujarat.
For the period, 16th June to 30th June, the system calculates professional tax basis as per the rules of Karnataka. It stores the value in the /3P2 wage type 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:
· Due basiswage type (/118)
· Nominal basis wage type (/119)
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:
· Retrospective professional tax processing wage type (/ZPT)
· Medical perquisite wage type (/3M3)- Through Cumulation of PTax basis rule (INPT)
· Housing perquisite wage type (/3RH) - Through Cumulation of PTax basis rule (INPT)
· Bonus (Model wage types - B101 and B202) - Through Cumulation of PTax basis rule (INPB)
3. Determines whether professional tax needs to be deducted for an employee. Some states exempt certain sections of employees from professional tax.
4. Determines whether professional tax needs to be deducted in the current payroll run. The frequency of professional tax deduction varies from one state to another.
5. Determines the Professional Tax amount for the current period.
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 types to distinguish them from one another.
6. Determines the tax for the current payroll period. The system sums up the professional tax amounts calculated for the split periods to arrive at the professional tax amount for the full period. It saves the professional tax amount for the full period in the Professional Tax – Full Period wage type (/3P3).
7. Determines the projected professional tax amount payable in the current financial year, and the professional tax amount already paid by the employee. It saves the same in the Annual Professional Tax wage type (/422). The projected professional tax amount is used by the Income Tax functionality.
Result
See also:
Retroactive Professional Tax Calculation