Section 80 Deduction
Purpose
Section 80 deductions are pre tax deductions from the Gross Taxable Income. Examples of components for Section 80 deductions are Contribution to certain Pension funds, Medical Premium paid, Donations to certain funds/charitable institutions and deductions for Permanent physical disability.
The SAP System provides you with the all the Section 80 subsections and the divisions of the subsections. The maximum limit of contribution for each subsection and each subsection division has also been provided by the system. This means that even if you contribute more than the limit, the payroll will consider only the limit for tax deduction.
Some of the contributions under Section 80 deductions are fully tax deductible, while some are partly tax deductible. The percentage of deduction for each of them is also configured by the SAP System.
A subsection of Section 80 may have different types of investments. Each of these different types of investments within a subsection is called a division in the SAP system.
The employee can declare the amount he or she wants to contribute towards each division of the subsection of Section 80. This can be done at any point of time in the year. You can populate this as proposed contributions in the Section 80 Deductions infotype (0585). The tax for each period will be calculated outside the payroll based on this proposed contribution. The actual contributions can also be populated in the Section 80 Deductions infotype (0585). You can calculate the tax for an employee or for all employees by considering the actual contributions of the employee. This is typically done towards the end of the year, when the employee has submitted all his declarations. If you want to calculate the tax for all or selected employees based on actual Section 80 contributions, you can run the Batch Program for section 80 (HINIS800) for those employees, instead of updating the infotype record of each employee.
Contributions to Section 80 investments can be made directly from the payroll of the employee. In this case, you must maintain the contribution details in the Membership Fees infotype (0057). In this case, the contribution amount for a particular subsection or division will be calculated by adding the contributions maintained in the Membership Fees infotype (0057) and the Section 80 Deductions infotype (0585).
Section 80C and Section 80CCC
Section 80C and Section 80CCC deductions are applicable from financial year 2005 – 2006 onwards.
The deductions under Section 80C includes all the investments that were valid under Section 88 till financial year 2004 – 2005.
From financial year 2006-2007, Fixed Deposit investments are also eligible for Section 80C deductions. These deductions are applicable if the Fixed Deposit is:
· For a fixed period of not less than five years
· From a scheduled bank
· In accordance with a central government framed and notified scheme
You can enter these deductions in the system using Section 80C Deductions infotype (0586).
The deductions under Section 80CCC includes certain pension funds.
The maximum amount of deduction available is INR 1,00,000. This includes the total of Section 80C and Section 80CCC deduction.
Integration
The payroll reads the Section 80 data from the Section 80 Deductions infotype (0585) for the purpose of tax deduction.
In case of a physically challenged employee, you have to create a Challenge infotype (0004) record and store the relevant disability information there. As soon as you save this infotype record, a Membership Fees infotype (0057) record for Section 80U deduction is created automatically for the employee. The employee gets this tax deduction each year for as long as the above two infotype records are valid.
Section 80 Contribution Detailsfunction (P0585) retrieves the data from the Section 80 Deductions infotype (0585) and updates the cluster table S80. Processing Request for Membership Fees function (P0057) retrieves the data from the Membership Fees infotype (0057) and updates the table P0057. Third Party Deductions payroll function (INTPD) reads S80 and the table P0057, and updates the cluster table S80. Section 80 Deductions for India payroll function (INS80) processes the cluster table S80 to generate the wage type for Total Section 80 deduction (/3I1). Actual Section 80 deduction wage type (/432) is the lower of the Total Section 80 deduction wage type (/3I1) and the Gross Total Income wage type (/430). Gross Taxable Income wage type (/434) is equal to Gross Total Income wage type (/430) minus Actual Section 80 deduction wage type (/432).
Features
The parameters for Section 80 subsections and divisions have been configured in the SAP System as follows:
...
1. In the table view Subsection description (V_T7INI5), the subsection descriptions have been maintained.
2. In the table view Subsection limit (V_T7INI7), the maximum limits for each subsection has been maintained.
3. In the table view Sub division description (V_T7INI8), the subsection division descriptions have been maintained.
4. In the table view Sub division details (V_T7INI9), the upper limit of contribution, the percentage to be considered for tax deduction and the validity periods for the subsection divisions have been maintained.
You do not need to configure these views.
If you are populating the Section 80 data for an employee from the Membership Fees infotype (0057), you must configure the wage types for those Section 80 subsections or divisions. To do this, go to the IMG under Payroll India: Tax ® Third Party Deductions ® Configure Wagetypes for Section 80. You can configure more than one wage type for a subsection or a division.
If you want to add any subsections or divisions to Section 80, you have been provided with a user exit EXIT_HINCALC0_003 in the Enhancement HRINITAX. You can access this from the IMG for Payroll India: Tax ® Tax Liability on Reimbursements, Allowances and Perks ® User Exit: Define User Rules for Section 80 and 88.
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