Withholding Taxes

This chapter provides overviews of tax computation process flow and delivered tax elements and discusses how to:

Set up and maintain tax information.
Report tax information.

Understanding Tax Computation Process Flow

This section discusses:

Income tax process flow.
Profession tax computation flow.

Note. To examine the specifics of the calculations, use the core Global Payroll application to examine the tax-related elements and rules.

Income Tax Process Flow

To calculate payee income tax to be withheld:

Calculate taxable earnings.

Taxable earnings are the sum of all earnings that a payee has received for the tax period, including such income as previous employment earnings, basic salary from current employment, house rent allowance, and perquisites.
Total previous and current employer exemptions.

Previous and current employer exemptions for the payee are totaled. These exemptions can be items such as house rent allowance, conveyance, or leave travel allowance.
Calculate gross salary.

Gross salary is calculated as taxable earnings minus exemptions.
The standard deduction is calculated, based on the previously calculated gross salary. Profession tax is taken into consideration during this step.
Calculate salary income.

Salary income is determined. Salary income is Taxable Earnings — Exemptions = Gross Salary — Standard Deduction = Salary Income.
Calculate other income.

Income from other sources is income derived by the employee from sources such as business income, and income from capital gains. The employee may choose to declare this income to the employer. Such income/loss is added/reduced from taxable income while determining taxes for the year
Calculate gross total income.

Gross total income is calculated by considering the total of all heads of incomes before allowing any deductions under chapter VIA.
Total Chapter VIA deductions.

All chapter VIA deductions (such as medical insurance or self education) that the payee claims calculated. Each deduction has a statutory limit defined in variables.
Calculate total taxable income (net income).

Total taxable income (net income) is calculated as gross total income minus chapter VIA deductions. The tax liability of the assessee is determined based on this result. The rates of taxes applicable, and the rebates that are given, are all based on this amount. The applicability of the surcharge is also dependent on this result.
Calculate tax liability.

The total taxable income (net income) is used to determine the applicable income tax rate. The income tax rates are stored in a bracket.
Apply rebates.

Rebates are reductions from the tax liability of an employee. Rebates are allowed for employees who make certain investments during the current year. They include premium on life insurance, and investments made in certain government supported bonds such as Infrastructure bonds, RBI Bonds, or National Savings Certificates. A certain percentage of the investment is allowed as a rebate, this percentage is usually determined by the annual finance Bill proposed every year.
Calculate balance tax.

Net tax payable is calculated as the result of the tax liability minus the rebates.
Calculate surcharge.

Surcharge is an additional levy on the net taxes of an employee. Once the net tax payable is determined, the surcharge is calculated. The amount calculated is added to the taxable income and considered for tax deduction. This is the last step in the tax computation process. The amount calculated is prorated and deducted on a monthly basis.
Calculate net tax liability.

The final tax liability is the result of the net tax payable plus the surcharge.
Determine monthly tax deduction.

To determine the month’s tax deduction for the payee, the balance tax of the employee is arrived after reducing the tax deducted so far from the employee’s tax liability for the year, and the balance determined. This is divided by the number of months left in the year and tax for the month determined. This is the amount that will reflect as TDS (tax deducted at source) month on month.

Profession Tax Computation Flow

The frequency with which you must deduct profession tax varies among states. The deduction frequencies for each state (monthly, quarterly, semi-annually, or annually) are stored in variables, one variable for each state.

Rates and slabs that are applicable to each state are stored in brackets, one bracket for each state.

Each employee is linked to an establishment and the establishment is linked to a state. The rates that are applicable to each state are stored in a bracket.

Profession Tax differs from state to state, and the deduction will happen based on the frequency determined. The deducted amount towards Profession Taxes is considered for the calculation of Standard Deduction as discussed in step 4 of the Income Tax process flow.

Note. Make sure a payee’s profession tax establishment is set up using the Establishment component (ESTABLISHMENT_DATA) in PeopleSoft Enterprise Human Resources because this information is vital to the proper calculation of a payee’s profession tax deduction. This is the only source where an employee is linked to an establishment and an establishment to the state, therefore determining the correct deduction

See Also

Accumulators

Setting Up Establishments

Understanding Delivered Tax Elements

This section discusses:

Delivered tax earnings.
Delivered tax deductions.

Delivered Tax Earnings

While the elements in this section are defined as earnings, they are really being used to store certain information. “Previous” in the table below refers to previous employment, such as “Previous Employment Salary”. They do not function as typical earnings elements.

Global Payroll for India delivers the following elements to process payee taxes:

Earnings	Description
PREV SAL	Previous salary.
PREV PT	Previous profession tax.
PREV TDS	Previous tax deducted at source.
PREV HRA	Previous house rent allowance.
PREV LIC	Previous life insurance deduction.
PREV SAL HRA	Previous salary for house rent allowance.
PREV MED EXM	Previous medical exemption.
PREV LTA EXM	Previous leave travel allowance exemption.
PREV PF	Previous provident fund.
PREV EDU EXM	Previous child education exemption.
PREV HOS EXM	Previous child hostel exemption.
PREV HRA EXM	Previous house rent allowance exemption.
PREV CON EXM	Previous conveyance exemption.
CHILD EDU ALW	Child education allowance.
CHILD HOSTEL	Child hostel allowance.
CONVEY EXM	Conveyance exemption.
PEN FND 80CC	Pension fund 80CCC.
MED INS 80D	Medical insurance premium 80D.
MED HND 80DD	Medical treatment (handicapped dependents) 80DD.
MED AIL80DDB	Medical treatment (special ailments) 80DDB.
EDU LOAN 80E	Education loan 80E.
DONAT 100PCT	Donations - 100 percent 80G.
DONAT 50PCT	Donations - 50 percent 80G.
RENT 80GG	Rent paid 80GG.
DONAT 80GGA	Donations - scientific research 80GGA.
INT SEC 80L	Interest on securities 80L.
PERM DIS 80U	Permanent physical disability.
LIC PREM	Life insurance corporation premium.
DEFRD ANNTY	Deferred annuity.
PPF	Public provident fund.
PO CUML DEPOSITS	Post office cumulative term deposits.
NSC DEPOSITS	National Savings Certificate deposits.
NSS DEPOSITS	National Savings Scheme deposits.
INT NSC	Interest on National Savings Certificate reinvested.
PRIN LOAN RE	Principal loan repayment.
MUTUAL FND	Mutual funds.
NHB SCHEME	National Housing Board scheme.
TX REBAT 88B	Tax rebate Section 88B.
TX REBAT 88C	Tax rebate Section 88C.
TX REBAT 89	Tax rebate Section 89.
INFRA BONDS	Infrastructure bonds.
LIC ANNUITY	Life insurance corporation annuity.
ULIP	Unit-linked insurance plan.
PERQ CAR	Car perquisite.
PERQ HOUSE	House perquisite.
TDS STD DED	Standard deduction.
HRA EXM	House rent allowance exemption.

Delivered Tax Deductions

Global Payroll for India delivers the following tax deductions:

Deductions	Description
TDS	Tax deduction at source.
PT	Profession tax.

Note. PeopleSoft delivers a query that you can run to view the names of all delivered elements that are designed for India.

Defining Earning and Deduction Elements

Setting Up and Maintaining Tax Information

This section provides an overview of tax information setup and maintenance and discusses how to:

Define the setup for tax information.
Enter payee general tax information.
Enter payee house rent allowance tax information.
Enter payee rebate tax information.

Understanding Tax Information Setup and Maintenance

To enter tax-related data as part of the setup and ongoing data maintenance:

Enter the income and profession tax-related information pertaining to the establishment.

See Setting Up Establishments.
Define the setup for payee tax declarations and previous employment.

You define the setup for each page in the Specify Tax Details IND component (GPIN_TDS_GEN).

See Defining the Setup for Tax Information.
Enter the declarations of a payee’s general and house rent allowance tax information.

See Entering Payee General Tax Information.

See Entering Payee House Rent Allowance Tax Information.
Enter the payee’s rebate, previous employment, deduction, exemption, other sources, and perquisites tax information.

See Entering Payee Rebate Tax Information.

Note. PeopleSoft provides tax element updates when there are amendments to the legislated rules governing income tax by the Central Finance Bill. However, for changes in slabs or rates, you must change the existing values to the amended rates or slabs.

Pages Used to Set Up and Maintain Tax Information

Page Name	Object Name	Navigation	Usage
Tax Setup	GPIN_TDS_SETUP	Set Up HRMS, Product Related, Global Payroll & Absence Mgmt, Taxes, Income Tax Details IND, Tax Setup	Define the element setup for payee tax declarations and previous employment data.
Specify Tax Details IND - General Information	GPIN_TDS_GEN	Global Payroll & Absence Mgmt, Payee Data, Taxes, Specify Tax Details IND, General Information	Enter the declaration of the payee’s general tax information.
Specify Tax Details IND - House Rent Allowance	GPIN_TDS_HRA	Global Payroll & Absence Mgmt, Payee Data, Taxes, Specify Tax Details IND, House Rent Allowance	Enter the declaration of the payee’s house rent allowance tax information.
Rebates	GPIN_TDS_REBATE	Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, Rebates	Enter the payee’s rebate tax information.
Previous Employment	GPIN_TDS_PREV	Global Payroll & Absence Mgmt, Payee data, Taxes, Maintain Tax Declarations IND, Previous Employment	Enter the payee’s previous employment tax information.
Deduction	GPIN_TDS_DEDN	Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, Deduction	Enter the payee’s deduction tax information.
Exemption	GPIN_TDS_EXEM	Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, Exemption	Enter the payee’s exemption tax information.
Other Sources	GPIN_TDS_OTH	Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, Other Sources	Enter the payee’s other source tax information.
Perquisites	GPIN_TDS_PERQ	Global Payroll & Absence Mgmt, Payee Data, Taxes, Maintain Tax Declarations IND, Perquisites	Enter the payee’s perquisites tax information.

Defining the Setup for Tax Information

Access the Tax Setup page.

You define the setup per data entry page. For example, the elements that you define for the Rebates page (GPIN_TDS_REBATE) will be the elements from which you can select when entering payee tax information on the Rebates page.

Sequence Number	Enter a sequence number to indicate the sequence of elements for the page.
Entry Type	Select the element’s entry type.
Element Name	Select the element name. Only those elements with the entry type that you select in the Entry Type column appear as choices. The corresponding description appears when you select the element name.

See Also

Entering Payee Rebate Tax Information

Entering Payee General Tax Information

Access the Specify Tax Details IND - General Information page.

Number of Children

Enter the number of children for the payee.

Disabled

Select if the payee is disabled.

Disabled Dependent

Select if the payee has a disabled dependent.

Senior Citizen

Select if the payee is a senior citizen.

Severely Disabled Dependent

Select if the payee has a severely disabled dependent.

Severe Disability

Select if the payee has a severe disability.

Profession Tax

Establishment ID

Select the establishment ID that is related to the profession tax for the payee.

Income Tax

Classification Code	Select the proper classification code for the payee.
Resident Status	Select Non-Resident or Resident.

See Also

Setting Up Establishments

Entering Payee House Rent Allowance Tax Information

Access the Specify Tax Details IND - House Rent Allowance page.

Accommodation Type

Select what type of accommodation the employee currently uses: House Rent, Company Lease, or neither (None). Select None if the payee is not eligible for HRA/CLA or if the payee resides in his own house.

House Rent Allowance

Rent Paid	Enter the amount of rent that is paid by the employee using the code INR.
Location	Select whether the payee resides in a metropolitan area, such as Bombay, Calcutta, Chennai, or Delhi, or a non-metropolitan area.

Company Lease Accommodation

Furnished

Select the company lease accommodation type: Furnished, Un-Furnished, or Not Applicable.

This is used for calculation of perquisites. This column is to be updated only if the Accommodation type is “Company Lease.” The type decides the extent of taxation of perquisite.

Entering Payee Rebate Tax Information

Access the Rebates page.

Element Name

This column displays all of the elements that are defined for this page on the Tax Setup page.

Amount

Enter an amount that is to be accumulated. The defined rules determine if the amount is to be added to, or subtracted from, the payee’s gross income.

Begin Dateand End Date

The End Date is desirable as the employee may change their tax plans year on year. The Begin Date will be the later of the financial year begin date or date of joining. The End Date will be the earlier of the close date of the financial year or termination date.

Note. All of the remaining pages in this component function identically to this Rebates page. Therefore, the fields on the remaining pages in this component are not documented.

See Also

Defining the Setup for Tax Information

Reporting Tax Information

This section discusses how to:

Report profession taxes.
Report allowance tax amounts.

Pages Used to Report Tax Information

Page Name	Object Name	Navigation	Usage
PT Reports (profession tax reports)	GPIN_PR_RC	Global Payroll & Absence Mgmt, Taxes, Profession Tax Report IND, PT Reports	Calculates and reports on profession taxes.
Amount Taxable IND	GPIN_RC_GPINTX01	Global Payroll & Absence Mgmt, Taxes, Allowance Taxable Amounts IND, Amount Taxable IND	Calculates and reports on allowance taxable amounts.

Reporting Profession Taxes

Access the PT Reports page.

Period ID

Select the period ID. The begin date and end date appear as soon as the period ID is selected. A period ID is created for each reporting period, such as Monthly or Annual. If the reporting is monthly, create a period ID for every month for reporting purposes.

Payee Sort Option

Select a sort order for the report. Options are:

Employee ID, Employee Rcd Nbr: Employee ID, employee record number.

Name, Employee Rcd Nbr: Name, employee record number.

Establishment ID

Select the establishment ID.

Bracket Name

Select the bracket name.

Reporting Allowance Taxable Amounts

Access the Amount Taxable IND page.

Period ID

Select the period ID. The begin date and end date appear as soon as the period ID is selected.

Begin Date and End Date

Displays the beginning and ending dates of the tax period for which you want to report.

Taxable Amount

Select whether the allowance is for leave travel allowance or medical.

Number of Children	Enter the number of children for the payee.
Disabled	Select if the payee is disabled.
Disabled Dependent	Select if the payee has a disabled dependent.
Senior Citizen	Select if the payee is a senior citizen.
Severely Disabled Dependent	Select if the payee has a severely disabled dependent.
Severe Disability	Select if the payee has a severe disability.

Element Name	This column displays all of the elements that are defined for this page on the Tax Setup page.
Amount	Enter an amount that is to be accumulated. The defined rules determine if the amount is to be added to, or subtracted from, the payee’s gross income.
Begin Dateand End Date	The End Date is desirable as the employee may change their tax plans year on year. The Begin Date will be the later of the financial year begin date or date of joining. The End Date will be the earlier of the close date of the financial year or termination date.

Period ID	Select the period ID. The begin date and end date appear as soon as the period ID is selected. A period ID is created for each reporting period, such as Monthly or Annual. If the reporting is monthly, create a period ID for every month for reporting purposes.
Payee Sort Option	Select a sort order for the report. Options are: Employee ID, Employee Rcd Nbr: Employee ID, employee record number. Name, Employee Rcd Nbr: Name, employee record number.
Establishment ID	Select the establishment ID.
Bracket Name	Select the bracket name.

Period ID	Select the period ID. The begin date and end date appear as soon as the period ID is selected.
Begin Date and End Date	Displays the beginning and ending dates of the tax period for which you want to report.
Taxable Amount	Select whether the allowance is for leave travel allowance or medical.